TEMENOS T24

GWHT (German withholding Tax)

User Guide

Information in this document is subject to change without notice.

No part of this document may be reproduced or transmitted in any form or by any means,
electronic or mechanical, for any purpose, without the express written permission of TEMENOS Holdings NV.

Copyright 2005 TEMENOS Holdings NV. All rights reserved.

GWHT - German Withholding Tax

Table of Contents
Overview.................................................................................................................................................. 3
Set up ...................................................................................................................................................... 3
TAX.TYPE ............................................................................................................................................ 3
APPL.GEN.CONDITION ...................................................................................................................... 4
TAX ...................................................................................................................................................... 5
TAX.GEN.CONDITION ........................................................................................................................ 9
EXEMPTION ...................................................................................................................................... 10
TAX.TYPE.CONDITION .................................................................................................................... 11
CUST.TAX.ALLOWANCE.................................................................................................................. 12
CUST.TAX.ENTITY ........................................................................................................................... 13
Accounting Process ............................................................................................................................... 15
Interest and Charges ......................................................................................................................... 16
INCOME.TAX.CALC .......................................................................................................................... 16
Account Tax Computation Joint Holder wise ..................................................................................... 17
TAX.LOCAL.RTN ............................................................................................................................... 20

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Overview
In T24 German Tax is now handled by the Tax Engine application. Prior to this to cater for German
Tax on accounts, the accounts module was used. This guide covers this processing and should only
be used by existing installations.

For new installations which require German Tax processing, please refer to the Tax Engine User
guide.

Set up
When a Bank has all the customer information in place they will need to set-up a new TAX.TYPE,
APPL.GEN.CONDITION, TAX, TAX.GEN.CONDITION and a TAX.TYPE.CONDITION for the
customers that they wish to be considered for GWHT processing. This will basically be a German
resident as defined on the CUSTOMER file. The specific TAX.TYPE called GWHT will indicate that a
customer will be liable for German Tax. The following screen shots and descriptions will show
examples of how to set-up the processing tables.

TAX.TYPE

This application allows definition of the types of TAX, which may be calculated within T24. Conditions
for applying this tax for a given set of customer conditions maybe defined in the next set of
applications; TAX.TYPE.CONDITION and TAX.GEN.CONDITION.

TAX.TYPE

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APPL.GEN.CONDITION

This application can be used to allocate the group you have defined for GWHT.

APPL.GEN.CONDITION

In The above example it shows that for Money Markets Conditions, any deal entered under
CONTRACT.GRP MMCAT which is equal to category 21012 (MM Deposits.) is liable for GWHT if that
CONTRACT.GRP is set up in TAX.TYPE.CONDITION, TAX.TYPE.CONDITION. This will be shown
in further diagrams. The DECISION fields can be multi-valued to add in new conditions for that
category, e.g. for GWHT deposits placed at 1.00 % or less are not liable for GWHT, as shown in the
shot below: -screenshot below:

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Multi-valued APPL.GEN.CONDITION

The above screenshot can also be input under L&D categories.

TAX

The set up of the TAX for GWHT is similar to the existing functionality but 3 new fields have been
entered:-

1. LINK.TAX. This field will contain a link to another existing tax record on this file and will form the
basis of the TAX-ON-TAX processing. The entry here must be a valid Tax record and if that has
a link tax already in place this must be checked for duplication.
2. TAX.BASE this field will contain either Tax or Event. If tax is chosen this shows that the above id
is to be calculated as a tax on tax. If Event is chosen it will indicate that the above tax is linked to
an event.
3. UPDATE.POOL.SEQ. This new field has been introduced for the updating of the customers record
via a Kest type pool. (Pool.1) any entries passed over Pool.1 are Kest liable so therefore will
update the CUST.TAX.ALLOWANCE accordingly. If left blank then no Pools will be updated.

Shown below is the TAX file for ZEST with the link shown to SOLI.

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TAX record for ZEST

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The screen shot below will show the LINK that the ZEST tax has with the SOLI. As you can see from
field LINK.TAX above, it is linked to another TAX record.

LINK.TAX with another TAX present will use the TAX-ON-TAX scenario.

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TAX record for SOLI

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Each Tax has a different CATEGORY for processing. This allowance allows for the different amounts
of tax to be processed on an individual basis, per percentage of tax. The DR and CR codes can
remain the same for bulk processing.

TAX.GEN.CONDITION

The set-up for TAX.GEN.CONDITION will determine who you want the process GWHT to affect. The
set up must contain the TAX.TYPE you set up originally and can be split to show the
Residency/Sector and Nationality of GWHT recipients.

The set-up here will also show those customers who are liable for GWHT but are also exempt to a
certain percentage of the Tax, e.g. Non-profit making organisations. These are also added here but
can have Exemption Certificates against them. This will be explained further on.

Below is the set-up for Customers that are liable for GWHT via standard T24 processing in
TAX.GEN.CONDITION.

TAX.GEN.CONDITION

The next shot shows that any customers that are a resident of Germany (DE), have a SECTOR of
5400 and have a NATIONALITY of (DE) are liable for GWHT. This can be changed if customers are
not residents of Germany and therefore not liable for GWHT.

