For achieving this, I created the special % withholding GL account and recorded the amount while making the entries for supplier payment.

Same but inversely I am making when withholding tax got deducted from my payment by my client. I just record the customer payment with withholding tax deducted by customer for closing the invoice and when my customer give me the paid challan, I balance the witholding account with reference of that paid tax challan.

It makes all receivables balanced and nothing remains in customer balance. I have customized the Front Accounting for it for myself.

Ideally the solution is to have a the Withholding Tax processed at the level of customer and supplier payments like a discount as detailed in earlier posts.  It could be configured in customer/supplier set up where the user could determine the % that should be withheld from the supplier payment or by the customer when he makes his payment and it could be offered as a option when processing customer and supplier payments.

Example:

In customer set up... +Withholding tax to be deducted by customer on payment  ..3..%
                                 +GL Allocation of Withholding Tax Deducted  ....5/2562...   (as selected by user from GL structure)

In customer payment screen...Amount of Discount  $x
                                              Amount of TDS         $x***

*** calculated like discount with reference to customer set up parameters and allocated to selected GL account as per customer set  up. Amount "Auto   filled" but with the option of manual over-ride.         

Sorry to only offer logic not a coded solution.

An architect sells services for $1000. He charges $15 Vat on top of this. FA can process these 2 elements.  His customer pays him $970 (1000 less 3%) + $15 Vat = $985. He receives $985 into FA against the customer account.  It looks like the customer still owes him $30 (1000 +15 - 985).  But in reality the customer owes him nothing as the $30 is income tax withheld by the customer from the payment to the architect and paid directly to the tax authority. 

How do I remove the $30 from the customer account and put it in the WHT accrued account?

The ideal solution would be to transfer it there on processing of the customer deposit like we do with a settlement discount which is transferred from customer account to the discount allowed account.  Except in this case it is transferred to WHT accrued account.

Why isn't the sales tax, 3$ paid by the seller, the invoice originator.?And why should the customer pay the tax? This tax is deductable for the buyer, and he can claim that from the tax authorities. Well I guess this the normal way of handling this.

Joe

In simple concept it would entail coding similar to settlement discount. 

In the same way FA deals with settlement discounts on payments from customers and payments to suppliers, there is an additional, similar type of transaction commonly dealt with by accountants - withholding tax (WHT)

When certain (not all) customers pay me, they are obliged to deduct with-holding tax from the amount they pay me.

For example, I invoice $100 to my customer, and he will pay me $97 and then he will pay the $3 balance to the tax authorities - as a payment of tax on my behalf. 

As far as the customer is concerned his account with me is zero - the $3 should not appear on the statement I send him. 

The accounting for this would be

Dr Bank                                       97
Dr WHT deducted on my behalf      3  (balance sheet receivable account as opposed to the discount allowed GL acc)
Cr Debtors Control                     100 

There is no way I see to account for this in FA at the level of customer payment. 

The ideal solution would be to have, at the level of customer and supplier set up, an option to process withholding tax on customer or supplier payment.

The reverse can happen when I pay certain suppliers.  For example, if I pay my rent I need to deduct 5% tax and pay it to the tax man.

The accounting entry for this would be

Dr Rent                                  100
Cr Bank                                    97
Cr WHt deducted by me              3 (balance sheet payable account - as opposed to the GL acc for discount received)

When I pay the tax man the entry would then be

Dr WHt deducted by me              3
Cr Bank                                      3       

Mark