How to setup INSS (withholding Tax) with fixed rate

 Added by Gustavo Machado, last edited by Gustavo Machado on Jan 19, 2012 (view change)

Purpose
How to customize the INSS withholding tax, specific for Brazil, without accumulation, used for all companies in
Brazil.

Overview

It will be explained in here, all the steps of the customizing starting from SD module until the final withhold line
item generated on the FI document. For the INSS's setup was used a fixed rate, 11%, but at the end of this
article there is a link to check how to customize the INSS using the new table, provided by government, where
the rates could vary.

The Original Document is:

http://wiki.sdn.sap.com/wiki/display/ERPFI/How+to+setup+INSS+%28withholding+Tax%29+wi
th+fixed+rate
SD customizing

In SD, the INSS is only set as a statistical condition, no influence in values.

First create a condition type INSS (V/06), you could copy from J1W1 standard condition type.
Add this condition type for your pricing procedure (V/08)

FI customizing

Go to SPRO, to start the setup in FI

Create a new withholding tax type at time invoice post, INSS don’t have accumulation and the base amount in
generally used as Gross amount, but it could depend for each business requirement, for NET amount as
example.

In SPRO, create a new withholding tax code for the tax type created before:
Use the percentage related to INSS rate, standard 11% and the posting indicator that would better fit on your
scenario, here we have “1” set, where a line item is posted with the amount withhold from base value.

INSS in Brazil has a maximum for withheld; in SPRO just below the previous customizing you have this setting,
remember you should put this information at tax code level for INSS. On this transaction you have the validity, so
you can keep all the historic of changes, since this value is generally revised annually.
Customer master data

After all these steps are performed is just a matter of set this withholding tax to the respective customer and set
validity and liability. FD02 /company code data / withholding tax tab:

Results

Finally when a document for this customer is posted, you got the INSS withhold at the time of posting.

Conclusion

The SD module customizing for INSS has no impact on the solution it's generally used only for the values to be
available on the pricing.
All the remaining customizing is very easy, so every consultant should be able to customizing this withholding tax
without so much effort.

Related content:

Related Documents:

Setup INSS with the new method using formulas (under construction)

Related Notes:
SAP Note 307701: Withholding tax is calculated incorrectly
SAP Note 615044: Withholding tax is not calculated
How to setup INSS (with new formulas from Brazilian government)

 Added by Renan Correa, last edited by Roberto Ruiz on Nov 03, 2012 (view change)

Purpose

This content was created to clarify the use of INSS tax together with the extended withholding tax
functionalities. With this article you should be able to customize the INSS withholding tax,
specific for Brazil. This is a tax that all companies should have customized for some business processes like
receipt of natural person vendor invoices of services (RPA).

Overview

It will be explained in here the formula that should be used to withhold this tax in the line item generated on the
FI document. Also, it will be shown the customizing needed in order to have a withholding tax type and code able
to read the formula and reckon the values correctly.

INSS Rates

You want to calculate the WHT INSS using the following scale provided by the government:

SAP's Calculation Logic

The SAP calculation procedure for withholding tax with formulas is a little bit complex, and if you create it using
the values as shown in the chart above it will not work

The values calculated by the system do not correspond to the expected values.

For example:
- Amount of R$ 2000

If you create a withholding tax formula using the field "Reduction of Base Amount" with the above values the
system calculates the wht using the value of 8% until 1107 and then
calculates 9% of the difference between 1107,00 and 1845,00 (738,00) and 11% of the difference between 1845
and 2000 ( 154,00 ).

The result is : 1107 * 8% = 88,5

738 * 9% = 66,4
154 * 11%= 16,9
Total = 172,0

You expect Total = 220,00 because It's 2000 * 11%.

The issue is in the formula used to calculate the tax. If you create a formula using the following values it will
work:

Value Tax rate Red.ba.Am.

1.107,52 8,00
1.845,87 9,00 984,46
99.999.999.999,00 11,00 1.510,25
View V_T059FB - Here you specify the formula used to calculate the taxes.

The logic to determine the value is previous value X tax rate = Result.
Result / Next Tax rate = Reduced base amount of next tax rate.

Example:
1107,52 * 0,08 = 88,60.

88,60 / 0,09 = 984,46 -> That's the value for the reduced base amount of 1845,87.
Necessary Conditions

It's necessary to create the WHT tax type with the following customizing described in the image. It will enable the
system to calculate the values using the gross amount, with month accumulation limited to a maximum amount.

View V_T059PI - Here you specify the settings of the withholding tax type. The recommended settings
are shown in the image.

Also it's necessary to create withholding tax codes as shown in the image below. It's necessary in order to
reckon the values using the correct amounts and also using the formula specified in the next step. The
description of the tax name may vary according to your business rules to name the settings in the system.
View V_T059Z - Here you specify the percentage subject to tax and also inform that there is a formula to
calculate the taxes.

INSS has a limit to be withheld. This limit is configured here as INSS maximum amount:. Also, there is a
minimum amount that should be maintained here.

View V_T059M_C - Here you specify the minimum and maximum amount of the tax code.
 Related Content

Related Documents
How to setup INSS (withholding Tax) with fixed rate

Related Notes/KBAs
 SAP Note 314204: Withholding tax calculation with formula
 SAP Note 671917: Ext. withholding tax w/ formula: other calculation logic

The Original Document is:

http://wiki.sdn.sap.com/wiki/display/ERPFI/How+to+setup+INSS+%28with+new+for
mulas+from+Brazilian+government%29

OBSERVAÇÕES:
A nota 916003 não contém instruções de configuração para o INSS. Ela contempla sómente os impostos
para a MP135. Para o INSS, verifiqure as instruções que estão na nota 178824. Certifique que se caso
configure a condição de INSS como estatística, verifique a configuração do tax type que está sendo
utilizado para que 'não' esteja como 'modified base/tax amount'. Esta opção espera que SD envie a
informação através da account key.

http://www.localizationforum.com/forum/index.php?action=search2