Withholding tax: the tax a company pays on behalf of others

Withholding transfers to the payer the obligation to deduct tax and remit it to the State. It applies, among other cases, to services, property income and payments to non-resident entities.

The risk with this mechanism is being forgotten. If the withholding is not made, the tax is still due — and the company that paid is accountable for it, not the supplier who received the full amount. The correction adds interest and, in practice, means paying twice for the same service.

Three points account for most problems: correctly identifying which transactions are covered, applying the right rate given the nature of the income and the beneficiary's residence, and meeting the remittance deadline. Buying services abroad needs extra attention, as it intersects with VAT and any double taxation treaty.

The way to control this is at contracting, not at payment. The tax treatment should be settled when the contract is signed and reflected on the invoice itself.