Finance User Manual ENG -> 2. Finance Configurations -> 2.10 VAT and Taxes -> LUFI-21004 Withholding Tax Configuration
LUFI-21004 Withholding Tax Configuration
LU Introduction
Sometimes MSF is requested to pay a tax retained when making payments for goods supplied. This tax is called withholding tax. For instance a 2% withholding tax out of a supplier invoice of 100 CHF is 2.04CHF. You owe to the government 2.04CHF and to your supplier 100CHF. The total cost of your expense is 102.04CHF.
Unlike the VAT recoverable, the withholding tax is booked on a Payable account as it a debt to be paid to the government. It is booked on the credit side as any other Payable accounts. Thus this tax should be excluded from the total price to pay to the supplier. Here below is shown how to proceed.
Withholding tax booked on the credit side as any other payables account
How to Set Up a Withholding Tax
Go to: Accounting/Configurations/Financial Accounting/Taxes/Taxes
- In the Search Taxes view, select
- Complete the {Tax Name} and {Tax Code} fields.
- In the Tax Application field, select the value {Purchase}.
- Leave the field {Tax included in Price} empty.
- In the {Tax Definition} tab, select the tax type {Percentage}.
- Enter an amount as a value between 0 and -1. For instance, for a tax of 2%, enter -0.02. You need to enter a negative value so that this tax (payable) is booked on the credit side as any other payable accounts.
- In the Accounting Information section, enter a payable account for both the Invoice Tax Account and Refund Tax Account.
Setting a withholding tax with negative amount
8. Click on {Save} button.
Example: The tax (1.36 USD) is what you owe to the tax office. The Total is your outstanding debt towards your supplier.
Withholding tax applied to a supplier invoice
