Down Payment with Withholding Tax Process

Down Payment with Withholding Tax Process

A down payment is basically an Advance given to Vendor before the physical exchange of goods and services. Once the delivery of goods and services occurs, the down payment is cleared against the final invoice.

 

Flow Diagram of a Purchase Down Payment Process.

 

 

Here, we would be discussing 2 scenarios.

1. Downpayment process wrt ME2DP
2. Downpayment process wrt F-47

We would be creating 1 PO line item and creating 2 downpayments wrt that 1 PO line item.

First downpayment would be created using Tcode ME2DP (MM) and second Downpayment would be created using Tcode F-47 (FI) for the same POline item.

 

 Scenario 1 – Downpayment Process wrt ME2DP

 

Below is the sample with taxes and with holding tax on Down payments.

Withholding tax is not applicable in most of the cases but in few countries the WHT is required on Down Payments, so here I am explaining the complete process with Taxes and WHT.

Step 1: Create a PO with 10% of Down payment and WHT of 5% is applicable for this vendor.

 

Here I am showing both the ways for the same PO, so 5% of down payment through ME2Dp and the remaining through F-47 process.

 

Step2: Create a Down Payment Request and Down payment.

TCODE: ME2DP – 5% of Down Payment Request and Down Payment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scenario 2 – Downpayment process wrt F-47

TCODE: F-47 – 5% of Down Payment Request and F110 to clear the Down Payment request.

 

 

 

 

 

 

Tcode: F110 – Clear the DP request.

 

 

 

Step 3: MIGO against the purchase Order.

 

Step4: Miro Against the PO.

 

 

 

 

Step 5: Final Payment to vendor.

Tcode: F110.

 

 

In Business Partner:

 

The Purchase Order History will get updated accordingly as per the transactions made.

 

Conclusion:

1. LOG_MMFI_P2P functionality needs to be activated.
2. A G/L with special G/L indicator A needs to be maintained in OBYR configuration.
3. At the time of Vendor Invoice processing click on Down Down payment Clearing Button and enter the Down Payments made to the vendor.
4. Finally Down Payment deducted from the Vendor Payment along with Withholding Successfully.

I hope you liked the blog post, and if you have any suggestions or questions please let me know.