Dynamics NAV withholding tax double entry

Withholding Tax

May 24, 2014

The payer is required to:

• Withhold tax at 15% of the gross income payable to the non-resident professional; OR
• the non-resident rate of 20% if the non-resident professional elects to be taxed on net income;

Source of withholding Tax from the IRAS website: http://www.iras.gov.sg/irashome/page01.aspx?id=758

Assuming the bill from the non-resident professional is $10,000, the amount payable to the non-resident professional will be $8,500 and the withholding tax amount will be at $1,500.

In the Payment transaction window, the amount paid to the non-resident professional will be $8,500; check the W/O (Write Off) checkbox and click the OK button to complete the payment (The balance $1,500 will be written off).

The double entry for this transaction will be:

Debit Accounts Payable account $8,500

Credit Cash at Bank account $8,500

On the following screen, MoneyWorks will prompt you to select a relevant “write off” account, in this case you select the Withholding Tax Payable account (Current Liability account type).

MoneyWorks will automatically create a new Purchase Invoice (debit balance) transaction for the $1,500 write off. The double entry will be:

Debit Accounts Payable account $1,500

Credit Withholding Tax Payable account $1,500

On the 15th of the following month, when you need to make payment to the IRAS for the $1,500 withholding tax due, you create a Payment transaction with Withholding Tax Payable account associated. This will:

Debit Withholding Tax Payable account $1,500

Credit Cash at Bank account $1,500