Market impact

• Primary region: India, where tax deducted at source (TDS) applies.

• Unaffected regions: The United States and Canada.

• Future scope: The feature can extend to other regions.

Feature limitations

• Default TDS rate: The default rate is 18% for invoices as a temporary placeholder.

• Enablement process: Submit a Level 2 (L2) request to the CashApp team.

• Configuration scope: The feature currently supports account-level configuration. It can extend to customer-level and invoice-level configuration after ERP integration endpoints are developed.

Tax withholding in invoice processing

In a typical invoice flow, the following events occur:

• The seller is responsible for tax on the sale.

• The buyer deducts the tax at source and pays it directly to the government.

• The seller receives the net amount after withholding. For example, when 10% is withheld from an invoice of ₹100, the seller receives ₹90.

Proof of Payment: The buyer provides Form 26AS as proof that the tax has been deposited on behalf of the seller.

Collection Impact: Collections teams face challenges when:

1. The remittance amount of ₹90 does not match the invoice total of ₹100.

2. TDS confirmation in Form 26AS arrives after the seventh day of the following month.

Zuora Cash Application automates this process by calculating the withheld tax during payment matching.

Payment matching when withholding tax is disabled

Zuora does not auto-match payments like ₹108 against invoices of ₹118 — these are treated as unmatched until remittance data is received.

Payment matching when withholding tax is enabled

When withholding tax is enabled, Zuora Cash Application automatically performs the following actions:

• The module matches the ₹90 payment to the corresponding ₹100 invoice.

• The module calculates the TDS percentage as 10%.

• The module automatically populates the TDS value in the matching summary.

Important considerations

• The feature currently supports India and Indian rupees (INR). You can request support for other currencies.

• The module skips automatic matching when a payment is linked to more than five open invoices. This situation occurs in fewer than 3% of cases.

• The feature does not apply withholding tax to partial payments.

Supported and potential regions

Currently Supported: India

Not Applicable: USA and Canada

Potential future regions: The following countries have similar withholding systems and might be supported with minimal configuration changes.

• Italy: Ritenuta d'Acconto, which applies to professional services and certain transactions.

• Spain: Retención IRPF, which withholds income tax at source for sales and services.

• Brazil: PIS, COFINS, and CSLL taxes, which are sometimes withheld at source, especially for government transactions.

• Colombia: Retención en la Fuente, a withholding tax applied to business-to-business (B2B) transactions for goods and services.

• Mexico: ISR withholding, which applies to professional services and leasing and generally does not apply to goods.

• China: Withholding value-added tax (VAT) for foreign service providers. Certain industries also withhold business tax at sale.

• Argentina: Percepción IVA, a withholding system for VAT and income tax on specific transactions.

• Bangladesh: Advance Tax (TDS) on imports and local sales of specific goods. Rates vary by item and tax status.

• Pakistan: Withholding tax on goods under Sections 236G and 236H, applied during payments from distributors and retailers.

• Indonesia: Withholding VAT and corporate income tax for B2B sales and government contracts.

• Malaysia: Withholding tax on services, royalties, and certain digital goods.

• Sri Lanka: Withholding tax on goods, especially for government-linked contracts.

• Ghana: Withholding VAT and income tax deductions on certain goods transactions.

• Kenya: Withholding VAT for registered suppliers and income tax.

• Philippines: Expanded Withholding Tax (EWT), which requires buyers to deduct tax before paying for goods and services.