WithHolding Tax - Advance Payments
Muhammad Rizwan Anwar
Dear Carlos.Ruiz,
I think this forum is about iDempiere but I need help about Adempiere and I hope this will not embarrassing you.
We are using Thai-Withholding Functionality in Adempiere.
Withholding is claculated at “Is Calculate on Payment”.
It is working nicely when we follow “Invoice to Payment” procedure (first post invoice than make payments, it is ok with both full payment and partial payments).
But in Pakistan, Businesses frequently pay payments to supplieres in advance without recording Invoice/Pro-forma invoice. In this case Adempiere create some problems in calculating and recording of WithHolding Tax.
I illustrate this with the following example.
Business Pay as advance Rs.100,000 to a vendor say XYZ without posting invoice (as invoice is yet not provided by vendor)
After completing work XYZ (vendor) send Invoice of amount Rs. 350,000 to the business.
It is recorded and Withholding is generated at 4% (4% of 350,000 = 14000). Please remember withholding calculation rule is “Is Calculate on Payment”
Now when we go to make remaining payment Rs.250,000 ( Total Invoice Amount 350,000 – Prepayment 100,000 = 250,000) for this vendor Adempiere will calculate withholding just as below
4% of Rs.250,000(remaining amount) = 10,000.
But business need to withhold Rs.14000 on full Invoice Amount as 4% of Rs.350,000.
Please guide me how to handle this issue regarding Withholding by using current functionality of Thia Withholding.
Thank you and best regards,
Rizwan Anwar
Carlos Antonio Ruiz Gomez
The LTH is based on LCO so I can answer how the LCO manages that case - cannot be sure if LTH is doing exactly the same.
I created a test case similar to what you described on http://demo.globalqss.com - firstly I changed the AP withholdings to calc on payment
* Purchase order 800003 - $450.000
* Payment 700000 - prepayment $100.000 (note the payment is assigned to the order to make it a prepayment)
* Invoice Vendor 10000012 - generate withholdings generate 3.5% from $450.000 for calc on payment $15.750
* Via Payment Allocation generated the Allocation 1000002 to match the prepayment with the invoice
* Payment 700001 - paid the remaining $334.250 - note the write-off is filled with the withholding amount $15.750
* This payment generates the Allocation 1000003.
As I see the case is managed correctly (BTW conducting the full test case I noticed a couple of things that can be improved in LCO to manage this case - will try to implement).
Regards,
Carlos Ruiz
Muhammad Rizwan Anwar
Muhammad Rizwan Anwar
Respected Carlos,
First of all sorry to sharing my findings late about withholding tax on Advance Payments as I wrote previously that I will test your instructions in Thai Withholding and ask you if help is needed.
I tested withholding tax both in Thai-Withholding (Adempiere in my Local Machine) as well as in Colombia Localization on http://demo.globalqss.com and find the following.
With Thai Withholding we can’t calculate properly withholding if we have made advance payment before posting vendor invoice but Colombia Localization helps well in this case (withholding on advance payment before entering vendor invoice).
Withholding on partial payments is possible in Thai Withholding but not in Colombia Localization (correct me if I am wrong). If withholding on partial payment is possible in Colombia Localization it would be great news for me.
AP Withholding on Invoice Time, in my opinion, may another solution for withholding tax on advance payment before entering vendor invoice but here we face following problem:
If we select AP Withholding on Invoice Time, it decrease Grand Total field by the Withholding Amount. For example;
We buy a product say Azalea Bush: Qty = 1, Price = 30000, Value Added (Tax) = 16%, Withholding tax = 3.5%.
ADempiere/IDempiere shows the following posting and it confuse with amount as the posted total figures not match with the total figure of actual invoice (vendor invoice)
Product Asset 30000(Dr)
Claimable Tax 480(Dr)
Withholding Tax -1050(Dr)
Accounts Payable Trade 33750(Cr)
In my opinion entry should be as follow
Product Asset 30000(Dr)
Claimable Tax 480(Dr)
Withholding Tax 1050(Cr)
Accounts Payable Trade 33750(Cr)
Is it possible to change the accounting entry scheme as I mentioned above without changing technical functionality of adempiere/idempiere?
With best regards
Rizwan Anwar
On Saturday, 1 March 2014 20:35:50 UTC+5, Carlos Antonio Ruiz Gómez wrote:
Carlos Antonio Ruiz Gomez
There is a flag on Accounting Schema that disable the negative postings - moving the negative to the other column as you suggested.
Regards,
Carlos Ruiz