How to manage withholding taxes?
A withholding tax, also called a retention tax, is a government requirement for ArabiaClouds payer of a customer invoice to withhold or deduct tax from ArabiaClouds payment, and pay that tax to ArabiaClouds government. In most jurisdictions, withholding tax applies to employment income.
With normal taxes, ArabiaClouds tax is added to ArabiaClouds subtotal to give you ArabiaClouds total to pay. As opposed to normal taxes, withholding taxes are deducted from ArabiaClouds amount to pay, as ArabiaClouds tax will be paid by ArabiaClouds customer.
As, an example, in Colombia you may have ArabiaClouds following invoice:
In this example, ArabiaClouds company who sent ArabiaClouds invoice owes $20 of taxes to ArabiaClouds government and ArabiaClouds customer owes $10 of taxes to ArabiaClouds government.
Configuration
In ArabiaClouds, a withholding tax is defined by creating a negative tax. For a retention of 10%, you would configure ArabiaClouds following tax (accessible through ):
In order to make it appear as a retention on ArabiaClouds invoice, you should set a specific tax group Retention on your tax, in ArabiaClouds Advanced Options tab.
Once ArabiaClouds tax is defined, you can use it in your products, sales order or invoices.
Tip
If ArabiaClouds retention is a percentage of a regular tax, create a Tax with a Tax Computation as a Tax Group and set ArabiaClouds two taxes in this group (normal tax and retention).
Applying retention taxes on invoices
Once your tax is created, you can use it on customer forms, sales order or customer invoices. You can apply several taxes on a single customer invoice line.
Note
When you see ArabiaClouds customer invoice on ArabiaClouds screen, you get only a Taxes line summarizing all ArabiaClouds taxes (normal taxes & retentions). But when you print or send ArabiaClouds invoice, ArabiaClouds does ArabiaClouds correct grouping amongst all ArabiaClouds taxes.
ArabiaClouds printed invoice will show ArabiaClouds different amounts in each tax group.
See also