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Processing Withholding Tax (WHT) Transactions In The Order To Cash Cycle

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Overview

This article sets out the process for recording Withholding Tax (WHT) in the Sales Order to Cash cycle. In order to process WHT transactions in the Order to Cash cycle, the following programs are used:
  • Withholding Tax Class
    • Create a new Withholding Tax Class and ensure that a GL Account is assigned to the 'Asset Account' field. 
    • Edit an existing Withholding Tax Class and assign a GL Account to the 'Asset Account' field. 
  • Customer Company
    • Edit a Customer Company to assign the appropriate WHT class to the Customer Company.
  • Receivable Transactions
    • Review the WHT calculated and amend it if necessary before posting the Receivable Transaction.
    • Process a WHT adjustment for a posted Receivable transaction (for example, if a discrepancy is found at time of Customer Receipt).
The process flow is as follows:
  • Create a GL Account (Chart of Accounts) for the Withholding Tax on Sales.
  • Set up the Withholding Tax Class and assign an asset GL Account.
  • Assign the Withholding Tax class (which has the asset GL account assigned) to a Customer Company.
  • Create a Receivable Transaction (either transferred from the Sales Order Invoice program or directly in the Receivables Transaction program) for that Customer Company, which will automatically identify the transaction as a WHT-applicable transaction and assign the WHT rate (as per the Withholding Tax class assigned to the Customer Company) to the transaction.
  • Upon saving / posting of a Receivable transaction, the calculated WHT Amount will be processed to the WHT Asset GL Account (as assigned in the Withholding Tax Class program) and the net amount due from the customer will be recorded.
  • When applying a cash receipt, the net cash receipt is applied to the net amount due from the customer and the customer account is cleared / settled.
  • When there is a discrepancy in the WHT Amount recorded, a user can process a WHT adjustment (if required).
  • Upon receipt of the Withholding Tax certificate from the customer, a user records the Withholding Tax certificate number and date of the certificate on the Receivable Withholding Tax transaction (and also uploads the Withholding Tax certificate to the transaction as an attachment, if so desired).
  • Once the Withholding Tax refund / claim is processed, a user marks the Receivable Withholding Tax Transaction as 'claimed'.
  • Users may generate reports for Receivable Withholding Tax transactions without a Withholding Tax certificate or where Withholding Tax tax transaction is not marked as 'claimed'. 

Create a GL Account for Withholding Tax on Sales

Navigation

Financial System Admin  > GL Accounts (Chart of Accounts)
 
  1. Click on "New GL Account".
  2. Enter an Account Number.
  3. Enter a Description for the GL Account.
  4. Select a GL Account Type - For WHT on Sales - select "Asset".
  5. Normal Balance - select "Debit".
  6. Type of Control Account -select "Not a Control Account".
  7. AP Account Type - leave as "None".
  8. AR Account Type - Select "Tax".
  9. GL Type - leave as "None"
  10. VAT Account - select "Not a VAT Account"
Withholding Tax Class

Navigation

Accounts Payable > Withholding Tax Class
 
  1. Select the Withholding Tax Class program.
  2. Click on "New Withholding Tax Class".
  3. Enter a WHT Class name.
  4. Enter a Description for the Withholding Tax Class.
  5. Liability Account - Assign the GL Account to be used for for Withholding Tax on Purchases.
  6. Asset Account - Assign the GL Account to be used for for Withholding Tax on Sales, as created per the above instructions.
  7. WHT Percentage - enter the WHT percentage appropriate to the WHT class created.
  8. Check Deduct Discount Before Tax Calculation if discount is to be deducted before calculating the Withholding Tax amount.
Customer Company

Navigation

Sales Order Setup > Customer Company
 
  1. Select the appropriate Customer Company.
  2. Click Edit.
  3. Select the Withholding Tax Class that you wish to assign to the Customer Company.
  4. Enter the Customer's WHT Identification Number for the Customer Company.
  5. Click Save.
Receivable Transaction

Navigation

Accounts Receivable > Receivable Transaction​​​​​
 
  1. Click New Receivable Transaction.
  2. Complete the various fields as described in the Receivable Transaction.
  3. Ensure that the selected Customer must have the Withholding Tax Class specified on the associated Customer Company record.
  4. Save the Receivable Transaction.
  5. If the Withholding Tax Class is present on the Customer company record then the button WHT Detail will appear.
  6. In case of an Un-Posted Session, click on the WHT Detail button.
    • Check the following field values:
      • The checkbox ‘WHT Transaction’ is set to true.
      • Withholding Tax Class
      • WHT Percentage
      • Transaction Amount – Txn Currency (display only field)
      • TAX Amount (display only field)
      • WHT Amount (display only field)
    • The WHT Percentage can be changed to any numeric value not less than zero or greater than 100.
    • If the WHT Percentage is changed, then the WHT Amount is auto-calculated.
    • The ‘WHT Transaction’ checkbox can be set from true to false.
    • When the ‘WHT Transaction’ checkbox is set to false, the other two fields ‘Withholding Tax Class’ and ‘WHT Percentage’ are disabled.
  7. When the Session is posted, Receivable WHT Transaction are created for these customers if the ‘WHT Transaction’ checkbox is set to true prior to posting.
  8. When the Session is posted, click on the WHT Detail button; the editable field ‘Adjustment Amount’ and display only field ‘Total Adjustments’ are available, as is the Create WHT Adjustment button.
  9. To create new WHT Adjustment Transactions, provide the adjustment value on the field ‘Adjustment Amount’ and click on the ‘Create WHT Adjustment’ button.
  10. The ‘Create WHT Adjustment’ button will create Receivable WHT Transactions with ‘Associated CR/DR Memo for Adjustments’.
  11. The ‘Associated CR/DR Memo for Adjustments’ is a lookup to the adjustment Receivable Transaction created as a result of the adjustments to the existing Receivable Transaction.
  IMPORTANT  The checkbox 'WHT Transaction' is editable when the Session is not posted. If this checkbox is set to false, NO Receivable WHT Transactions will be created when the session is posted.

User-added image  NOTE  The Adjustment amounts cannot exceed either
The remaining transaction amount less previous adjustments
OR
The WHT Amount plus any previous adjustments


SEE ALSO
 
Settings
Processing Withholding Tax (WHT) Transactions In The Order To Cash Cycle
Processing-Withholding-Tax-WHT-Transactions-In-The-Order-To-Cash-Cycle
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