Classic wht and extended wht

Question

hi,
may i know what is the difference between classic wht and extended wht? can advise what is the major difference between these two?
thanks

Answer 1

Hi,
Classic WHT- In some countries, the law provides that invoice recipients must withhold a certain portion of the payment amount and pay this to the tax authorities as withholding tax on behalf of the vendor. This requirement exists in the United Kingdom, for example. In other countries, withholding tax need only be reported to the tax authorities for certain vendors, such as self-employed people. Withholding tax is not posted in these countries. This is the case in France, for example.
Withholding tax amounts are reported to the tax authorities at regular intervals and a statement is also sent to the vendor periodically. These reporting periods vary from country to country.
The way in which withholding tax is calculated depends on the type of service. Transactions may:
Have a variable base for tax/SI contributions
Have different tax rates
Not relevant for withholding tax
EWHT-With extended withholding tax, you can process withholding tax from both the vendor and customer view.
In Accounts Payable, the vendor is the person subject to tax, and the company code is obligated to deduct withholding tax and pay this over to the tax authorities on the vendoru2019s behalf. In Accounts Receivable, the company code itself is subject to tax, and the customers that do business with this company code deduct withholding tax and pay this over to the tax authorities on the company codeu2019s behalf. In both cases, the business partner of the person/entity subject to tax deducts the tax and pays it over to the tax authorities.
Withholding tax is calculated and posted to the appropriate withholding tax accounts at different stages, depending on the legal requirements in each country. As a rule, withholding tax is posted at the same time that the payment is posted, in other words the outgoing payment (Accounts Payable) or incoming payment (Accounts Receivable), is reduced by the withholding tax amount.
In certain countries, such as Brazil, the Philippines, and Spain, withholding tax can or must be posted when the invoice is posted. This means that the amount receivable or payable is reduced by the withholding tax amount.
Extended withholding tax supports both concepts.
The key concept in extended withholding tax is the distinction between withholding tax type and withholding tax code. While withholding tax types represent basic calculation rules, specific features of these rules - in particular the percentage rate - are represented by the withholding tax code. You can define any number of withholding tax codes for a given withholding tax type.
If a particular transaction requires more than one kind of withholding tax, this is covered in the SAP System by defining more than one withholding tax type. When entering a line item, you can enter withholding tax data for each of these withholding tax types.
For more information about the functions of extended withholding tax (in comparison to classic withholding tax), see Withholding Tax
The following special features also exist:
In some countries, such as Argentina and Italy, other kinds of posting are required for certain business transactions. Instead of the payment amount being reduced by the withholding tax amount, the withholding tax is posted as an offsetting entry to an expense account You make the relevant settings in the withholding tax code.
Where cleared items are reset, the clearing document is automatically reversed if it contains withholding tax data. For withholding tax types with accumulation, the accumulation base amount is adjusted if the payment document is reversed.
Hope this helps.
Rgds
Manish