According to an article published on TheNation Newspaper online, ‘Withholding Tax (WHT) is an advance payment of income tax. In principle, it is a payment for the ultimate income tax liability of the taxpayer or company. It is not a separate tax and does not confer an exemption from the filing of yearly tax returns by the company which suffered WHT. The tax is deducted at source when a payment is to be made to the beneficiary‘.
It is a tax deducted at source for service rendered or sales.
This article illustrates how you should treat Withholding Tax in an accounting software (QuickBooks)
When you render a service or make a sale to your customers, by law they are expected to withhold a certain percentage of the transaction value as a tax which is remitted to tax agency and at the end pay the remaining balance as settlement. In such scenario, you are expected to treat the balance as WHT or else the system will hold it an account receivable balance.
Here are the steps to follow:
Note: I assume you have entered an invoice and received payment on your accounting software.
- Open the General Journal window of your accounting software.
- Under the ‘Account’ column, select ‘Accounting Receivable’ and ‘WHT Receivable’
- Credit the Former and Debit the Latter with amount withheld by the customer
- Select the customer’s name and fill other fields – Date, General Journal No and Memo.
Continue reading Accounting Treatment For Withholding Tax On Revenue
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