Withholding Tax Receipts — Complete User Guide — Two Accounts Web

Comprehensive guide for managing withholding tax receipts from customers, recording WHT collections, and tracking receivable balances

Table of Contents

1. Overview
   • What Is Withholding Tax?
   • Customer WHT vs Supplier WHT
2. Enabling the Tab via Customize Menu
3. System Accounts
   • Three WHT Accounts
   • Enabling Withholding Tax
4. Field-by-Field Guide
5. Creating a Withholding Tax Receipt
   • From the WHT Receipts Tab
   • From a Customer WHT Receivable
6. Withholding Tax on Transactions
   • Sales Invoice WHT
   • Purchase Invoice WHT
7. Accounting Impact
   • WHT Receipt GL Posting
   • WHT Receivable vs WHT Clearing
8. Opening Balances
9. Reports
   • WHT Receipts Listing
   • Customer WHT Receivable View
   • Supplier WHT Payable View
   • Balance Sheet
10. Sample Data and Report Output
11. Accounting Regulation Compliance

1. Overview

1.1 What Is Withholding Tax?

Withholding Tax (WHT) is a tax deducted at source by one party when making a payment to another party. In a business context:

• Customers may deduct WHT from payments they make to your business, and issue a withholding tax certificate
• Your business may deduct WHT from payments to suppliers, and remit it to the tax authority

The Withholding Tax Receipt is the document used to record the receipt of a WHT certificate from a customer — it acknowledges that the customer has withheld tax on a payment and provides the documentation needed to claim the tax credit from the tax authority.

1.2 Customer WHT vs Supplier WHT

2. Enabling the Tab via Customize Menu

Withholding Tax Receipts is a sub-tab of the Sales Invoices tab. To enable:

1. First ensure Sales Invoices is visible in the navigation bar
2. Then open Customize Menu
3. Find "Withholding Tax Receipts" in the list
4. Toggle to Visible and click Save

Once enabled, you will see:

• Withholding Tax Receipts — the main listing of all WHT receipts
• WHT Receivable drill-down on each Customer's record — shows all WHT receivable transactions for that customer
• WHT Payable drill-down on each Supplier's record — shows all WHT payable transactions for that supplier

3. System Accounts

3.1 Three WHT Accounts

The system uses three accounts for withholding tax:

All three accounts use the Operating Activities cash flow category.

3.2 Enabling Withholding Tax

Navigate to Settings to enable WHT features:

• Withholding Tax Receivable — enables customer-side WHT on Sales Invoices, Credit Notes, Sales Quotes, and Sales Orders
• Withholding Tax Payable — enables supplier-side WHT on Purchase Invoices, Debit Notes, Purchase Orders, and Purchase Quotes

When enabled, the relevant WHT fields appear on invoices, and the WHT Receivable/Payable accounts become visible in the Chart of Accounts.

4. Field-by-Field Guide

5. Creating a Withholding Tax Receipt

5.1 From the WHT Receipts Tab

1. Go to Withholding Tax Receipts > New Withholding Tax Receipt
2. Select the Customer
3. Enter the Amount of tax withheld
4. Add a Description referencing the original invoice and/or WHT certificate number
5. If the customer has a foreign currency, verify the Exchange Rate
6. Save

5.2 From a Customer WHT Receivable

1. Go to Customers and open the customer record
2. Click the WHT Receivable balance value to open the drill-down view
3. The view shows all WHT receivable transactions for this customer
4. Click New Receipt to create a WHT Receipt with the customer pre-populated
5. Enter the Amount and Description
6. Save

6. Withholding Tax on Transactions

6.1 Sales Invoice WHT

When a Sales Invoice has Withholding Tax enabled, the invoice total includes the WHT amount. The GL posting for the invoice creates:

Sales Invoice entry:
    Dr  Accounts Receivable (Customer)          Invoice Total
        Cr  Revenue / Income                                 Line Amounts
        Cr  VAT Payable (if applicable)                       Tax Amount

Withholding Tax entry (if enabled on the invoice):
    Dr  Withholding Tax Receivable               WHT Amount
        Cr  Accounts Receivable                               WHT Amount

Net Accounts Receivable = Invoice Total − WHT Amount

This means the customer pays the net amount (invoice total minus WHT) and issues a WHT certificate for the deducted amount. The WHT Receivable represents the tax credit you can claim.

