First of all i would personally like to thank you for creating such a wonderful software. My problem is with the withholding taxes.
Let me explain you a little bit that how the taxes work in most of the countries worldwide. There are
VAT or GST.
Withholding taxes (Income tax deduction at source.).
The software currently is making wonderful calculation in terms of point -1. In relation to Point - 2 its only work with the sales invoices not with the purchase invoices. We need the similar option with the Purchase invoice in the same manner i.e. it is an optional. The reason is it is quite possible that not to withhold the amount on the purchase invoices as well (tax exempted entities.)
Plus the withholding tax account code in the software should be separate form the VAT or GST code. Please note both are separate things, So when we are pulling the reports of the account the GST should not get combined with the Withholding taxes.
Please can you confirm us is this something in your Agenda. As we are interested in the purchase of the Server version of your software.
Plus if we would like to do the customization immediately. What will be the charges in this connection.
Withholding taxes are supported on sales invoices only. The reason was to make sure implementation is good before it will be rolled onto purchase invoices.
Can you test sales invoice side and confirm withholding taxes are working the way you’d expect?
@sherazali I have made this request before but I realised the feature is actually needed mostly for sales. In other words, there is more to managing withholding tax receivable than payable.
With the payable you can create a purchases invoice item and enter a negetive number during the invoice creation. At the end of the month just sort by date and export to go and pay.
Withholding tax payable or on purchases is quite simple, Withhold and Pay. But, with receivable you must track and get a withholding tax certificate and move the amount from WT receivable account to Withholding tax when you get the certificate ( I have forgotten the process)
What is really on my mind is the ability to use the feature also in receive money. This inability is making the feature almost useless.
But I understand the difficulty in implementing it. Sales invoices adds the customers account under account receivable control account, so the WT receivable is easily recorded. Cash sales on the other hand is different.
I am hoping @lubos will find a solution to this problem.
I will like to add that the withholding tax feature in Manager is something I have not seen anywhere before in any app or ERP. I showed it to one auditor friend and he immediately took the website to visit here.
@lubos, A customer walks in and make cash purchases of $100 with withholding tax of $10.
Customer pays $90 and takes goods away. In his records he will have a withholding tax liability of $10 and the buyer will have a withholding tax asset of $10.
In a busy environment, one cannot always issue an invoice before receiving money. Therefore it would be nice to enter an amount as withholding tax in receive money that would be part of the withholding tax receivable. I know the challenge would be on what name/account the amount will stand under. The solution would be a special account/customer set asside for recording withholding tax receivable on all cash sales.
I know accounting software can’t do everything for a user and I appreciate your efforts.
Now that said, when are Items going to be usable under receive and spend money?
This is not correct. The feature is highly needed for the purchase as well. The following are the reasons:
The withholding tax agent (One withhold the payment) can be a buyer and seller so in both cases the amount need to be withhold at both the levels.
It can be an asset or liability depending on the case but the rules can be widely established at the software level.
Both VAT OR GST receivable and payable need to be recorded in the system separate account.
Withholding taxes need to be recorded at the separate system account.
The features could be like the same in the sales invoice that is withholding tax is deducted after adding all the other taxes OR If Lubo want to give the option to deduct the same before adding another taxes. I am happy with the software currently working like this that deducting the withholding taxes after adding up all the taxes.
In my country, sales tax is not added before computing withholding tax so the percentage option doesn’t work for me but the amount option works perfect.
I didn’t say withholding tax for purchases shouldn’t be added, I just said it needed mostly for sales.
Currently I create purchases invoice items and enter negetive amount for it. At the end of the period I just export what is in the account for the period and pay, the only problem is that I can’t use the purchases invoice item in receive money
But how can a seller withhold payment? A seller suffers withholding tax, a buyer withholds it.
Many thanks for the detail explanation in relation to your country.
So for general purpose, I believe the withholding tax should have the option to be deducted on the purchase invoice amount or the amount after adding all the taxes.
