A question from Suguna and the answer (Link: Initial Issues)
“By referring to the issue, the end result will be a small amount of Tax deduction (pph21) in off-cycle pay result while then the rest would be brought forward into the next Regular Pay Run, in the same period, to recalculate the actual Tax deduction. The affect is that the employee salary in the next regular pay run could be less and/or becoming negative cause by the tax deduction.”
The above also happens in other situations such as this one below.
We have run regular payroll in 20th May, and we follow that with an off-cycle (Bonus) in May 26th. The employee has a transfer action on 1st May.
In this case, the tax is small in off-cycle pay result, while then the rest is eventually recovered in the following periods. In this case the employee is transferred for the 1st of the month. The Off-cycle is not in January, but in May.
Have you come across this type of situation.
Will SAP solve this issue, do you know.
And the Answer
In what payroll country you’re dealing with?Me, for Indonesian Payroll (PY-ID).
In PY-ID, because Indonesia is using annualized method in their income tax calculation (PPh21) then actually there’re some factors that SAP use to calculate the income tax.
1. SAP will always calculate the total income along the year until the existing period then multiply it by its projection factor in the current payroll period. So globally the formulas will become as these:
/416 = /414 + /415 or
Annual Total Net = Annual Regular Net + Annual Irregular Net
/414 = (/412 + prev /412 ytd) * /402 or
Annual Regular Net = (Regular Net Income + previous Regular Net Income year to date) * Projection Factor
/415 = /413 + prev /413 ytd or
Annular Irregular Net = Irregular Net Income + previous Irregular Net Income year to date
(**Note: prev /413 ytd is /413 from CRT table in previous period)
Off-cycle payroll wage types is often defined as Irregular Net Income (that is cumulated into irregular taxable income) by SAP Customer. SAP will not calculate this irregular taxable income wage type with the projection factor in the their future tax calculation, only the regular taxable income does.
So it explains why the total tax in off-cycle period is becoming very small when it is run in the beginning of year although it will be adjusted in the next payroll period. This is treated as my case as I’ve already explained at above.
2. In PY-ID (indonesian Payroll), the income tax will be paid and reported to the Tax Office (KPP or Kantor Pelayanan Pajak) where the employee located or in other words, where the company code (NPWP:Nomor Pokok Wajib Pajak) is registered in their local tax office. How we define the tax office, it closely related as how we define our Enterprise Structure configuration, that are Company Code-Personnel Area – Personnel Sub Area (I’ll try to explain more about this enterprise structure config detail in separate treat later). So, in your case, I assume the transfer action is across the personnel area that lead to the difference Tax Office Grouping. Therefore SAP will try to calculate the total income from the beginning again means the total income from the previous period until the transfer date will not be calculate in the transfer period and later, since it belongs to the previous Tax Office reporting. That’s why when you run the off-cycle bonus soon after the transfer action, the total income tax will be small or very small, if I may say. It will be adjusted into the next payroll period off course.
So from the above explanation, in PY-ID, whenever there’re such transfer action in the mid of year that may lead to the different Tax Office reporting. Then, in the year-end, SAP will produce The 1721 A1 (SPT pajak tahunan) as many as the tranfer action across tax office grouping has done. In Summary, the grouping in the year-end Tax Report are Tax Office Grouping, Employee Number (Pernr).
Hope it can answer your issue, should there’re some other opinions and ideas are welcome.