--- description: The tutorial explains how to Post Withholding Tax during Vendor Invoice Posting. Enter transaction FB60 in SAP Command Field title: Withholding Tax in SAP: Vendor Invoice & Payment Posting image: https://www.guru99.com/images/withholding-tax-in-sap.png --- [Skip to content](#main) **⚡ Smart Summary** Withholding tax in SAP is the amount an organisation deducts from a vendor payment or invoice on behalf of the tax authority, posting the retained amount to a separate liability account for later remittance. * 🔘 **Two posting points:** SAP deducts withholding tax either when the invoice is posted in FB60 or when the payment is made in F-53. * ☑️ **Type and code:** The withholding tax type sets the calculation rule and timing, while the withholding tax code sets the rate. * ✅ **Vendor master:** The vendor must carry the withholding tax type and code in its master record before either transaction calculates tax. * 🧾 **Invoice posting:** On the FB60 Withholding Tax tab, the base amount and any exempt amount drive the deduction. * 🔗 **Payment posting:** In F-53 the tax is credited to the withholding liability account as the open item is cleared. * 🛠️ **Extended method:** Extended withholding tax supports both timings, multiple codes, thresholds and certificates, and is required in S/4HANA. [ Read More ](javascript:void%280%29;) ![Withholding Tax in SAP during Vendor Invoice and Payment Posting](https://www.guru99.com/images/withholding-tax-in-sap.png) Withholding tax, also called tax deducted at source, requires the paying company to retain part of a vendor’s invoice or payment and hand it to the tax authority. SAP calculates and posts this deduction automatically once the vendor and the tax keys are configured, either at the invoice stage or at the payment stage. ## What Is Withholding Tax in SAP? Withholding tax is an amount the payer deducts from a supplier’s income and remits directly to the government, so the vendor receives only the net figure. In [accounts payable](https://www.guru99.com/accounts-payable-in-sap-fi.html) the company code acts as the withholding agent, deducting the tax on the vendor’s behalf and reporting it to the authorities periodically. SAP models the deduction with two objects. The withholding tax type defines the basic calculation rule and, crucially, when the deduction happens — at invoice entry or at payment. The withholding tax code sits under a type and defines the actual percentage rate and the liability account that receives the retained amount. A single vendor can carry several type-and-code pairs at once. The amount SAP deducts depends on three things: * The withholding tax type and code assigned to the vendor master record * The tax base amount, which is usually the net or gross value of the invoice * Any exemption or reduced-rate certificate recorded against the vendor ## Classic vs Extended Withholding Tax SAP offers two withholding tax solutions. Classic withholding tax is the original, limited method, while extended withholding tax is the current standard that SAP recommends for every new implementation. | Feature | Classic withholding tax | Extended withholding tax | | --------------------------- | ----------------------------- | ------------------------------------ | | Deduction timing | Payment only | Invoice and payment | | Tax lines per document | One withholding tax code | Several types and codes at once | | Accumulation and thresholds | Not supported | Supported | | Exemptions and certificates | Limited | Full support | | Availability | Legacy, not for new customers | Standard; the only option in S/4HANA | Because extended withholding tax covers everything classic does and adds invoice-time deduction, multiple codes and accumulation, it is the version behind both procedures below. SAP S/4HANA supports extended withholding tax only. ## Post Withholding Tax During Vendor Invoice Posting When the withholding tax type is set to deduct at invoice entry, the tax is calculated as soon as the supplier invoice is posted in FB60\. The steps below record the invoice and its withholding tax in a single document. Step 1) Enter the transaction code FB60 in the [SAP](https://www.guru99.com/what-is-sap-definition-of-sap-erp-software.html) command field. [](https://www.guru99.com/images/sap/2012/07/WithHInv011.png) Step 2) On the next screen, enter the company code to which the invoice is to be posted. [](https://www.guru99.com/images/sap/2012/05/Custinv023.png) Step 3) On the Basic data tab, enter the following invoice details. The screenshot after the list shows where each field sits. 1. Enter the Vendor ID (withholding tax enabled) of the vendor to be invoiced 2. Enter the Invoice Date 3. Confirm the document type is Vendor Invoice 4. Enter the Amount for the invoice 5. Select the Tax Code for the applicable tax 6. Tick the Calculate Tax indicator 7. Enter the [Purchase Account](https://www.guru99.com/how-to-post-a-purchase-invoice.html) 8. Enter the amount for the line item [](https://www.guru99.com/images/sap/2012/07/WithHInv022.png) Step 4) Select the Withholding Tax tab and enter the following, then confirm the code that defaults from the vendor master. 1. Enter the Tax Base Amount 2. Enter the Tax Exempt Amount 3. Check the Withholding Tax Code [](https://www.guru99.com/images/sap/2012/07/WithHInv031.png) Step 5) Press the Post button on the standard toolbar. [](https://www.guru99.com/images/sap/2012/07/WithHInv041.png) Step 6) Wait for the document number to be generated and shown on the status bar for confirmation. [](https://www.guru99.com/images/sap/2012/07/WithHInv051.png) The vendor invoice has now been posted with its withholding tax deducted at source, and the retained amount sits on the withholding tax liability account ready for remittance. ### RELATED ARTICLES * [What is Residual Payment in SAP with Example ](https://www.guru99.com/how-to-post-incoming-partial-payments-by-residual-method.html "What is Residual Payment in SAP with Example") * [Posting Rounding Differences in SAP Tutorial ](https://www.guru99.com/posting-rounding-differences.html "Posting Rounding Differences in SAP Tutorial") * [Symbolic Account to G/L Mapping Table in SAP ](https://www.guru99.com/how-to-map-symbolic-account-to-gl-account.html "Symbolic Account to G/L Mapping Table in SAP") * [How To Create a Vendor Account