Tax Code Classification

1

Hi

I would like to ask regarding the tax code.
In our country Indonesia, besides VAT, we also have other taxes that we normally cut from supplier/from payment. for example shipping cost of 1,000,000. we need to cut service tax of 2% which we will be paid later to government.

The journal will be

Shipping Exp DB 980,000
Tax Exp DB 20,000
Account Payable CR 980,000
Tax Liability CR 20,000

i have tried to use tax code use -2%. however the journal becomes as follow

Shipping exp DB 1,000,000
Account Payable CR 980,000
Tax Liability CR 20,000

it means, i can only seperate the liabilities transactions. the expense remain the same but actually must be consist of 2 expenses which are tax and shipping exp. is there any way that i can make the transaction as the first journal?

thank you

Elvie

2

See this section of the guides, in particular “Multi-component tax codes”.

Tax Codes: Create and use tax codes | Choose between tax-exclusive and tax-inclusive prices | Work with multi-component custom tax codes | Reverse charge VAT (Value Added Tax) | Make tax codes inactive

In the future I think Manager would benefit from defining Multi-component tax codes as a group of single component tax codes, as doing so would enable country specific reports in jurisdictions with many entities charging a tax. But that is another subject.

3

Hi Patch

Tax Code is really a great function in manager io. but i hope later on the expense can be classified to support our tax rules. as per the above journal.

we can use bellow picuture as to support our tax

Tax Code
Tax Code1566Ă—424 7.73 KB

unfortunately, when i do the transaction the result as bellow picture

Example
Example1932Ă—1172 46.5 KB

Tax expense not seperate to main expense.

Furthermore, is that possible to have additional function which is tax code under payment as well. as currently no tax code in payment function.

Payment
Payment1700Ă—754 8.53 KB

thank you

Elvie

4

Taxes are not an expense to your business and should not appear on your P & L

You collect them on behalf of the tax authority and they are a liability

5

Why -2? I think it should be 2.

6

At a guess

  • This should be entered as a withholding tax or
  • Tax inclusive vs exclusive is not being entered as is designed for Manager
1 Like
7

To provide better support, a better understanding of what you are trying to do would probably help. Ideally could you please describe this in functional external requirements rather than debit / credits from accounts you have set up in an internal accounting system.

Some back ground.
Are trying to efficiently process

  • A sale of goods / services you produce
  • A purchase of goods / services you need for your business
  • Are you an agent, changing a fee to facilitate movement of goods between two other businesses.

What are all the core components of this transaction

  • What is shown on a typical invoice
  • What is constant between all such invoices, such as VAT rate, Shipping service tax rate. Also what quantity is each percentage calculated from.
  • About when is each component received or paid and to what different entities (supplier, customer, federal tax department, transport department, other)

I think with this information you could get more direct support on how best to set up Manager for your business. The underlying issue is setting up Manger requires

  • A good knowledge of local tax requirements
  • A good knowledge of Managers capabilities and design approach

What I’m suggesting above is an attempt to separate these two requirements.

8

Dear Patch,

Indeed the tax normally comes from the income transaction. but in our country is different. we also need to cut our supplier tax and pay to government. we call it PPH. In return, we will give the supplier a later stated that we have paid their tax.

so for example
In May 2021, Company A bill us an invoice of shipping goods amounted to Rp1,000,000. which becomes their income. From 1 mio bill, we cannot pay them 1 mio. Instead we need to cut their tax of 2% which is Rp20,000. so they will only received 980,000 not 1,000,000. if we pay to the company A in 15 Jun 2021 amounted 980,000. then we will also pay to government as Jun 2021 Tax of 20,000. but the payment to government must be paid in Jul 2021 before 10th. Hence, during Jun, the tax of 20,000 is still remain as tax liability.

that’s why our transaction journal become as bellow

Shipping Exp DB 980,000
Tax Exp DB 20,000
Account Payable CR 980,000
Tax Liability CR 20,000

and later on we will have journal as bellow when payment
Done in Jun
Acct Payable DR 980,000 to supplier
Cash & Bank CR 980,000

Done in Jul
Tax Liability DR 20,000 to government
Cash & Bank CR 20,000

Hence, we cannot use tax code under purchase invoice. instead we need to use tax code under payment. and the -2 is due to we cut the amount to be paid to supplier as to be given to government.

thank you

Elvie

9

This is a withholding tax. You should use this functionality and not tax codes.

10

Read the Guide: Account for withholding tax on purchase invoices | Manager.

11

Hi Patch and Tut

We have 5 taxes other than VAT.

PPh 4(2) - 10% (other than VAT)
PPH 23 with Tax Card - 2%
PPH 23 No Tax Card - 4%
PPH 21 with Tax Card - 2.5%
PPH 21 No Tax Card - 3%

I give u the complete example. the company A bill us an invoice as follow
Shipping cost 1,000,000
VAT 10% 100,000
Total 1,100,000

But we cannot pay them such amount. First we need to identify which tax belongs to the company. for example we need to impose “PPH 23 with Tax Card” = 2%

then bellow will be our transaction in accounting book:
Shipping Exp - 980,000 (1,000,000 - PPH 23 (1,000,000*2%))
VAT - 100,000
Total paid to company A = 1,080,000 (Payment)

Transaction for tax
PPH 23 Exp 20,000
PPH 23 Liability 20,000

Later on when paid to government

PPH 23 Lability 20,000
Cash 20,000

I found tax code is quite good because we can list down the tax that we can choose as bellow.

example
example1856Ă—290 8.01 KB

unfortunately the transaction becomes as follow

Result
Result1490Ă—1016 64.4 KB

Thank you

Elvie

12

As you can read here PPH is a WithHolding Tax (WHT): Redirect Notice

What you are writing doesn’t make so much sense both on how WHT, like all other taxes, works, and under an accounting point of view:

  1. A WHT should never appear in you P&L since it is something you are paying on behalf of your client
  2. How can you pretend to have:
  • a credit for VAT of 100.000
  • a debit vs your supplier of 1.080.000
  • a debit for WHT of 20.000
  • an expense for services of 1.000.000
  • an expense for WHT of 20.000 wrong

As you can see this would be unbalanced of 20.000.

As already suggested you should use the tax module for its designed scope, ie for VAT and WHT functionality for PPH:

https://www.manager.io/guides/36135