Tax receivable

I need some help with the management of VAT and Withholding tax.

When we import we pay upfront a certain amount of WH and VAT. These amounts are a credit for us which we use when we have to declare quaterly VAT and quaterly CIT. The WH paid on imports is used against the CIT we have to pay, while the VAT on imports is used (together with the VAT on local purchases) against the VAT collected on our sales.

Now, how do I enter in Manager the quaterly VAT and CIT payments that we do? By the end of the quarter we have a certain tax payble amount and once we pay what we owe, that amount should go down (to zero).

Also, how does it work if we have a VAT or CIT credit and we get a refund?

First, what is CIT?

Second, what is the withholding for? In other words, what is the tax withheld applied to? You were not specific.

Third, who do you pay these amounts to?

Fourth, have you read these Guides:

CIT stands for Corporate Income Tax, which is paid at the end of the year based on profits. However, every quarter we have to pay one fourth of the CIT paid the previous year, as an advanced payment for the current year.

We pay a WH of 5% on imported goods. This is paid upfront when we clear the goods, and WH can be claimed back as a credit when we declare the quaterly CIT or at the end of the year for the yearly final CIT.

We pay all these taxes, including VAT, to the RRA (Rwanda Revenue Authority) who collects all taxes in Rwanda.

I will read the guides. I have already set the codes and percentages of these two taxes. In fact I use a method that I have read in posts here, but that unfortunately I cannot find any more. See here:


However, I fear there is an issue as I do not indicate any account in the last four lines of this purchase invoices. I cannot find the posts related to this, but maybe I have to create an account for WH tax and one for VAT?

I believe we had the discussion about Corporate Income Tax somewhere on the forum and the conclusion was that you can manually set up accounts, no way to have that done automatically in the way VAT is handled in Manager.

There are several concepts to understand, @mauroskov. To begin, tax codes in Manager are applied to line items. Normal VAT on a purchase, for example, is applied to the line item listing what is being bought. The program calculates it and subtracts it from Tax payable as an amount you are claiming as input tax. This is offset in the same Tax payable account by VAT you collect from domestic customers. The difference is what you remit to the authority with your periodic filings; or, if the balance goes the other way, you are entitled to a refund from the authority.

Because a foreign supplier is outside the authority’s jurisdiction, they are billing you directly. The VAT on such a bill is not like your typical 18% tax code. Instead, it is 100% tax. Therefore, you must account for it with a 100% tax code, as described in the first link I sent you earlier. Your situation is exactly what this option was created for in the program. The full amount will post to Tax payable, reducing its balance the same way as other input taxes would. When you pay this tax, the Payee should be the tax authority, not the foreign supplier, who is not involved in this part of the purchase transaction.

What you have called withholding tax is not withholding tax as that term is used by Manager. Manager uses that phrase to denote tax that is withheld by a customer from what they would otherwise owe you under Accounts receivable and paid directly to the authority on your behalf. In your situation, withholding tax is instead paid directly to the authority as a deposit against income tax you will eventually owe.

So you must do two things. First, set up an asset account named something like Withheld CIT. Second, post the withholding charges to that account when you pay them. Again, the Payee should be the tax authority. Do not define or use a tax code for this portion of a transaction, because you are not applying a percentage to a line item. You are just paying an advance to the tax authority, which you will draw upon for your quarterly CIT filing. In other words, you are creating an asset to be used later.

At CIT filing time, make a journal entry debiting your CIT expense account and crediting Withheld CIT to transfer this asset to current expenses. If you owe more, you would use a bank transaction to pay the balance, posting the payment to CIT as well. The end result of these steps will be a zero balance in Withheld CIT and a current balance in your CIT expense account reflecting how much you have paid in total for CIT during the accounting period.

You did not fully explain the transaction in your screen shot. It appears to be a purchase invoice, based on the header information. Whatever it is, all line items shown are either incorrect or incomplete. Follow the instructions I’ve given instead and you should be all right. Ask if you have more questions.

This is clear and it is in fact what we do. Every quater we calculate what we have cashed as VAT on sales and compare it to what we have spent as VAT on purchases and imports. Based on this, we either pay or claim the difference to the tax authority.

In your first link to the guide Create tax codes in one of the examples the text says “When she remits that amount to her tax authority, the Tax payable balance will drop to zero.” My first question is… In Manager, technically, how do I remit the amount to the tax authority (or credit the refund from tax authority in case VAT paid to suppliers and on imports is higher than the VAT cashed from sales)?


