Withholding Tax Feature Improvement

I was very happy to see the new workflow of withholding taxes being improved.
But after testing the system i discovered something i want to raise.

1.Withholding tax function on purchases invoices: When a company making payment receives an invoice, the paying company may work out Withholding tax and pay the receiving company the net amount. The Withholding tax becomes a ‘withholding tax asset’ to the receiving company and a 'withholding tax liability to the paying company which is payable to the tax collecting body of the jurisdiction.So the withholding tax field must not only appear on the Sales Invoices creation page but also on the purchases invoice creation page.

2.Tax on Tax: I also discovered after testing the feature that the withholding tax was calculated on the invoice total which included Sales Tax or VAT. From my understanding this is tax on tax, the withholding tax must be computed on the subtotal.

3.Withholding Tax applicable to line items: I also suggest that just like how sales tax can be applied line by line on items on the invoice creation page, withholding tax must also be applied line by line on items. It will give the user the opportunity to apply withholding tax to items ‘withholding tax deductible’. In my country for example some items on the same invoice may suffer withholding tax while others (exempt goods and services) may not.

Thanks for the amazing accounting app

  1. I’m going to implement withholding tax support on both sides. But first I want to get it right on Sales side, then I’ll duplicate it on the other side too.
  2. This is a good point. Based on my research, in some countries withholding tax is on tax-inclusive amount, in other countries, it’s on tax-exclusive amount and then there are countries where “it depends”.
  3. I think this is good solution to handle point 2.)
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I guess your research findings in point 2 makes it more complicated, but I trust you will find a way to put options down in the app to satisfy all users.
Great work

The Witholding Tax Feature is gone ?

Can we have the withholding tax feature in the Bank/ Cash feature also. While I do not raise an invoice, but I get paid by cheque after withholding the tax amount.

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Yes I thought of that too, so in the mean time let use the invoicing

It’s not gone but it’s still work in progress (it means it goes through changes) while I’m trying to nail down the implementation.

How does this work. How does your supplier know how much to pay/withhold without you issuing them an invoice? I mean at some point, the invoice has to be issued (at least for their records), right?

I think he is talking about someone who just entered the shop and bought something and paid with cash/cheque immediately, the person may withhold some of the money, this way withholding tax function in receive money can help. Also if his company made an ‘on the counter’ buying or just walked into a shop and bought something to pay with cash/cheque immedately, his company may withhold some of the funds as withholding tax so in that case withholding tax function in Spend money will help.

Hi Lubos,
I am also facing this problem of withholding tax on Tax (either vat or service tax) as highlighted by Abeiku.
Can you please provide an option (like a drop down) to select either to consider TDS on invoice amount with tax or without tax.

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Can we also get an option to select the name of this “Withholding Tax” like TDS or any another as per the requirement

thanks in advance.

I am actually seriously waiting for this to happen too… i belive most countries on TDS calculate it on the invoice amount not including sales tax.

And also the ability to use TDS on purchases too