Group in SAP FICO ](https://www.guru99.com/how-to-create-a-vendor-account-group.html "How To Create a Vendor Account Group in SAP FICO") ## Post Withholding Tax During Payment Posting When the withholding tax type is configured to deduct at payment, no tax is taken at invoice time. Instead, the deduction is calculated when the open item is cleared with an [outgoing payment](https://www.guru99.com/how-to-post-outgoing-vendor-payment.html) in F-53\. The steps below post the payment and its withholding tax together. Step 1) Enter the transaction code F-53 in the command field. [](https://www.guru99.com/images/sap/2012/07/WithHPay011.png) Step 2) On the next screen, enter the following header and bank data. 1. Enter the Document Date 2. Enter the Cash or Bank Account from which the payment is posted 3. Enter the Payment Amount 4. Enter the Vendor ID of the vendor receiving the payment [](https://www.guru99.com/images/sap/2012/07/WithHPay02.png) Step 3) Assign the payment amount to the appropriate invoice so that the payment balances against the open item. [](https://www.guru99.com/images/sap/2012/07/WithHPay03.png) Step 4) From the standard menu bar, choose Document then Simulate to preview the clearing document. [](https://www.guru99.com/images/sap/2012/07/WithHPay04.png) Step 5) On the simulation screen, confirm that the withholding tax is also credited according to the base amount entered on the invoice. [](https://www.guru99.com/images/sap/2012/07/WithHPay05.png) Step 6) Press Post on the standard toolbar to post the outgoing payment. [](https://www.guru99.com/images/sap/2012/07/WithHPay06.png) Step 7) Check the status bar for the document number that is generated. [](https://www.guru99.com/images/sap/2012/07/WithHPay07.png) The outgoing payment has now been posted, and SAP has deducted the withholding tax at the moment of clearing rather than at invoice entry. ## Withholding Tax Configuration, Tables, and Reporting Before either transaction can calculate tax, extended withholding tax has to be configured and switched on for the company code. The main setup runs through the following IMG activities: 1. Define the withholding tax type separately for invoice posting and for payment posting 2. Define the withholding tax codes and their rates under each type 3. Assign the types and codes to the company code and set the validity period 4. Activate extended withholding tax for the company code 5. Assign the general ledger accounts that receive the withholding tax 6. Enter the withholding tax type and code in the vendor master record SAP stores the configuration and the posted amounts in a small set of tables, which are useful for verification and reporting. | Table | Contents | | ---------- | ---------------------------------------------- | | T059P | Withholding tax types | | T059Z | Withholding tax codes and rates | | T001WT | Company code settings per withholding tax type | | LFBW | Withholding tax data in the vendor master | | WITH\_ITEM | Withholding tax line items per document | For period-end, the generic withholding tax reporting tool produces the returns and vendor certificates that authorities require, with country versions such as J1INMIS for India. Related transactions include FB60 and FB65 for invoices, F-53 and F110 for payments, and FBL1N to review the vendor line items. These postings feed the standard [FI reports](https://www.guru99.com/important-reports-sap-fi.html) and the [FI tables](https://www.guru99.com/important-tables-in-fi-module.html) used across the module. ## FAQs ⚡ What is the difference between withholding tax and input tax in SAP? Input tax, such as VAT, is charged by the supplier and reclaimed from the authority. Withholding tax is deducted by the buyer from the supplier’s payment and paid to the authority on the supplier’s behalf. They post to different accounts. 🔄 Why is SAP not calculating withholding tax on a vendor invoice? Usually the vendor master has no withholding tax type or code, or the type is set to deduct at payment rather than at invoice. Check the base amount is not zero and that the type is active for the company code. 🧾 What do the tax base amount and exempt amount mean? The tax base amount is the portion of the invoice that is subject to withholding tax, and the rate is applied to it. The exempt amount is the part excluded from the deduction, for example an allowance or a certificate-based reduction. 💱 Can one vendor have more than one withholding tax code? Yes, under extended withholding tax. A vendor master can hold several type-and-code combinations, so a single invoice can carry, for example, a base tax plus a surcharge or cess line, each posting to its own liability account. 🔁 How do you reverse a document that has withholding tax? Reverse an invoice with FB08 and the withholding tax lines reverse with it. If the item was already paid, first [reset the clearing](https://www.guru99.com/how-to-reset-ar-cleared-items.html) with FBRA, then reverse the payment. A reversal reason and an open posting period are required. 🤖 How is AI used in tax determination and compliance in SAP? Machine learning suggests the correct tax and withholding codes from historical postings, flags vendors missing tax data, and detects anomalies before filing. SAP delivers this through Business AI and Document Information Extraction embedded in accounts payable and tax compliance. 💡 Can GitHub Copilot help automate SAP withholding tax postings? [GitHub Copilot](https://github.com/features/copilot) helps with the code around the transaction, not the SAP screen. It drafts ABAP calls to BAPI\_ACC\_DOCUMENT\_POST, batch input recordings and reporting scripts. Every generated withholding tax posting still needs testing in a sandbox client. 📊 Does withholding tax apply to the gross or the net invoice amount? It depends on the base amount configured for the withholding tax type. SAP can calculate on the gross amount, the net amount, or a modified base such as net plus tax. The tax base amount field on the Withholding Tax tab shows the value actually used. #### Summarize this post with: ChatGPT Perplexity Grok Google AI **Stay Updated on AI** **Get Weekly AI Skills, Trends, Actionable Advice.** ##### Sign up for the newsletter Subscribe for Free You have successfully subscribed. 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