I am a bit confused here. I don’t think we have to add the 100% tax code. When we import we pay the following taxes:

25% import duties
70% excise tax
0,2% infrastructure development levy
0,2% African Union tax
5% withholding tax
18% VAT

All these taxes are calculated in an import declaration where we can see the amount of each tax paid for each item imported. We treat the first 4 taxes as a cost to be apply to our cost of goods sold. Therefore in Manager we do not use specific tax codes for these 4 taxes but we just create a Purchase Invoice where the Payee is the tax authority and each item has no quantity and the cost of each item is the sum of the 4 taxes paid on each item. Like here:

The only 2 tax codes we added to Manager is the VAT of 18% (which is the in-built tax code) and the Withholding tax of 5%. Therefore we are not using the Withholding tax on sales that you mentioned. We actually created a specific Withholding tax for our purposes. And based on the examples I saw in other posts (but that I cannot find any more) we add VAT and “our” Withholding tax to the import Purchase Invoice like in the example above. If in the import declaration (which is basically an invoice to us from the tax authority) we pay for example 1.000 in withholding tax, we calculate the value on which the 5% tax would be 1.000:

1.000/5x100=20.000 and therefore 20.000x5%=1.000

In the Purchase Invoice like the one above we add a line with 20.000 as cost and a Wihtholding tax of 5% so that the 1.000 paid in Withholding tax is created, but we also add a line with -20.000 and no tax in order not to add additional costs on the purchase invoice that we didn’t pay (I hope this is explained clearly enough). The same for VAT. By doing this our Tax payable shows for both taxes what was cashed and paid out:

However, as in the Purchase invoice I haven’t selected any account for the 4 lines created for these two taxes, there is a problem when I run a Tax audit report as VAT and Withhoding paid on import appears as suspense:

Any idea on which account I should use?

Maybe here you mean that in the Purchase Invoice I should not do what I have just explained regarding VAT and “our” Withholding tax, but instead create an account such as Withheld CIT and put the total . Correct? Is this better than what I am doing in your opinion?

I am not familiar with Journal entries. Overall, when I reach the end of the year and have to pay CIT, how do I do that and how do I deduct and treat the amount paid as CIT?

Create a bank transaction, posting it to Tax payable. If you owe money, Spend Money. If you get a refund, Receive Money.

You did not mention these taxes in your earlier posts, so I did not address them. And nothing I wrote applies to them. It sounds like you are handling them correctly, because they are not offsetting taxes like VAT. I would, however, edit the descriptions to make it clear these are taxes on the inventory items rather than the inventory items themselves. Otherwise, things could get confusing later.

This is what I said earlier you are doing incorrectly. You should not use the built-in VAT code on an invoice like this, because that is meant to be applied to a line item. Since this VAT amount is entirely tax, you should use the 100% code. Then, you won’t need to back out the amount you put in so you could calculate tax on it.

If you created the Withholding 5% tax code, those amounts are going through the offsetting Tax payable account. They should not. All your withholding is doing is prepaying income tax so you can use your prepayment against your actual income tax due at filing time. The procedure I described before is the way to do that. The way you are doing it, it is distorting your VAT calculation, because all tax codes are posted to Tax payable.

Yes, exactly.

Read the Guide: Manager Cloud. As I said before, debit the CIT expense account (you should have one, if you don’t already) and credit Withheld CIT for its full balance. Then Spend Money for whatever additional you owe, also posting to CIT. CIT is a current expense, so it should show up in an expense account on your P&L statement.

Note: My comments about CIT assume your business is a corporation and pays its own income tax, not that you are a sole trader who pays taxes on business income as personal income.

@Tut thank you so much, things are getting clearer.

This is what I was doing but I am afraid I am doing something wrong. For example, I am trying to post a VAT refund from the tax authority and I am receving money using the Tax payable account. However, the amount gets posted as a credit like the VAT received from a client when we issue a Sales invoice, and therefore I fear it reflects as money received and hence to be repaid. Is it normal or should I do it in another way?

This is what I get now. I named the VAT 100% enttry simply as VAT, and the entry for the Withheld CIT simply as Withheld CIT.


However, which account should I use for the VAT 100%? I though I should use Tax payable but Manager does not give me that option:

Maybe this entry doesn’t need an account to be specified because it is a special type of entry where the amount is automatically accounted as Tax payable?

This is normal. Receiving money is the equivalent of debiting your bank account and crediting Tax payable. Tax payable is a credit account, so credits cause its balance to increase. The balance of Tax payable is the net of what you have collected versus what you have paid in tax. Suppose all you ever did was buy things. Tax payable would become more and more negative until you recorded your refund, then would jump back up to zero. If all you ever did was sell, it would grow more and more positive until you remitted your payment to the authority. Then it would jump back down to zero. Collections make it increase, whether they come from customers or the authority.

Yes, it does. Posting accounts for tax codes are selected under Settings => Tax Codes. Tax payable is the default:


It is not that the entry doesn’t need an account. The Account field you see on any line item is where the line item itself is posted. The tax applied to the line is posted separately to whichever account is specified in the tax code definition. Since nothing on the VAT 100% line is posted anywhere but Tax payable, that line item’s Account field remains blank.

Everything now looks correct to me. I do, however, repeat my recommendation that you consider editing the purchase invoice to indicate these are tax amounts. You could add something like “Tax on…” to the beginning of the description after the Item is selected. Or you could enter a summary level Description in the header saying something like “Taxes on imported items listed below.” But that is your choice.

Great! Thanks so much!

I use descpitions in the header, yes, and most imporantly I use a separate Pruchase invoice for the taxes paid on the items and they are coded in a way that I can search for them.

Again, thanks a lot!