Topic: Withholded tax deduction at PURCHASE transactions

This must be a question to more experienced users, not that much about coding I think.

I have PURCHASE operations for items that typically have 0 taxes.
However for some certain suppliers at this standard pricing, I have to withhold some percent on the resulting amount and pay it as tax (but not to the supplier).


One solution that comes to my mind is removing the negative rate data check for tax rates.
However I am not sure whether to expect complications this way...

Any ready work around???

Re: Withholded tax deduction at PURCHASE transactions

Hello,

Have you looked at quick entries?

I have done something similar to what you are looking for using quick entries for vat on items acquired from EU, where I have to pay local vat on these items.

Re: Withholded tax deduction at PURCHASE transactions

Commissions off the books or amount set aside for possible contractual reasons / bullying the supplier!
A special tax called "On Hold" can be made and on every such purchase invoice it can be credited to a special "Payable Account" from where it can be paid out to the real beneficiary.

Re: Withholded tax deduction at PURCHASE transactions

gj6n68 wrote:

Hello,

Have you looked at quick entries?

I have done something similar to what you are looking for using quick entries for vat on items acquired from EU, where I have to pay local vat on these items.


Hi, and thank you. I have to try, are the stock quantities adjusted with quick entries?

5 (edited by stefan 11/10/2017 08:07:02 am)

Re: Withholded tax deduction at PURCHASE transactions

apmuthu wrote:

Commissions off the books or amount set aside for possible contractual reasons / bullying the supplier!

:-) :-) :-)

Here they made a "Flat taxing" - if you are in a out of tax hypothesis, somebody has to collect the tax for you and pay it.
If you are a person, not entity and you sell to an entity, the person is charged with the same rate as the "profit" tax for the entity. And it's all in the books. :-)

Re: Withholded tax deduction at PURCHASE transactions

apmuthu wrote:

Commissions off the books or amount set aside for possible contractual reasons / bullying the supplier!
A special tax called "On Hold" can be made and on every such purchase invoice it can be credited to a special "Payable Account" from where it can be paid out to the real beneficiary.


I am now bumped into same issue how to do Withholding Tax /w FA

@apmuthu, can you elaborate more on this solution ?

For example, we have Mr.John as airconditioning repairman who did $100 job on our company.
This $100 is further broken down to :
- $98 Supplier Invoice to John and
- $2 Withholding Tax for John that our company must pay on behalf of Mr. John

How do we do it ?


If we do it using your solution above the Supplier Balance would remain $100, wouldn't it whereas it should've been only $98

Thanks

Re: Withholded tax deduction at PURCHASE transactions

Work Done - Supplier Invoice:
Cr John $98
Cr Witholding Tax Payable $2
Dr Repairs and Maintenance (Actual Invoice Amount) $100

Supplier Paid / Allocated
Dr John $98
Cr Bank/Cash $98

Witholding Tax Payment (consolidating all such payables like many $2 or such taxes)
Dr Witholding Tax Payable $2
Cr Bank/Cash $2

Re: Withholded tax deduction at PURCHASE transactions

I can do the latest step using manual journal entry. that's no problem. it'll just be ugly way to do things around withholding tax. I'm trying to get it done under what's supposed to be by inputting onto Supplier Invoice

Maybe There's something that i'm missing because the entry generated by Supplier Invoice operation are not what I would have expected it would be /w Withholding Tax component


Ok. So the following setup is what I have done so far :

1. Set a new Tax in Setup -> Tax named "Withholding Tax" with its
    Sales GL Account to "Withholding Tax Payable"
    and
    Purchasing GL Account also to the same "Withholding Tax Payable"

    Default Rate is 2%
    Well, our company just concern with Withholding for Purchase. so that's the only subject of interest for now

2. Create a new Item Tax Types that make sure "airconditioning service charge" have this tax component.
    In fact it's the only tax component for this item

    It is a Service type item, so its :
    Sales Account is set to "Sales"
    COGS Account is set to "Repairs and Maintenance"

3. Create John as Suppliers and make sure he is also in Tax Group with Withholding Tax checked. Not that it matters a lot

    John's
    Account Payable Account is set to "Account Payable"
    Purchase Account is set to "Repairs and Maintenance"

4. Create a direct Supplier Invoice for a $100 worth of invoice.

    The Price Before Tax Line is set to $100. Hence there's a $2 Withhold Tax on this transaction


The created Journal Entry would be ( from creating Supplier Invoice operation in FA )

Dr Withholding Tax Payable $2       ---> I would expect this to be Cr, like what you thought it would have been
Dr Repairs and Maintenance $100
Cr John Payable $102

9 (edited by aleifuuwork 04/14/2019 11:53:51 pm)

Re: Withholded tax deduction at PURCHASE transactions

I suppose there are only 2 ways to input WHT in FA :


a. manual journal entry, like @apmuthu describes
b. quick entry ... which basically just a setup manual journal entry. this only works if your purchase is of fixed amount over time

I don't think the current Supplier Invoice operation supports this since the journal of any additional tax are treated like VAT ( WHT is kinda tricky that it's not addition )

Someone can clarify findings maybe to make things better for FA