Withholding Tax Reporting for Korea

ERP CLOUD Withholding Tax Reporting for Korea Oracle Financials for Asia Pacific Table of Contents 1. Purpose of the document... 4 2. Assumptions and Prerequisites... 4 3. Feature Specific Setup... 4 Security Console Configuration... 5 Create Job Role... 5 Assign users... 6 Legal Reporting Unit (LRU) Setup for Withholding Tax Report... 6 Manage Tax Registrations for the created Legal Reporting Unit... 6 Tax Authority Setup... 7 KR Tax Authority... 8 Check Payments... 8 Check Addresses... 9 Check Sites... 9 Set Site Assignments... 10 Withholding Tax Setup... 10 Create Tax Regime... 10 Create Tax Jurisdiction... 11 Create Taxes... 12 Create Tax Statuses... 15 Income tax status - KR_IN_STATUS... 15 KR_Resident tax status - KR_RE_STATUS... 15 Create Tax Rates... 15 1

Income Tax Rate... 15 Resident Tax Rate... 17 Create Tax Formulas... 19 Tax Determining Factor Sets... 19 Tax Condition Sets... 20 Tax Formulas... 20 Create Tax Rules... 21 General Rule... 21 Tax Reporting Type (seeded) for Suppliers... 22 Resident Individual in Korea... 23 Resident Corporation in Korea... 23 Foreign Corporation in Korea... 24 Foreign Individual in Korea... 24 Supplier Configuration... 24 Check Payments... 25 Check Addresses... 25 Check Sites... 26 Set Site Assignments... 26 Check Transaction Tax... 27 Supplier is Individual (Supplier has Taxpayer ID)... 27 Supplier has a Tax Registration Number (Corporation)... 28 Supplier is Contractor... 30 Manage Tax Reporting and Withholding Tax Options... 30 4. Enter AP Invoices... 31 Manage AP Invoice UI (WHT)... 31 5. Running Withholding Tax Reports... 33 Resident Business Income Withholding Form for Korea... 33 Resident General Income Withholding Form for Korea... 36 Non-resident General Income Withholding Form for Korea... 39 Resident Business Income Withholding Tape for Korea... 42 Resident General Income Withholding Tape for Korea... 43 Non-Resident Business and General Income Tape for Korea... 44 Withholding Tax Listing Report for Korea... 45 2

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1. Purpose of the document In Korea, companies are required to withhold tax on certain types of income payments to their suppliers. Korean companies pay the supplier invoice net of the withheld amount, issue a withholding certificate for the withheld amount to the supplier, and remit the withheld tax to the proper tax authority. There are two types of withholding under Korean tax law: Income withholding and Resident withholding. Income withholding comprises Business withholding and General withholding. Business withholding is withholding on payments for professional services to suppliers such as lawyers, accountants, and doctors. General withholding is withholding on all other types of income payments to suppliers, such as interest, dividends, and real estate income payments. Resident withholding is a surcharge on the General and Business withholding tax. Normal operating expenses, such as purchase transactions between companies, are not subject to withholding tax. The Korean Withholding Tax business flow is almost the same as the standard process in the AP module. However, the Korean Withholding Tax system necessitates reporting of additional information with pre-defined report formats. This document describes the additional information and reporting format requirements for Korea. ERP Cloud provides the following Korean reports: Resident Business Income Withholding Form for Korea Resident General Income Withholding Form for Korea Non-Resident General Income Withholding Form for Korea Resident Business Income Withholding Tape for Korea Resident General Income Withholding Tape for Korea Non-Resident Business and General Income Withholding Tape for Korea Withholding Tax List Summary 2. Assumptions and Prerequisites In this document, the following entities are assumed to have already been set up: Data Security Geographies Enterprise Structure Ledger Business Unit Legal Entity Legal Reporting Unit (LRU) Common setups for Payables It is recommended that the Implementation Project is complete for your organization before commencing the Feature Specific Setup outlined below. 3. Feature Specific Setup The following flow shows the required setup for implementing Korean Withholding Tax. 4

Security Console Configuration From the Navigator console, please navigate to Tools then to Security Console. Create Job Role The current duty role (APAC Financial Reporting) to run the Korea reports is an orphan duty role. You must create a job role and assign a user before running Korea reports. The new job role name is Manage Asia Pacific financial reporting. 5

Note: This job role must inherit the following APAC Financial Reporting duty roles: - ORA_JA_APAC_FINANCIAL_REPORTING_DUTY(user will have privilege to submit report jobs) - ORA_JA_APAC_FINANCIAL_REPORTING_DUTY_OBI(user will have privilege to run the reports) Assign users Legal Reporting Unit (LRU) Setup for Withholding Tax Report Manage Tax Registrations for the created Legal Reporting Unit 6

Tax Authority Setup Create Tax Authority in Manage Suppliers whose supplier type is Tax Authority. From the Navigator console, please navigate to Procurement then to Suppliers to create Tax Authority as a supplier. 7

