Recording Corporate Income Taxes

[kendirangu]

Hello All,

I would like to record income taxes.

1. In my country, organisations are expected to pay an installment tax. This is in anticipation of the tax payable for a year of income.
2. I have a customer who withholds 3% from every invoice and submits to the tax collector as withheld income tax.

I have an income tax expense account where i am recording the installment tax.
I have setup journal entries to match the invoices paid by the customer and the respective withheld income tax into the same income tax expense account.

How can i track this so that by the end of the financial year, I have the below.

1. The total income tax already paid (installments and withheld)
2. The balance of payable tax based on profit.
3. So I need to do anything on the P&L given the above ?

[Tut]

What you describe is called withholding tax in Manager. You should read all the Guides about it.

[kendirangu]

I have read the guides on withholding tax. I have recorded the withholding tax that has been remitted and the installment tax as an expense in the income statement.

Do I need to do anything on the P&L ?
Do I manually calculate any tax balances and raise them as a liability ?

[eko]

If you implement WHT as per guidelines (and there are a number) than your Chart of Account on:

• Sales Invoice will have automatically created 2 accounts in the Assets group: 1. Withholding tax receivable and 2. Withholding tax see Account for withholding tax on sales invoices | Manager for more details on Sales.

• Purchase Invoice, see Account for withholding tax on purchase invoices | Manager, will have automatically created a Withholding tax payable account under liabilities. When withheld tax is remitted to the tax authority, a payment is posted to the Withholding tax payable account (see example in the guide on how).

When enabling Withholding Tax Receipts in Customize (see Customize a business | Manager) it records notifications of remittances by customers of tax withheld when sales invoices were paid off. In this tab the receipts are visible and transfer assets from Withholding tax receivable to Withholding tax accounts.

So if as @Tut advised you followed the guidelines you would be able to answer the questions you posted yourself.

[kendirangu]

Thanks for the response eko.
I have read the guides several times and as stated, I have recorded withholding and installment taxes.

Now, how do I reflect this withheld income tax on the P&L ? (at the moment it appears as an asset in the balance sheet.)

I also note that my withholding tax receipts is blank despite several sales invoices being successfully receipted.

[eko]

All information is in the guides, if you follow them to the letter it will do all correctly. Of course Assets and Liabilities are not part of P&L and for WHT it indicates that you either will still receive something (receivable) or have to pay something (payable). The evidence of such is either through a payment or receipt remitted to the receivable or the payable. The way to remit is explained near the end of for example the Sales Invoice guide.