In many countries, the buyer is legally responsible for paying withholding tax. Withholding tax is tax on non-inventory deliveries (often services) that are delivered by a supplier (person) who is not an employee in the company. The supplier submits an invoice for services to the buying company and receives payment for this invoice.
The buyer is legally responsible for withholding of a certain percentage of the invoice amount at the time of payment, and the net amount (invoice amount minus the withholding tax) is paid to the supplier. The tax, which has been withheld, is posted to a ledger account for withholding tax and is periodically paid to the tax authorities.
The following topics provide information about setting up withholding tax: