Withholding Tax is a tax that applies on services payments, if the services purchased are of non resident i.e. Payments made from a resident party or a PE to a non-resident party for services- example, Saudi get the labors from UAE, when making payment, 5% % of it will be paid to government as withholding tax.
Fortunately, the withholding tax in Saudi Arabia defines its interest rates without complexity. Indeed, they are 5% for every payment regarding interest rates. In Saudi, this tax applies if you are a non-resident receiving interest payments from a local source.
Enable the settings-Go to Administration > Taxes > WHT Accounting
The rates vary between 5%, 15%, and 20% based on the type of service.
Go to Accounting module > Entity > open the required entity > Go to Tax accounting tab > Enable WHT Accounting.
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Add the services and their rates where the withholding taxes should be applied. By default, there are some services already available in the base with rates.
When creating a Bank payment, make sure to enable the option Apply WHT in the main tab, this will add the accounting per tax in each line of inventory, with where the rate and its Amount will be filled in contract, payment and national currency.
The entry will be-
Dr. Prepayments to supplier
Cr Current WHT payables
Summary of such services with WHT can be analyzed using the reports-
Analysis of WHT Payable by services
Statement of WHT Payable (KSA)
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