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

innovation-driven technology

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

innovation-driven technology

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

innovation-driven technology

Re: Withholded tax deduction at PURCHASE transactions

We are also suffering due to lack of provision for witholding Taxes in FA.
Manual Entry (Journal or Quick) has no use!. We need to report and pay the collected amount from the supplier to government.
We need Supplier name, Pan Card No. and other mandate information as well. If you are doing manual entry, how will you prepare these reports by having only ledger entry?
It is Mandatory Requirement for most of Asian Governments to pay the Tax Collected from the supplier by way of Withholding Tax.
TDS (Tax Deducted at Source) filling is also separate mandatory report like Tax Report of GST.
Hope, We have implemented another set of Tax set up to implement the withholding Taxes in FA.
This is also most wanted features for FA users.
Does anyone have any solutions for this issue?

Regards,
Bharathiraja Kaliyamoorthy

Re: Withholded tax deduction at PURCHASE transactions

@joe: any standard way out for this?

Re: Withholded tax deduction at PURCHASE transactions

Hi, it is difficult to satisfy every aspect of tax handling. I think FA has a very good way of handling the taxes.
Maybe someone in the audience has a solution. Otherwise someone may write an extension.

Joe

Re: Withholded tax deduction at PURCHASE transactions

Thanks for your prompt reply @apmuthusir | @joe sir.
Yes, FA has splendid way of handling the GST/VAT.
Hope, FA's Existing Tax handling method could also be used to create the addon. But it requires seperate set up files i.e tax type, Tax group based on the nature of transaction.
I will prepare and provide detailed requirement file, If anyone coming forward to implement the same in FA.
Very curious to share with volunteers in the developers group.

Regards,
Bharathiraja Kaliyamoorthy

Re: Withholded tax deduction at PURCHASE transactions

Retentive tax works fine if you enter a tax as negative, you will have to modify the database directly as FA does not allow negative taxes.