Withholding tax on foreign purchases

1

I have checked some old posts but I am struggling to find a solution.

When we buy something in forex from abroad we have to pay a 15% withholding tax to the local tax revenue authority. This means that is I buy something for $100 I have to covert that in the local currency and calculate 15% withholding tax on that, which we then pay to the revenue authority. The amount of the 15% withholding tax becomes a liability then that we pay the following month.

I don’t seem to find a solution in Manager. If I use a custom tax code, and select it for example in a purchase invoice, the total cost of the purchase invoice is the actual cost to be given to the supplier plus the 15% withholding tax. The 15% then appear as a negative amount under liabiliies in the custom account that I have created and where I’d like the liability to show. This happens, I think, because Manager interprets this 15% withholding tax in the purchase invoice as a credit to be deducted from what we owe to the tax revenue authority. In realty it is actually the opposite.

Any suggestions?

2

The way to handle this depends on what the 15% tax is for. Is it VAT that would otherwise have been collected and remitted by the supplier? If so, that is not what Manager refers to as withholding tax. Manager uses the term withholding tax to refer to tax withheld at the source by a customer, usually as a prepayment of income tax. For example, you invoice 100, but your customer pays you only 85 and remits the 15 to the government.

What you describe sounds more like reverse charge method VAT. For that, see the Guide: Reverse charge VAT (Value Added Tax) | Manager.

However, the fact that you actually pay the tax to the authority, rather than offset it and end up paying nothing, suggests the possibility of something different. If this is not an offsettable VAT, please explain more about the purpose of the tax and how it works.