2 Replies Latest reply on Jan 4, 2011 11:18 AM by Jerry VanScoter

    Withholding Tax

    Jerry VanScoter Expert

      We recently ran into an issue in Mexico where we just found out that 10% of our suppliers are individuals.  Apparently this means that we are subject to a withholding tax or taxes.

       

      We recently received an invoice that included VAT, VAT Withholding and ISR Withholding (Income Tax).  Since we are only allowed to have one tax type per line item we have to separate these three entries into multiple lines or multiple tax types in order for us to submit the invoice.

       

      The VAT rate is 16%.  We have to pay the supplier 1/3 of that tax and the other 2/3 goes to the Mexican treasury.  The ISR (Income Tax) is 10%.  We have to pay that entire amount to the Treasury.  I'm not sure how to create these invoices in Ariba.  We are just doing manual invoice entry in Mexico.

       

      Has anyone else run into this issue in Mexico or anywhere else?  What did you do to resolve it?  I hear they have the same type of tax situation in India which is another country we will be implementing P2P in soon.  Any assistance is appreciated.

        • Re: Withholding Tax
          Russ Stebbins Master

          Jerry,

           

          You are 3-4 months ahead of Ally moving to invoicing in Mexico and I would be interested in anything you learn in the process.  We have a similar problem in Canada where there are multiple taxes.  The work around we came up with was to have the sales tax assigned to a line item but to add the other taxes as new line items on the invoice.  Less than ideal and I don't know what issues we will encounter when we start to eInvoice (not an issue in Mexico, can't do).

            • Re: Withholding Tax
              Jerry VanScoter Expert

              We have been doing manual invoices in Mexico a little over a year.  This is the first time we have run into this issue.  We haven't resolved this yet but up til now we haven't had any issues with invoices.  We are using a slightly customized version of the P2P invoice tool to do our invoicing in all countries other than Canada.

               

              As for Canada, we had a working solution for the multiple tax types on one line item in Ontario (the only province we are rolling out to currently).  However, before we went live they changed the tax laws in Ontario.  They are now using the Harmonized Tax, HST.  This does away with that issue from my understanding.  We are now in the process of reworking the tax codes for the new process and will be implementing in the next few months.

               

              You are able to do multiple tax types on a line item.  This works fine where you have GST and PST on a single line item.  You are forced to do line item taxes in order to make this work.