Dynamics Community Forum Thread Details

Accounting practices - Withholding tax calculation

Hello experts,

I am trying to automate the calculation for the Withhold taxes in the Accounts payable module. In order to make it a streamlined process, I must calculate the VAT 16% from all the vendor invoices, so the Base amount is used to calculate the Withholding taxes in the Payment journal. Consider the following:

I am working for a Non-Profit organization, then some of those paid taxes (VAT 16%) are subject to be recovered from the Fiscal authority.
We use Projects to debit the expenses to the company.
With that said, when the VAT 16% is not recoverable, the whole invoice amount must be charged to the Expense account (via Projects)

The problem:

The company is only using a Sales tax code to calculate the VAT 16 when it is recoverable, they do not record the VAT when it is not recoverable; naturally, the invoice journal only Debits Project and Credits Vendor.
If I try to calculate the Withholding taxes without the VAT, the calculation is incorrect, because it won't be using the Base amount.

As I said, I must set up the VAT calculation for all invoices, but then the expense will not be recorded in the Project, instead, It would go to a VAT Payable account. We do not want this. So I came out with the possible workarounds:

In the same invoice journal, there should be an offsetting transaction for the VAT and charge the full invoice to the Project. Screenshot bellow.
Post all the invoices. At the end of the exercise (month-end closing), there should be a General Journal entry to offset the balance in the VAT payable account and charge the full invoice to the projects

The questions: Is there an automatic process to settle the balance in the VAT account and charge the full amount to the Projects?

Is there another way to configure the Tax codes so I get the Base amount to calculate the Withholding taxes (and the full invoice is charged to the Projects)?

Thanks!