6.2 Purchase Invoice WHT

When a Purchase Invoice has Withholding Tax enabled, the system creates WHT Payable entries:

Purchase Invoice entry:
    Dr  Expense / Asset                         Line Amounts
    Dr  VAT Receivable (if applicable)           Tax Amount
        Cr  Accounts Payable (Supplier)                      Invoice Total

Withholding Tax entry (if enabled on the invoice):
    Dr  Accounts Payable                         WHT Amount
        Cr  Withholding Tax Payable                           WHT Amount

Net Accounts Payable = Invoice Total − WHT Amount

The WHT Payable is a liability — you must remit this amount to the tax authority.

7. Accounting Impact

7.1 WHT Receipt GL Posting

When a Withholding Tax Receipt is saved, the system creates two GL transactions:

Entry 1 — Debit WHT Clearing (moves WHT from receivable to clearing):
    Dr  Withholding Tax (Clearing Account)          WHT Amount
        Cr  Withholding Tax Receivable (Customer)               WHT Amount
    (This is the NON-balancing leg)
    Customer reference set, transaction amount = Amount
    Account Currency = Customer's Currency (if foreign)

Entry 2 — Credit WHT Receivable (the balancing leg):
    Dr  Withholding Tax Receivable (Customer)        WHT Amount
        Cr  Withholding Tax (Clearing Account)                   WHT Amount
    (This is the BALANCING leg)
    Customer reference set, transaction amount = Amount × −1

Net effect:
    WHT Receivable balance: Decrease by WHT Amount (cleared)
    WHT Clearing balance:   No net change (Dr + Cr cancel)

7.2 WHT Receivable vs WHT Clearing

• WHT Receivable accumulates when Sales Invoices with WHT are created (Dr WHT Receivable, Cr AR)
• WHT Receipt reduces WHT Receivable and moves the amount through the WHT Clearing account
• WHT Clearing is a transitory account — its balance should ideally be zero after all receipts are processed
• The WHT Clearing account only becomes visible in the Chart of Accounts after the first WHT Receipt is created

8. Opening Balances

WHT Receipts cannot have opening balances directly. However, the Withholding Tax Receivable balance that WHT Receipts affect can be set via:

1. Settings > Opening Balances > Add
2. Select an account that supports WHT Receivable — this is the Withholding Tax Receivable account or a control account linked to it
3. The Customer field appears — select the customer who had WHT deducted at the business start
4. Set the Amount and Debit/Credit direction (Debit = customer deducted WHT from you)
5. If the customer has a foreign currency, the Currency field auto-populates
6. Save

Similarly, for supplier-side WHT Payable opening balances, select the Withholding Tax Payable account with the Supplier field populated.

9. Reports

9.1 WHT Receipts Listing

The main WHT Receipts page shows all receipts with the following columns:

• Date — the receipt date
• Customer — customer name
• Description — receipt description
• Amount — the WHT amount (from the balancing GL transaction, displayed with the currency)

9.2 Customer WHT Receivable View

Each Customer record has a WHT Receivable balance. Clicking it opens the Withholding Tax Receivable transaction viewer showing all GL transactions posted to the WHT Receivable account for that specific customer. This viewer has a New Receipt button to create a WHT Receipt pre-populated with the customer.

9.3 Supplier WHT Payable View

Each Supplier record has a WHT Payable balance. Clicking it opens the Withholding Tax Payable transaction viewer showing all GL transactions posted to the WHT Payable account for that supplier. This viewer has a New Payment button to create a Payment against the WHT Payable.

9.4 Balance Sheet

The three WHT accounts appear on the Balance Sheet under their configured groups:

• Withholding Tax Receivable — Current Assets (amounts recoverable from tax authority)
• Withholding Tax Payable — Current Liabilities (amounts due to tax authority)
• Withholding Tax (Clearing) — Current Assets (transitory, should be near zero)

10. Sample Data and Report Output

Setup

Scenario: WHT Deduction on Sales Invoice + WHT Receipt

GL Transactions Created

SI-001 — Sales Invoice with WHT:
    Dr  Accounts Receivable (ABC Retail)             10,000.00
    Dr  Withholding Tax Receivable (ABC Retail)        1,000.00
        Cr  Revenue                                               9,000.00
        Cr  VAT Payable (if applicable)                            1,500.00
        Cr  Accounts Receivable (WHT offset)                       1,000.00
    Net AR: 10,000.00 − 1,000.00 = 9,000.00 ✓

