based on this update I ask you kindly how you would manage this scenario which is very common in Italy.
A few premises:
Our accounting is on accrual basis
WHT however always works on cash basis
99% of the suppliers which are subject to WHT issue proforma and only tax invoice after payment
Given, as said that WHT goes cash basis, and that proforma are not included in Manager’s accounting, we need a report of the WHT of the month to be paid linked to the proforma (purchase order) or the invoices.
Since purchase order are not linked to WHT I was thinking to develop a workflow like this, if we have a sequence proforma, payment, invoice:
register proforma inside purchase order
register a payment of the supplier with two lines. One with the whole amount against P&L account and the second with the negative amount vs WHT liabilities
register the invoice with a WHT equal to zero to have it linked to the WHT account (the supplier has 60 days to issue it so we don’t usually receive it in the right period)
register payment of the WHT
If we will receive the invoice before payment:
register the invoice completely with WHT
register payment of the payment of the supplier
register payment of the WHT
Then we will create a custom report grouped by supplier of all the writings inside WHT liabilities.
Withholding tax implementation is compatible with cash-basis. The only piece that is missing is some kind of report like we have for tax codes such as Tax Summary even though you can extract withholding tax payable on cash-basis from balance sheet.
For example. I’ve created this purchase invoice where I paid half of it.
I think that maybe I didn’t explain the issue well. There are two payments: one of the proforma and one of the WHT.
When we pay the proforma (no invoice is accounted but only an order), so a supplier prepayment, under a legal point of view, we have to account a liability for WHT. Then we generate a list of all the WHT of the proforma paid in the month and will pay the WHT.
The problem is how to account the WHT tax before receiving the invoices to generate the report to support the payment. I think that a solution can be this one:
I did some testing on WHT inside a new business. This solution, even if not optimal, can potentially work. But there is one issue with several consequences that makes it unusable right now: the WHT account is activated only with the creation of a WHT tax inside an invoice and a WHT tax equal to 0 is not considered a WHT.
So basically (i) the module will not activated, (ii), even if I activate it temporally, creating a WHT in a invoice, to write a first payment, and then delete the WHT, the payment disappear from the CoA and (iii) an invoice with the WHT tax activated (flag) but with an amount equal to 0 is not linked in any way to the WHT account.
Can you provide a solution for this? Maybe activating the WHT account by checking if the account is empty and not by only by checking if there is a WHT in a invoice? Also, would it be possible to show an invoice inside the WHT account if the WHT flag is selected and we insert an amount equal to 0?
I’m asking again to add the possibility to note WHT inside orders so that we can clone them directly inside of the invoices and we can query orders with WHT that were converted to invoices with WHT by creating a custom report?
No. In Italy, WHT accrue at the moment of the payment of the proforma not a the issue of the invoice, so it is not a deposit. Paradoxically, for the Italian law, under a workflow point of view, it would be more correct to have the WHT flag and the percentage (or the amount) on the payment form instead of the purchase invoice (though it is shown on the invoice itself!).
@Davide I think what will work best for you is to create an account, use this account in payment transactions and enter negative numbers to record the WHT. The downside is that you will not get the WHT payable grouped by contacts. @lubos kindly make it possible to edit and place the WHT Payable account under a group.
If I understand you correctly, you have a Sales Invoice or Tax Invoice which you use for actual accounting transactions, and separately for say shipping of goods, you need to use a Shipping Invoice/Proforma Invoice as a document for declaring import/export of goods through customs, but is not a payable invoice, is that how you mean by Proforma?
If so, I produce these manually outside Manager, but would be great to make these in Manager, it’s a bit like a Delivery Order with pricing (but may include other information like notifying party, packing details weights & dims).
i.e. If I sold a product to a foreign country, I would send a Tax Invoice to the client for payment, but attach a Proforma (Shipping) Invoice to the product for shipping and customs declaration when it arrives in the foreign country customs for import taxes/duties etc.
Yes it is true. We are doing a prepayment of the amount due, less WHT, and we are using the first option since we register it under accounts payable. But this is not my issue. My issue is that, at the time of the payment, WHT accrues. And in Manager is not displayed in any way.
Basically, the best and easiest solution, on my side, would be to have WHT flag and field also under payments, but I don’t know if it is feasible. The other solution is this one:
but I’m facing those issues:
I know I can do this with a special account but since now we have this new “module” I think that @lubos can save us some extra job by solving those small issues.
Basically yes. But let’s forget about Proforma for a minute. Let’s focus of WHT and Tax Invoice. WHT accrues when I make the payment that is not when I receive the Tax Invoice since my suppliers (I’m talking basically only of lawyers and accountants) has 30 days from payment to issue the tax invoice.