Withholding Tax

Core Concept

When a supplier is subject to withholding tax:

• The supplier is paid less

• The withholding tax amount is recorded as payable to the tax authority

Implementation Steps

1. Step 1: Create a Tax Withholding Category. Define:

   • Category Name – e.g., Professional Services WHT

   • Rate – e.g., 5%

   • Account Head – Withholding Tax Payable. The account_type of the account must be set to Tax

   • Company

   • Applicable Thresholds (optional). Just ensure that the value of Single Transaction Threshold is set to 1

2. Step 2: Assign Category to Supplier

   • Edit the Supplier record and set the value of Tax Withholding Category for the supplier. Now every purchase invoice for this supplier automatically applies WHT.

3. When Creating a Purchase Invoice

   • Create a Purchase Invoice as usual. Set the value of tax_withholding_category to be the Tax Category you just created.

4. Payment Entry Behavior

   • When you create a Payment Entry, the net outstanding amount is reflected