Receipt — Customer pays 9,000.00:
    Dr  Cash at Bank                                 9,000.00
        Cr  Accounts Receivable (ABC Retail)                      9,000.00
    AR now: 9,000.00 − 9,000.00 = 0.00 ✓

WHT Receipt — Record WHT certificate:
    Entry 1 (non-balancing):
        Dr  Withholding Tax (Clearing)               1,000.00
            Cr  Withholding Tax Receivable (ABC)                1,000.00
    Entry 2 (balancing):
        Dr  Withholding Tax Receivable (ABC)         1,000.00
            Cr  Withholding Tax (Clearing)                        1,000.00

WHT Receivable Balance Tracking

DR = CR Verification

Sales Invoice SI-001:
    Dr  AR                                  10,000.00
    Dr  WHT Receivable                        1,000.00
        Cr  Revenue                                       9,000.00
        Cr  AR (WHT offset)                               1,000.00
        Cr  VAT Payable                                    1,500.00
    DR = CR: 10,000 + 1,000 − 9,000 − 1,000 − 1,000 = 0.00 ✓
    (Note: VAT Payable depends on tax code — shown as example)

Receipt:
    Dr  Cash                                  9,000.00
        Cr  AR                                             9,000.00
    DR = CR: 9,000 − 9,000 = 0.00 ✓

WHT Receipt:
    Dr  Withholding Tax (Clearing)            1,000.00
        Cr  Withholding Tax Receivable                     1,000.00
    Dr  Withholding Tax Receivable            1,000.00
        Cr  Withholding Tax (Clearing)                      1,000.00
    DR = CR: 1,000 + 1,000 − 1,000 − 1,000 = 0.00 ✓

All entries balanced. WHT Receivable net = 0.00 after receipt ✓

11. Accounting Regulation Compliance

11.1 IAS 12 — Income Taxes

Requirement (§12-13): Withholding tax on income is a form of income tax. The amount withheld is a tax credit recoverable from the tax authority.

How this system complies: The Withholding Tax Receivable account records the tax deducted by customers as an asset — representing the recoverable tax credit. The WHT Receipt documents the receipt of the tax certificate and supports the audit trail for claiming the credit. The WHT Receivable balance is reported on the Balance Sheet under Current Assets.

11.2 IAS 1 — Presentation of Financial Statements

Requirement (§54): Current tax assets and liabilities must be presented separately on the face of the Balance Sheet.

How this system complies: The three WHT accounts appear separately on the Balance Sheet — WHT Receivable as a current asset, WHT Payable as a current liability, and WHT Clearing as a current asset (transitory). Each account is distinct and separately identifiable.

11.3 IAS 32 — Financial Instruments: Presentation

Requirement (§42): A financial asset is derecognized when the contractual rights to the cash flows expire or are settled.

How this system complies: The WHT Receipt derecognizes the WHT Receivable by moving it through the clearing account. The receivable is effectively settled when the WHT certificate is received and recorded.

11.4 IAS 21 — The Effects of Changes in Foreign Exchange Rates

Requirement (§23): Foreign currency monetary items are translated at the closing rate at each reporting date.

How this system complies: Withholding Tax Receipts support foreign currency customers via the Exchange Rate field. The WHT Receivable account uses the Customer's Currency, enabling proper FX tracking and period-end revaluation.

11.5 DR = CR Verification

WHT Receivable at invoice time:
    Dr  WHT Receivable                         1,000.00
        Cr  AR (WHT offset)                                1,000.00
    DR = CR: 1,000 − 1,000 = 0.00 ✓

WHT Receipt:
    Dr  WHT Clearing                            1,000.00
        Cr  WHT Receivable                                  1,000.00
    Dr  WHT Receivable                          1,000.00
        Cr  WHT Clearing                                    1,000.00
    DR = CR: 1,000 + 1,000 − 1,000 − 1,000 = 0.00 ✓

Net WHT Receivable after receipt: 1,000 − 1,000 = 0.00 ✓

11.6 Relevant but Not Applicable

• IFRS 15 (Revenue): Withholding tax is a tax collection mechanism, not a revenue transaction. Revenue is recognized on the Sales Invoice at the gross amount before WHT deduction.
• IFRS 16 (Leases): WHT can apply to lease payments, but the WHT Receipt itself is not a lease transaction.
• IAS 7 (Cash Flow Statement): WHT Receipts are non-cash transactions — they move balances between accounts without affecting cash. They do not appear directly on the CFS.

End of Withholding Tax Receipts Guide