WITAX takes into account tax exemption limits
The Withholding Tax Relief Modernisation Act (“Abzugsteuerentlastungsmodernisierungsgesetz “ AbzStEntModG) and its impact on withholding tax processing.
Digitising the withholding tax process and benefiting from the Withholding Tax Relief Modernisation Act with WITAX
The Withholding Tax Relief Modernisation Act brings significant changes when it comes to withholding tax. In the context of the §50a EStG, the Withholding Tax Relief Modernisation Act's introduction eliminates the laborious registration process that used to be applied. Furthermore, creditors that are subject to withholding tax can now make use of an annual exemption limit of 5,000 Euros in cases of rights transfer.
When developing WITAX it was important to us to create a solution that would support you in the best possible and most comprehensive way. For this reason, WITAX automatically checks each receipt to determine the extent to which the annual exemption limit has already been exhausted for a creditor subject to withholding tax and provides recommendations on how individual receipts should be evaluated in order to make optimal use of the exemption limit. In this way, the receipt verification process can be handled quickly and transparently. Another advantage is that you, as the remuneration debtor, do not have to withhold tax if the exemption limit can be used, which in turn reduces compliance and administrative costs.
Furthermore, WITAX also provides you with an overview of all creditors and can see which amounts have already been declared, for which creditor the exemption limit has not yet been exceeded and where there is still potential.
With this exemption limit check, WITAX halts the payment in SAP until the receipts are released for further processing by the FI area after evaluation by the Tax Department. As the solution reports a unique tax code to FI, it is also clearly visible in the FI system for which creditors or receipts the exemption limit was applied.
Digitalising and automating this verification process with a TaxTech solution thus makes a significant contribution to further improving process efficiency and the quality of tax calculation, as well as to ensuring tax compliance. Since, in many companies, 80 – 90% of the cases for which withholding tax has to be paid relate to the transfer of rights, this new function and the use of the exemption limit also offer potential savings in the amounts of withholding tax to be paid.