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Withholding Tax

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Our tax structure for normal vatable purchase invoices as below

Example: Base Cost: = 100

VAT (15%) =15

Gross = 115

WHT (2% of base cost) =2

Net to be paid (115-2) =113

For some invoices, the tax law that obliges us not to record VAT (15% of base cost),so that we put the gross amount (115), BUT withholding should be calculated from the base cost.

How can I set the withholding parameter to calculate back to get the base cost ( mathematically => Gross amount/1.15)?

Thank you

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MauricioSaldana on at

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Hi Merga,

Maybe an option is to use a non-deductible vat code, if you go to the tax value and set 100% on non deductible, the system will calculate

Base 100

vat 15 (but because is non deductible will be added to the cost account)

WHT 2

Net to be paid 113

Regards

Mauricio

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Ludwig Reinhard Microsoft Employee on at

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Hi,

When you setup withholding tax you can define whether it is calculated on the gross or the net amount.

You could simply setup 2 withholding tax codes to get your 'normal' cases and your exceptions incorporated.

Best regards,

Ludwig

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Community Member on at

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Hi Ludwig,

My issue is not calculation WHT from Gross or Net. But the case is that there is non-refundable VAT, which is 15% of the base cost. In such cases, we record the gross amount (base cost +15% of it), and withholding tax (the 2%) should be calculated from base cost amount (mathematically which is =gross amount divided by 1.15). Hence, my problem is how to make the system calculate WHT from the base cost?

Thank you.

Merga

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MauricioSaldana on at

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Hi Merga,

Is this what you need?

On the voucher the last line is actually the WHT but I used an existing account for my testing

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Ludwig Reinhard Microsoft Employee on at

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Hi Merga,

Thanks for the clarification.

What you describe sounds as if the VAT is not expensed in this case.

If you run a VAT report do you see that the non-refundable VAT is included?

How did you setup the non-refundable VAT?

Best regards,

Ludwig

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Community Member on at

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Hi Ludwi

Please see my answer as below:

What you describe sounds as if the VAT is not expensed in this case.

Ans: VAT is expense.

If you run a VAT report do you see that the non-refundable VAT is included?

Ans: No, I don't want to see in VAT as it is part of the expense.

How did you setup the non-refundable VAT?

Ans: I don't need to set non-refundable VAT, my issue is that I don't need to consider VAT amount for Withholding tax calculation

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Community Member on at

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Hi Mauricio,

I think your last table seems what I am looking for. Can you give me how to setup in Dynamics AX 2012 R2?

Thanks

Merga

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MauricioSaldana on at

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You need to setup two tax codes, one for the VAT with non deductible as 100% (explained on my first post) and then other tax code for the WHT (in this case you won't be able to use the standard WHT functionality) on the tax code you need to mark allow negative sales tax percentage.

You need to include both tax codes into the correspondent sales tax group and item sales tax group. Be sure both are calculated on the net amount.

Of course the WHT code will need his own settlement period and posting profile.

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Community Member on at

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A bit more detail for clarifications please see below cases:

1. Vendor invoice contents(Sample)

Item Code Description Qty Unit cost Total cost

IC003 Entertainment service 1 100 100

Amount before VAT 100

VAT (15%) 15

Gross including VAT 115

2. Invoice Recording in AX

DR CR

Expense. 115

Credit Vendor 115

3. Invoice Payment-Payment payment journal

DR CR

Vendor .............................................................. 115

Withholding Tax (2% of amt before VAT) 2

Bank.................................................................................. 113

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MauricioSaldana on at

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In this case you won't be able to have the WHT at payment but you will have to calculate at invoicing. If this is not good enough I think you will need to think on a customization.

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