In my country The withholding is deducted after adding the taxes which is normally GST. Currently the software is working like this.
As usual the major request is to separate the system account and provide the above features in such a manner that it would cover every country environment. Either it can be at the setup level or at the transactions level. The withholding will be deducted before other taxes or not. Dropdown option, clicking the checkbox or any other type.
Plus in my case if i add the negative amount while making the purchase. The GST calculated by the system is not correct as it will first reduced the amount by witholding tax and calculate the GST after that. But actually GST should be at the original amount and after the adding the GST the withholding is calculated.
I guess lubos understand the point stated earlier to make an option that withholding will be calculated before other taxes or after taxes.
You are 100% correct how the seller can withhold. I mean to say we have revenues and at the same time the cost. So the withholding will be done on the revenues as well and at the cost side as well. So in case of revenue the other party is withholding and in case of cost i.e. expenses we are withholding the same.
I guess this strategy cover all the withholding for the other countries as well.
Just a heads up, @Lubos, in case you weren’t aware: The nomenclature “Withholding tax” means something very different in North America to what it apparently means in this discussion thread. Here, “withholding tax” refers only to taxes that are taken out of an employee’s paycheck and remitted to the government as advance payments on income taxes. Any other use of the term “withholding” is bound to confuse North American users unless it’s made clear that it has to do with sales taxes not with payroll.
Yes NZ is the same … Banks here also debit Withholding Tax from any Bank account bearing an interest gain. The taxes in this thread means something different, some additional tax when purchasing this must be some special case. [quote=“sherazali, post:1, topic:6112”]
Withholding taxes (Income tax deduction at source.).
[/quote]
This is the not the case. The withholding tax as the name indicate means the tax deducted at source. In various countries laws permit you to deduct the tax while making the payment this is simply a withholding tax.
Just in case of payroll you deduct the tax and on the later period deposit the same to the tax authorities.
The GST or VAT is a different tax. VAT is a value addition that mean at each stage the value is added to the goods and service. It is not a withhold. For example
Goods Price 100
GST % 15
The invoice which you will give is of 115. In case of bill, if you have received the service/goods from some one else it would be 115 as well.
You will collect your 100 and deposit the 15 to the authorities. In case of bill you will make the payment of 115 the other party will deposit the 15 to authorities.
The example of withholding tax:
Goods Price 100
GST % 15
The Bill which you will received is of 115.
Tax Withhold %age 6%
so when the payment you will be making it will be 115 * 6% = 108.91
The 6.9 will be the withhold amount.
The withhold amount is only done by the payee. I guess you understand my point i.e. why it is a tax deducted at source. I believe this is a very important thing which is required by almost every country laws.
Plus in the proposal to @lubos we have also confirmed to shown as an option to add it on the purchases invoice or not. So if your transaction does not require the withholding tax you can simply leave that option.
As far as the withhold of the payroll you can simply park it by opening an account Payroll tax payable.
I guess this is no more a special case. This should be a mandatory feature for the software.
@Jon In my country tax deducted at source on payroll is a type of withholding tax but a payslip item is used for that deduction. This function in Manager.io is just to extend tax deducted at source to other transactions. Any money withheld by the payer and remitted to the government is a Withholding tax wether on salaries/pay cheque, dividend or whatever
All I’m saying is that the term “withholding” has a very particular, specific meaning in North America (and, from what @compuit wrote above, in New Zealand as well). It may be a general term in other countries, but if “withholding” becomes the name of a function in Manager, some users will be very confused because they would never associate that word with anything other than payroll.
@Lubos, what of bringing back the debit and credit functions in spend cash accounts and purchases invoices. It will enable us to compute the tax and credit it to the withholding tax account. The net amount then goes to the bank. The software used to work like that. I am currently having a challenge with a client of mine because are unable to deduct WHT before effecting the net amount as payment to the payee.
e.g. DR Office Equipment Repairs 1000
CR Withholding Tax 50
CR Cash Account 950
That’s what most ERPs do. Please treat as urgent.