This blog explains about e-withholding tax in Thailand and SAP solution for e-withholding tax including additional customizations that you need to consider.

What is e-withholding tax system in Thailand

e-Withholding Tax system is a new service of the Revenue Department that listens to the needs of those in the process of reporting the amount of tax withheld, both the person liable to withhold tax and the taxpayer from whom tax is withheld. The system uses information technology designed and developed to integrate with financial technologies for greater ease and convenience. It reduces steps in the process for all relevant parties employing the Revenue Department’s D²RIVE strategy and new normal policy which every sector, business operator, and individual globally must comply with.

The new e-Withholding Tax system manages withholding tax completely in One Step. As an electronic medium service that meets international standards of security, it is an alternative way to cover the withholding tax steps in what has been a daunting process and makes the system shorter and more pleasant. Expense on messengers and printing are therefore avoided. Moreover, the documents according to Section 50 Bis are digitised and so not easily lost. It also promotes transparency with its channel to check evidence at the Revenue Department website www.rd.go.th 24 hours without having to keep physical documents. Taxpayers who are responsible for filing withholding tax can use the e-filing system. Although filling withholding tax returns via internet is easy, using the e-Withholding Tax system is easier.

Source: Ministry of Finance e-withholding tax 

In addition, as part of tax measures to help those affected by COVID-19 by increasing financial liquidity – Thai Cabinet approved an amendment to Ministerial Regulation no. 361 (B.E. 2563) to expand the scope of the withholding tax reduction to include a reduction—from 5% to 2%—of the withholding tax on certain taxable income for payments made via the e-withholding tax system. The reduction of withholding tax from 5% and from 3% to 2% for payments made through the e-withholding tax system would be extended for the period 1 October 2020 through 31 December 2022.

Source: KPMG Thailand: Tax measures supporting R&D, electronic tax systems and e-filing

SAP Solution for e-withholding tax Thailand

Points to consider :-

1. e-withholding tax is only applicable for payment with Bank transfer, cheque or cash payment or other payment method still continue with paper withholding tax. Therefore transactions with e-withholding tax must not generate withholding tax certificate (50BIS) and not include in withholding tax report (PND).
2. Withholding Tax Posting shall consider the bank reconciliation because not every banks amend their bank statements to send information of Paid amount & Withholding Tax amount to businesses to do bank reconciliation, as such some banks still send bank statement of Paid amount Only, No withholding tax amount.
3. Businesses need to amend Payment Advice file sent to Banks to include withholding data.

Point 1: e-withholding tax transactions must not generate withholding tax certificate (50BIS) and must not include in withholding tax report (PND).

Solution:

Configuration:

• Create New Income types for e-withholding tax: Income types 001-099 for Domestic and Income types 501-599 for Cross-border
• Create New Withholding Tax Types for e-withholding tax: Mark “No Cert. Numbering”
• Create New Withholding Tax Codes for e-withholding tax and maintain the reduced percentage (2%) first, after end year 2022 then change percentage to normal rate (3% or 5%). Posting indicator shall be maintained based on Withholding Tax Posting Cases – see Point 2.

See list of e-withholding tax income types and sample withholding tax types and withholding tax codes at SAP Help portal

• SAP S/4HANA > Local Versions > Asia-Pacific > Thailand – Select version 2020 FPS2 onward
• SAP S/4HANA Cloud > Country/Region-Specific Functions > Thailand – Select version 2105 onward

Note that: The help document may not be published yet when this blog is created.

Code Changes:

• SAP made the code change on program “Generic Withholding Tax report” (RFIDYYWT) and “Advanced Compliance Reporting” (ACR) – Withholding Certificate (50BIS) and Withholding Tax Reports (PND) for Thailand to EXCLUDE e-withholding tax transactions based on “Income types” of e-withholding. Relevant SAP Note Number will be updated later.

Point 2: Base on bank statement scenario, there are two-ways of withholding tax posting for e-withholding tax:-

Solution:

Configuration:

• For Case 1: Maintain Withholding Tax Code – Set Posting Indicator value = 1 (WIT) & Maintain Accounts for Withholding Tax to be Paid Over
• For Case 2: Maintain Withholding Tax Code – Set Posting indicator value = 3 (OFF) & Maintain Accounts for Withholding Tax Offsetting Entry

Important Note: if your company uses multiple banks that have both cases, you need to maintain 2 sets of withholding tax codes (for Case 1 & Case 2) and users must know which code they should input when posting invoice, which is depends on the bank used for payment.

Point 3: Amend Payment Advice or Payment Medium Structure sent to Banks to include withholding data.

Payment Advice File format varies as it depends on Bank’s format therefore Business need to customize the interface file as per Bank’s requirement.

Payment medium structure (FPAYH/ FPAYP) already included with some withholding tax data, by reading WITH_ITEM using class method cl_idfi_cgo_dmee_utils.

If other fields are required such as income type & description, posting indicator (to determine withholding tax condition) then the event 06 of the Payment Medium Workbench could be used for a similar select from WITH_ITEM or any other tables.

More detail please check relevant blog (Link will be updated once the blog is published).

Also check SAP Note 2253571 – Collective information note: CGI_XML_CT, CGI_XML_DD extended with Badi enhancement.

Additional Customization that you may consider:-

Posting of e-withholding tax payment to AP-Bank has to be done manually (FB05) whereby in paper withholding tax, Posting withholding tax payment to RD is included in program RFIDYYWT. As such Business may consider to do customize program to automate posting withholding tax payment to AP-Bank, also since it could be payment to multiple banks therefore the customize program shall also include the logic to determine AP-Bank from house bank maintained in invoice or payment.

This blog is intended to provide Customers and Partners how to handle e-withholding tax in Thailand based on the input & feedback from customers who initiated to apply e-withholding tax at end of year 2020.

Please share your feedback and thoughts in a comment. If you have questions about e-withholding tax in Thailand, you can post your question here.