Problem: I need to reduce withholding tax (12%) from the payable invoice and accrue it to the Current Tax Payable.
Solution: Some tax authorities require withholding tax to increase tax law compliance and secure earlier receipt of tax revenues. In simple terms, customers are required to withhold a portion of the balance due on sales invoices they receive from suppliers and pay that portion directly to the tax authority instead of to their suppliers. It can proceed in FirstBIT using the following way.
1. Enter the Invoice Received with Out of Scope Taxation type:
At the Expenses tab, put the Amount Payable to the Vendor (do not include Withholding Tax).
In the below example, the lines are split because the deferral will be applied to the part of the invoice.
Select the corresponding GL accounts in GL accounts column:
The invoice received creates the following GL entries:
2. Go to Taxes > Master Data > VAT Rates:
Create the new VAT Rate for 12 %:
See also 8.1.2.1. Adding a VAT Rate
3. Go to Taxes > Taxes Documents > Output VAT Transactions:
Create a new Output VAT Transaction:
- Transaction Type: Invoice
- Adjustment Type: Increase
- Basis: select the previously entered Invoice Received
At the Inventory and Services tab, put the Item and VAT Amount, and select the Expense GL Account that will be debited as a result of manual entry:
See also 8.2.1. Output VAT Transactions
Output VAT Transaction creates the following GL entries:
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