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EXEMPTION

The EXEMPTION application is used to determine which organisation will be exempt. This applies
to Non-profit making Organisations, e.g. Churches, Sports Funds who can claim Part/Full exemption
from GWHT. These are named NV certificates and carry a wide range of percentage reductions.

EXEMPTION

The EXEMPTION shown here will bear a 50 % reduction on Zest processing if added to a
CUST.TAX.ALLOWANCE at input Stage.

This can be transferred to CUST.TAX.ALLOWANCE to give a percentage reduction in Zest GWHT

processing. The shot below shows a customer with NV01 certification that gives him Exemption for 1
year at 50% of the Zest percentage from 01/03/01 until 28/02/02.

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CUST.TAX.ALLOWANCE

TAX.TYPE.CONDITION

The TAX.TYPE.CONDTION table will govern which contract groups will incur GWHT.

Included with the TAX.TYPE.CONDITION is the tax liable for those chosen. As per the set up in
APPL.GEN.CONDITION, the contract groups set in here along with the Tax set up will form the main
GHWT functionality.

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TAX.TYPE.CONDITION

CUST.TAX.ALLOWANCE

The set-up of CUST.TAX.ALLOWANCE is based on all the above functionalities that have been set up
previous to this. It is individually based but there is an option to Merge/De-Merge customers based on
circumstances such as Marriage, Divorce, and Death.

This allows individual customers to increase their single allowance to a joint allowance. They can also
spread their allowance amongst different institutions depending on their account structure. But, as any
taxation, it is centrally reported, so therefore it is up to the individual/s to maintain their correct Tax
returns or be liable for penalties.

The set-up involves the T24 CUSTOMER number plus the current tax year (Which is added
automatically at process). For allowance purposes, the Customer has to request what amount he/she
wishes to use within the institution. Additionally, there is an ALLOWANCE.MOVEMENT amount which
lets the customer Increase/Decrease their current ALLOWANCE if need be by the process of a + or in
front of the amount. This is governed by the MAX.ALLOWANCE amount,, which cannot be broken at
any time.

Below shows the set-up of an individual CUST.TAX.ALLOWANCE, which has a MAX.ALLOWANCE

of Dem 3100 and an ALLOWANCE.MOVEMENT of Dem 3100. This means the customer in question has

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a normal allowance of Dem 3100 but can adjust it up to Dem 3100 at any time, though this is the
maximum he/she can go up to.

Amending the CUST.TAX.ALLOWANCE

CUST.TAX.ENTITY

The CUST.TAX.ENTITY application allows the institution to Merge/De-merge customers to give them
one single allowance for a joint couple (MERGE Process). This process happens (MERGE) if
customers are joined in Marriage.

It is up to the individual customers to tell the institution what allowance they wish to set (as per the
single CUST.TAX.ALLOWANCE) for the joint application. The rules of MAX.ALLOWANCE and
ALLOWANCE.MOVEMENT still apply for a joint application.

If one member of the party is does not hold an account with the institution, an account has to be set-
up to complete the merge. This process can only work for individual customers and not for any other
companies.

Once customers are merged you can amend their CUST.TAX.ALLOWANCE to a new amount if they
wish to Increase/Decrease their Allowance, however this cannot break their original MAX.ALLOWANCE.

The opposite of this is the De-Merge process. This happens if the Customers divorce or in the
circumstance of death. Again, it is up to the Individual/s to advise their Bank regarding this.

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Once the De-merge process is complete you will need to set up a new CUST.TAX.ALLOWANCE
for the new customers again only if they wish to change their allowances.
On the next page you can see the Merge/De-merge process in the way of screen shoots, including the
CUST.TAX .ENTITY.

The first two screen shots show individual customers with SINGLE allowances before the MERGE
process.

Single allowance 1

Single allowance 2

The next will show the process of Merge and De-merge via CUST.TAX.ENTITY. Once set up
CUST.TAX.ENTITY will still keep a record of the Individual allowances, but that is for the De-
merge option.

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Merged allowance on CUST.TAX.ENTITY

As stated, in the case of divorce or death the process of De-merge will take place. The customers will
need to be reverted to their single status and a new allowance (if necessary) must be input.
Depending on the split of allowance, it must be checked against any outstanding and settled trades
that have and will pass through their accounts. This is done at customer level and they must advise
their institution what balance they have left (per customer) after they have decided on what allowance
they have left.

De-merging

Accounting Process
For T24 to post deducted tax amounts to CUST.TAX.ALLOWANCE the accounting side must be set
up correctly. For LC, MM and Interest and Charges the Transaction Codes are hard coded and
therefore must by defined for the individual deal type, otherwise T24 will calculate GHWT but not post
it to the Customer GWHT framework.

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The accounting set up involves the input of a new field in the TRANSACTION application. The
UPDATE.INTEREST.POOLS field, when set to YES will (as it states) update the Interest Pools of
POOL.1 (individual customer taxation) and pass accounting entries to show this. If left blank normal
accounting is still performed (Default is NO).