KR Tax Authority You need to create the following two new tax authorities: KR Tax Authority and KR GU Office Check Payments 8

Check Addresses Check Sites 9

Set Site Assignments Withholding Tax Setup Create Tax Regime From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Regimes to setup Withholding Tax Regime: KR_WHT Regime. 10

Create Tax Jurisdiction From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Regimes and create income tax jurisdiction under the Withholding Tax regime: KR_IN_JU Income tax jurisdiction - KR_IN_JU Resident tax jurisdiction - KR_RE_JU 11

Create Taxes From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Regimes and further to Manage Taxes to create different types of Withholding Tax. Income tax withholding- KR_IN_TAX Controls and Defaults tab Tax Rule Defaults tab Note: The Tax Basis formula will impact the taxable amount. The Default Tax Rate is Business. Tax Accounts tab Threshold Controls 12

Tax Reporting Codes tab Tax Jurisdictions tab Tax Authorities tab Resident tax withholding- KR_RE_TAX Controls and Defaults tab 13

Tax Rule Defaults tab Tax Accounts tab Threshold Controls tab Tax Reporting Codes tab Tax Jurisdictions tab Tax Authorities tab 14

Create Tax Statuses Income tax status - KR_IN_STATUS From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Status. KR_Resident tax status - KR_RE_STATUS Create Tax Rates Income Tax Rate From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Rates. There are two rates for Income Tax: business rate (default option) and general rate. 15

Business income tax rate - KR_BIN_RATE 16

General income tax rate - KR_GIN_RATE The value of the Tax Classification Code Set Assignments is the same as that of KR_BIN_RATE. Resident Tax Rate There are also two Resident Tax rates: business rate and general rate. 17

Business resident tax rate - KR_BRE_RATE The value of the Tax Classification Code Set Assignments is the same as that of KR_BIN_RATE. General resident tax rate - KR_GRE_RATE 18

The value of the Tax Classification Code Set Assignments is the same as that of KR_BIN_RATE. Create Tax Formulas Use the tax formulas to define taxable amount. After defining the amount, you must enable tax formula. Tax Determining Factor Sets From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Determining Factor Sets. KR_RATE_DET KR_TAX_DET 19

Tax Condition Sets KR_GEN_TAX_CS KR_GRE_TAX_CS Tax Formulas From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Formulas. KR_IN_TAX_BASIS Income tax whose taxable amount is line amount s 80% Calculation Rule: 1+base rate modifier=1+(-20)=80% 20

KR_RE_TAX_BASIS Resident tax whose taxable amount is prior tax s tax amount. Prior tax is income tax. Create Tax Rules From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Rules and set up Tax Rate Rules for Withholding Tax. General Rule When you setup Tax, specify the default tax rate for tax amount calculation. The tax rate for a business is the default tax for both income tax and resident tax. Use the Tax Rate Rule to specify when the general tax rate must be used. KR_GIN_RULE Use this rule to calculate the income tax amount. When the second level of the product category is ORA_GENERAL_INCOME, use the general tax rate. 21

KR_GRE_RULE Tax Reporting Type (seeded) for Suppliers From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Reporting Type. The Tax Reporting Type is used to link suppliers for the reporting filter. 22

Resident Individual in Korea Resident Corporation in Korea 23

Foreign Corporation in Korea Foreign Individual in Korea Supplier Configuration From the Navigator console, please navigate to Procurement then to Supplier. 24

Check Payments Check Addresses 25

Check Sites Set Site Assignments 26

Check Transaction Tax Supplier is Individual (Supplier has Taxpayer ID) If the Tax Organization Type of the Supplier is Individual, this supplier would have a Taxpayer ID. From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Registration. 27

From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Registration. Supplier has a Tax Registration Number (Corporation) If the Tax Organization Type of the Supplier is Corporation, this supplier would have a Tax Registration Number (TRN). 28

From the Navigator console, please navigate to Setup and Maintenance then to Manage Tax Registration. Search for the Supplier created previously by Supplier name to enter Tax Registration Number information 29

Supplier is Contractor Manage Tax Reporting and Withholding Tax Options This setup determines when to calculate withholding tax: Invoice Validation or Payment or both Invoice Validation and Payment. 30

4. Enter AP Invoices Manage AP Invoice UI (WHT) From the Navigator console, please navigate to Payables then to Invoices and Manage Invoices. 31

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5. Running Withholding Tax Reports Resident Business Income Withholding Form for Korea 33

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Resident General Income Withholding Form for Korea 36

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Non-resident General Income Withholding Form for Korea 39

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Resident Business Income Withholding Tape for Korea 42

Resident General Income Withholding Tape for Korea 43

Non-Resident Business and General Income Tape for Korea 44

Withholding Tax Listing Report for Korea 45

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