This module will not be further enhanced. Support is limited to defect fixing only.

Introduction to Redemption of Withholding Tax

This module covers the calculation of the Withholding tax, on interest payable to a customer for early redemption of a term deposit. The interest amount arrives at by netting the early redemption fee from the calculated interest, and applying tax on the balance interest amount.

WHT is applied for the interest earned on account or deposit products belonging to private customers (not corporate). The bank is responsible for the tax at source and forwards the deducted tax amount to the state treasury. Requested module is connected with the WHT calculations in Finland, Sweden and has the possibility to cover situation when there is an early redemption of deposits. In such scenario, the tax needs to be calculated after deducting the early redemption fee.

There are two functional aspects addressed:

• Calculation of early redemption fee: The early redemption fee is calculated based on the differential market borrowing cost of funds, for the financial institution, applicable, for the remaining term of the deposit, from the date of redemption, and the market borrowing cost of funds applicable, when it had taken the deposit from the customer.
• Withholding tax on interest calculated for early redemption: The Withholding tax is calculated as a percentage of the interest computed during early redemption, with the early redemption fee netted off.

This user guide provides details on the necessary configuration required in the system to achieve the functionality of calculating Withholding tax, in Sweden, based on a threshold amount.