As stated before, the TRANSACTION codes for T24 accounting are hard coded per module so for
each type the UPDATE.INTEREST.POOLS must be set to YES. The hard coded TRANSACTION
codes are found in the SYSTEM.RECORD application of T24 and hold all the TRANSACTION codes
for the different Modules.

Interest and Charges

The current codes are as follows for interest and charges

INTEREST and CHARGES: 381 and 382

Depending on what LD and MM deals you are setting up in your APPL.GEN.CONDITION you will
have to amend the TRANSACTION codes accordingly.

INCOME.TAX.CALC
This field in the MM and LD portion of GWHT enables a customer to indicate how the interest tax is to
be calculated for the deposit.

1. FULL or NULL - The full interest will be calculated and deducted from the interest, i.e. no tax
allowance or exemption, will be taken into account.

REDUCED - The interest will be offset by any tax allowance or exemption. If the resultant is
greater than 0 then it will be used as the base to calculate the interest tax, which will then be
deducted from the interest. Otherwise, there will be no interest tax. The tax allowance of the
customer will be REDUCED in both cases.
ZERO - This deposit will be free of interest tax.

VALIDATION RULES

Valid rules are:

NULL
FULL
REDUCED
ZERO
DEFAULT IS NULL

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Tax calculation on MM

Account Tax Computation Joint Holder wise

There may be accounts in a Bank where each joint holder falls into different tax slabs based on their
RESIDENCE, NATIONALITY, SECTOR, etc. T24 allows for computation of tax on ACCOUNT
interest based on the individual tax status of each joint holder.

Tax can be calculated JOINT.HOLDER wise on ACCOUNT interest by adding a sample routine
TAX.LOCAL.RTN in field CALC.ROUTINE in application TAX.

When tax joint holder wise is to be computed, a valid TAX.TYPE.CONDITION record has to be
specified in ACCOUNT.CREDIT.INTEREST, ACCOUNT.DEBIT.INTEREST,
GROUP.DEBIT.INTEREST, and GROUP.CREDIT.INTEREST in the field TAX.KEY as shown in the
below screen shot.

ACCOUNT.CREDIT.INTEREST

As shown in the above screen shot, the field TAX.KEY has to be input with the tax type and not the
tax key for computing tax joint holder wise for an account.

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From the tax type specified for the account, for the tax key applicable for the main customer based on
the tax type specified in CUSTOMER.CHARGE table, the local routine must be input in application
TAX in the field CALC.ROUTINE.

When a customer record is created based on the RESIDENCE, NATIONALITY, SECTOR, etc
TAX.GEN.CONDITION is validated for the tax conditions applicable for the customer and the same is
updated in table CUSTOMER.CHARGE. When the tax type is specified on the account interest, it
checks for a valid TAX.TYPE and a TAX.ACT.GROUP in CUSTOMER.CHARGE and applies the
tax rate for the group in field CUST.TAX.GRP of TAX.TYPE.CONDITION for each joint holder.

Screenshots of TAX, TAX.TYPE.CONDITION, TAX.GEN.CONDITION, and

CUSTOMER.CHARGE.

TAX.GEN.CONDITION

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CUSTOMER.CHARGE

TAX.TYPE.CONDITION

TAX

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TAX.LOCAL.RTN
The routine is to be input for the Tax key applicable to the main customer in the account. Tax for the
account will be computed JOINT.HOLDER wise and the total of the individual tax will be computed.
Credit Interest or Debit Interest on the account, is divided equally based on the number of holders and
then Tax is calculated.

For example, if there is a main CUSTOMER.ID and a JOINT.HOLDER in an account with tax rates
as 10% for the main CUSTOMER.ID and 20% for the JOINT.HOLDER based on their status, and if
the interest earned is 100USD, the interest amount will be equally divided as 50USD to each
JOINT.HOLDER and the tax computed would be 5USD for main CUSTOMER.ID and 10USD for the
JOINT.HOLDER, so the total tax for the account would be 15USD.

The individual tax amounts JOINT.HOLDER wise can be viewed through INT.MOVEMENT and
through the table TAX.CAP.LOCAL.INFO. To enable update of INT.MOVEMENT the field
INT.MVMT.UPDATE must be set to Y flag in application ACCOUNT.PARAMETER and also a valid
Interest and Charge application ID must be specified in field SYSTEM.ID in application
INT.MOVEMENT.PARAM.

Screen shots of ACCOUNT.PARAMETER, INT.MOVEMENT.PARAM, INT.MOVEMENT

AND TAX.CAP.LOCAL.INFO.

ACCOUNT.PARAMETER

Field INT.MVMT.UPDATE is set to flag Y in ACCOUNT.PARAMETER as shown in the above

screen shot.

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INT.MOVEMENT.PARAM

Field SYSTEM.ID in application INT.MOVEMENT.PARAM has to be set to the Interest and Charges
application ID as shown in the above screen shot.

TAX.CAP.LOCAL.INFO

TAX.CAP.LOCAL.INFO displays the tax amount for the joint account customer wise as shown in the
screen shot above.

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INT.MOVEMENT

INT.MOVEMENT as displayed in the above screen shot will show the tax amount for the joint account
customer wise along with other details like total interest amount.

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