Withholding Tax Examples

This example uses a single withholding tax code, 159, that has a percentage recoverable of 100%, and a tax rate of 10%. The supplier invoice also includes VAT of 20%. The transaction, base, and statutory currencies are the same.

The following is a summary of the details on the Withholding Tax tab of the invoice:


Invoice Total	WHT Line	Fees	WHT Code	Taxable Fees	WHT Rate	WHT Amt	Expenses
120	1	80	159	80	10%	8	0
	2						20
	Total	80		80		8	20

The credit terms on the invoice provide a 2% cash settlement discount if the invoice is paid within 10 days.

After eight days, a payment is made settling the full invoice amount.

The system creates the following postings when the supplier invoice is saved.


Supplier Invoice Creation
GL Account	Description	DR	CR
7200	Audit Fees	80.00
8300	Expenses	20.00
1400	Value Added Tax	20.00
2100	Supplier Control Account		120.00
	Total	120.00	120.00

The system creates the following postings when the supplier payment is saved in the For Collection status.


Supplier Payment Create—For Collection
GL Account	Description	DR	CR
2100	Supplier Control Account	112.00
5200	AP Discount		2.00
2110	Supplier Payment Account		110.00
	Total	112.00	112.00

The system creates the following postings when the banking entry paying the invoice is allocated against the supplier payment. The allocation sets the supplier payment to Paid.


Banking Entry
GL Account	Description	DR	CR
2110	Supplier Payment Account	110.00
1040	Bank Account		110.00
2451	Withholding Tax Liability		8.00
2100	Supplier Control Account	8.00
	Total	118.00	118.00

This example describes a partial payment on an invoice subject to withholding tax.

The example uses two withholding tax codes: tax code 159, with a percentage recoverable of 100% and a tax rate of 10%, and tax code 316, with a percentage recoverable of 80% and a tax rate of 5%. The VAT on the invoice is 20%, and the transaction, base, and statutory currencies are the same.

The invoice is for a total of 240.00, including VAT, and has two lines in the Withholding Tax tab as follows:


Tab	WHT Line	WHT Code	Fees (CR)	Taxable Fees (CR)	WHT Rate	WHT Amt	Expenses	VAT Amt	Line Total
WHT	1	159	80.00	80.00	10%	8.00	50.00		130.00
WHT	2	316	70.00	56.00	5%	2.80			70.00
Tax								40.00	40.00
	Total		150.00	136.00		10.80	50.00	40.00	240.00

The credit terms on the invoice provide a 2% cash settlement discount if the invoice is paid within 10 days.

Within seven days of the invoice date, a payment is made that settles 60% of the invoice amount, as shown in Supply Payment Allocate, Partial Payment.

The following is a summary of the payment details:


Invoice Total	Allocated	WHT Base	WHT Amount	WHT % (Composite)	Discount	Paid Amount
240.00	144.00	81.60	-6.48	7.94	-2.40	135.12

The system creates the following postings when the supplier invoice is saved.


Supplier Invoice Creation
GL Account	Description	DR	CR
7200	Fee 1	80.00
7300	Fee 2	70.00
8300	Expenses	50.00
1400	Value Added Tax	40.00
2100	Supplier Control Account		240.00
	Total	240.00	240.00

The system creates the following postings when the supplier payment is saved in the For Collection status.


Supplier Payment Create—For Collection
GL Account	Description	DR	CR
2100	Supplier Control Account	137.52
5200	AP Discount		2.40
2110	Supplier Payment Account		135.12
	Total	137.52	137.52

The system creates the following postings when the banking entry paying the invoice is allocated against the supplier payment. The allocation sets the supplier payment to Paid.


Banking Entry
GL Account	Description	DR	CR
2110	Supplier Payment Account	135.12
1040	Bank Account		135.12
2451	Withholding Tax Liability 1		4.80
2452	Withholding Tax Liability 2		1.68
2100	Supplier Control Account	6.48
	Total	141.60	141.60