Accounting 2.1 - How to use Withholding Tax-New

This article is mend for Accounting 2.1 Revision 33 and above as the Withholding Tax function is revamped to cater more business scenarios.

Withholding Tax is an amount withheld by the party making payment (Payer) on income earned by ta non-resident (Payee) and then the tax will be paid to the Inland Revenue Board.

Enabling Withholding Tax

1. Go to Tools > Options > General > Withholding Tax.

2. Check the checkbox Enable Withholding Tax, then click OK.

3. You will also need to generate Withholding Tax related Accounts (GL Code) for posting purpose. To create these accounts, go to GL > Account Maintenance.

4. You may create the following related Withholding Tax accounts:

5. Next, go to Tax > Withholding Tax Maintenance.

6. Click on the Withholding Tax Settings to assign Creditable and Payable Withholding Control Account. Click OK when done.

7. Then create a new Withholding Tax Code. Click on the New button.

Example of Withholding Tax Code:

Withholding Tax Code: A name for the tax code. This code must be unique among all tax codes

Creditable Account No: Select an account for posting purpose for Debtor Withholding Tax

Payable Account No: Select an account for posting purpose for Creditor Withholding Tax

Description: Define the meaning of this withholding tax code

Tax Percentage: Define the percentage of the tax code

Applying Withholding Tax in transactions

Transaction Entry

The following will show the steps of how to apply withholding tax for Purchase side (Payable Withholding Tax)

1. Create a new Purchase Invoice. To apply Withholding Tax for this Purchase Invoice, you will need to click on the WHT button.

2. Click on the + button to add in withholding tax record. Key in Withholding Amount and select the appropriate Withholding Tax Code, click OK when done.

*You may set the WHT Posting Date to a different date if you wish to post the WHT in another date.

3. After adding Withholding Tax, your footer’s Local WHT and WHT will be updated. You may click Save.

*Transactions with Withholding Tax requires Tax Entity / TIN number. You must assign or set the Tax Entity or TIN number for the Debtor or Creditor.

Posting details for Withholding Tax

Payment Entry

Before proceeding to payment, do aware that the outstanding for this Purchase Invoice will be 900 only after deduct Withholding Tax.

You can also view Creditor Statement and Creditor Aging. The outstanding for this transaction is 900.

Applying Payment

1. Create a new A/P Payment. You will see that the knock-off section will show the outstanding bills with Org Amt, WHT, Outstanding etc.

2. Key in the Payment Method and Payment Amount then knock-off the PI which is created as previous section. Click Save.

3. If there is any foreign Gain or Loss, a dialog will appear. Click OK.

Posting details of the payment

Reporting

Ledger Report

The Withholding Control Account is offset to zero balance after knock-off with payment.

Withholding Tax Transaction Listing Report

1. Go to Tax > Withholding Tax Transaction Listing Report.

2. You may filter the date range and Withholding Tax Code, then click on inquiry.

*The ARAP document does not have payment knock-off will not post into Withholding Tax Transaction.