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we're going to be looking at configuring withholding taxes. So we'll be looking at setting up withholding tax configuration and describing withholding tax thresholds. Let's start off with the definition.

So withholding tax. This is the amount of a supplier payment that's withheld by the purchasing party and sent directly to the government as a partial payment of the tax owed by the supplier. So sometimes different parts of the world, professional services, rather than pay the supplier directly, the company, in this case, the purchasing party withholds an amount of tax referred to as withholding tax, and they pay that directly to the legal authority or the government authority rather than directly to the supplier.

Now, tax can be withheld either at the time of creating a payables invoice or a payment. And by setting withholding tax thresholds, you can set the minimum and maximum allowed for withholding tax.

Now the first key decision when thinking about setting up your withholding tax is to realize there are two ways that you can do this within your cloud environment. You can set up withholding tax using payables setups, or you can use the tax engine for more complex tax requirements. So as you can see here, then we've got the very simple or basic requirements. If that's all you've got, simple or basic tax requirements, then you can use payables to do your withholding tax setup. And most of the configuration there is driven by the withholding tax classification code.

If you've got more complex requirements, so let's say the withholding tax depends on the person or the products, then you can use the full power of Oracle Tax for these complex tax requirements. And in this particular class, when you do all your practices, you'll see we're using Oracle Tax setup. And also to mention that payables withholding tax reports are compatible with both payables and the Oracle Tax withholding tax configurations. The EMEA country specific withholding tax reports are compatible with the Oracle Tax withholding tax configuration.

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withholding tax regime

Common configuration means, if there was different business units, they could potentially subscribe to this one regime. And I minimize my setup, but I do allow party override, so there could be unique party overrides per regime-- sorry, per business unit or per legal entity. The product exceptions are based on the common config, and again, you either got party specific or common, so we'll leave this as common. And the effective date in class, we're going to use the same as the regime date, but it could obviously be different.

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withholging Tax Rule

Creating Withholding Tax Rules. We've done our foundation or basic withholding tax setup, and at the moment, that basic withholding tax setup, tax is not applicable. So we're now going to build an advanced rule that basically is going to be driven by a party fiscal classification. If our supplier has withholding tax classification, then this particular withholding tax will apply on my Payables invoice lines.

So we've got seven steps to do-- well, six setup steps, and then the final one to review the result of your setup. So what we're going to do with starting is looking at defining a new party fiscal classification. And notice here, the little tricky bit is this is done not in Financials or Tax, but it shares the TCA foundation. So you need to be in the offering of customer data management.

So to emphasize that point, I was in Financials. I'm going to move to Customer Data Management, looking at my trading community foundations, and what I'm after is the task manage classification categories. And I want to create a new one, so on here, I'm going to give it a name. So it's going to be called '03 withholding tax.

Plus, I'm also going to make the same in terms of the meaning and the description. I'm just going to copy and paste that, and I'm going to save it before I do anything else, so I've got a new parent record, if you like, called xx_withholding_class. And now, going to add-- so what I should have done, better do that before I continue, is it needs to have an entity.

So here, rather than the list of values, I'm going to type it, so it's hz_parties. And there could be a WHERE clause to narrow that down. I'll save that.

Now, I'm going to hit the Create Classification Codes, and on here, the second icon is the Create. And what we're going to do is Next, and what we're going to put in here is say 03_withholdingtax. And again, I'm not going to deviate the internal code, the meaning, and the description. They're all going to be the same, and I'm going to say OK to that.
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