1. Objective and Scope

1.1. Objective of this Procedure

The purpose of this document is to explain how to perform the posting of Withholding Tax.

1.2. Scope

Services – or, using a broader term, intangibles, like royalties or interests - are, in many countries, liable to withholding tax (WHT) 

WHT is usually due upon the payment of the invoice

• Exceptions apply: WHT may be due when the invoice is booked by the Customer, regardless of payment

WHT rates and scope evolves and are affected by local and transnational regulations, as well as by Court Decisions

2. Definitions

See Finance Glossary:

• CAM
• CICC
• CROCO
• GBU
• WBS

3. Tasks description

3.1. Responsibilities

Responsibilities: 

• Performing the calculation and the posting for withholding tax;
• Checking the posting consistency (right number of posting, one for each customer and in the right currency);

3.2. Process

1. A Requester asks Interco Team to issue a services invoice
2. It is responsibility of the Requester to also inform Interco Team if such invoice / flow is liable to WHT and at which rate, in which case the Interco Team will proceed as follows:
1. A C1 type document is posted on the Vendors side, by the amount of the WHT

1. Conversely, a M1 type document is posted on the Customers side, by the same amount of WHT

In this case, entity 2232 is entitled to the amount of € 326.622,96, but when receiving it, if the two documents above haven’t been netted beforehand, the AR Team will allocate the payment to document nr 5000183253 and we end up with two unnecessary open items in our ERP.

• The counterparty of the C1 type document posted in the Vendor books is a Balance Sheet account
• The decision to transfer the WHT to a P/L account means it’s not a tax credit for the Vendor, although it might be if specific circumstances are met. However, it’s not a responsibility of the Interco Team to take any decision on this, as:
• It does not manage the Tax position of Entities.
• Each country has specific rules regarding WHT offset against the Corporate Income Tax liability, a theme which is also out of the scope of Interco Team.
• WHT recognition as a cost vs tax credit impacts only the relation between the Vendor and it’s State of Residency / Establishment, not being, thus, an Interco matter.

• The transfer to P/L of the WHT amounts booked in the Balance Sheet in
• Account #2415000000 (PF2); or
• Account 44700700 (WP2)

shall be made by the corresponding ACP Team, in accordance with the guidelines provided by the CAD / CAM / TCM of the Entity

• We propose this transfer is done on a quarterly basis to match the group reporting period to the Market 

A SA document shall be used in this posting and is mandatory to attach the WHT payment slip issued by the Customer’s country Tax Authorities.

• The WHT payment slip shall mention:
• The Tax Identification Number (TIN) of the Entity that suffered WHT;
• Period (YEAR – mandatory – and month, quarter, etc) the WHT respects to;
• The type of income and amount of WHT paid; and
• Mention to the invoices paid or being paid (this is not mandatory, can be accomplished by a cross-reference to a separate document)
• Interco Team after posting the C1 and M1 documents informs AR Team through a shared filed with the invoices those documents respect to.
• Upon payment of the invoices liable to WHT, AR Team proceeds with the clearing.

Drive with AR Team

 End of document.