Withholding Tax
Ruddle
Member Posts: 3
Hope someone can help as this is stopping us from using Wave. We need to be able to with hold 2-3% tax after adding a 7% VAT to an amount, is this possible in Wave?
2
Comments
Hi @Ruddle ! If I'm correctly understanding what you mean to record here, you could do this by writing off the tax portion. A full guide can be found here Essentially you will want to:
1) Apply a partial payment to the invoice using the undeposited fund's account - you could name this account something else like 'Withholding Tax'.
2) Add the related expense transaction for the same amount.
I'd advise running this by an accountant, of course. If you happen to have an example transaction we can also walk through the process together.
I screenshot an example of how it would look on an invoice. This is some Thailand specific software that I have to use because no one seems to do withholding tax. Basically in Thailand we have to withhold a percentage of the tax collected, the percentage ranges from 0.5% - 15% depending on the product or service. The important part really is how it is displayed on the invoice which is after VAT is added
Hi, @Ruddle.
You didn't attach a screenshot to your last post. You can do so by using this button:
With that said, it isn't possible to have a negative tax in Wave at this time. The only way to add this to an invoice in Wave would be to calculate it manually, add it as a line item with a negative amount, and then move that amount from the income account it would be assigned to, to the appropriate tax payable liability account.
how very disappointing! No fewer than 36 countries use withholding tax in some form and you guys won't consider programming a simple negative tax into your invoice templates. WOW! is pretty much all I can say
Hi, @Ruddle.
I understand that this is frustrating, but know that we will absolutely consider your feedback. While I can't make any promises, I can tell you that we do take the needs of our users seriously, and feedback and feature suggestions from our users have a significant impact on what we choose to build next for Wave.
I've just got to this too. In Japan, we use withholding tax. I now can't use the software which is a shame as I've invested a lot of time into it and think it's really promising. Is it that hard just to add a line on estimates and invoices etc to create a negative amount field for this? Also, on the estimates, I have to manually ads a tax line, surely this should be automatic? thank you
Hi, @Andy_Mitch, thank you for your feedback.
I'm not a developer, so I can't speak to how easy it would be to add a tax like this one to Wave. For the time being, your only option would be to use the workaround suggested by Charlotte at the beginning of this discussion.
As for adding a line for a tax, there is one already on the estimate itself, as long as you did associate taxes to your items. It won't appear until you save the estimate, but it's right here:
Hi Alexia. Thanks for your help but withholding tax means the company hold it back from my payment and pay it on my behalf, that means it has to be a negative number. In Japan it's -10.21% of total payment that's withheld after the total amount is shown. So, according to your image above, I'd have a total amount of 30 (lets forget consumption tax here) which is what the client wants to see, then a new row with 'withholding tax @ -10.21%' (3.06) would give a total amount due of 26.94. It would be great just to add this sub-line and new 'total amount due' similar to the image attached. I could set up manually but I can't add negative amounts in the custom panel.
Thank you, Andy
Thank you for the feedback, @Andy_Mitch!
I'll make sure to pass it along to our product team. I can't promise it's a feature that will be added to Wave, but your feedback does count for a lot in assessing what we'll build next.
OH NO!!!
I was very confident Wave was the right choice for me, until I discovered it can't handle Withhold Taxes!!
That's a real problem, and will possibly force me to choose another system...
I'm operating in Spain, and when paying my rent to the landlord of the premises, the bill comes with a withhold tax; amount that I will have to pay to the authority on the owner's behalf.
It works about like this:
Invoice (Bill) received example:
Monthly rent = 1000€
Base = 1000€
VAT (21%) = +210€
IRPF(-19%) = -190€
TOTAL = 1000+210-190 = 1020 €
I would need a way to track/log all IRPF amounts, in a similar way than with VAT, since it needs to be declared to the Tax department every quarter.
Researching this community forum, I realise I'm not the only one suffering from the absence of this essential feature.
Any update/comment on a potential fix?
Thanks.
Hello again @Dedric! I replied to your other Comment regarding this road block. Lexi has indeed passed it along but we cannot say for sure if/when it would be developed.
I have a similar situation. I operate is in Puerto Rico and in a B2B transaction for professional services, we have to withhold 7% of the payment and send it directly towards the PR Treasury Department (Hacienda). This withholding is considered to Hacienda as an estimated tax payment.
I invoice my clients for my professional services, but in PR it is not required to include the withholding in the invoice. However, when I get the payment, if I receive a lower amount than the invoiced, I pressume the rest was sent to Hacienda.
In an example, if I invoice a client $300.00, the total amount in the invoice will be $300.00 (no need to state the withholding). When the client pays me, I receive $279.00. At the end of the year, my client sends me an official government form with the total amount paid to me and the total amount sent to Hacienda.
The same goes to services I hire as independent contractors. They invoice me an amount and when the time comes to pay them, 7% goes to directly to Hacienda and the rest to my contractor. One of the main reasons to create a Wave account was to track the withholdings I make to my contractors and the ones my clients make me.
I don't know how to deal with this in Wave. If someone has any ideas as to how to make this work, I will appreciate.
++++ for this functionality please! Thank you
That's blocking for most of the countries, included Spain. It's not a Region-to-region functionality, but a global functionality that some regions require to their taxable people. Hope you can give us feedback, and I'll reconsider waveapps as my first option for invoicing and charging my clients
@wildblue @jpicornell Thanks for weighing in on the need for this type of Tax functionality. I've ensured that I have passed this along to the Product Team, as Lexi had done previously.
@Giomar Charlotte's response at the beginning of this thread will likely be the best workaround at this time.
Hi there any update on this? I see the website has had a new look, I was hoping this feature (used in 26 countries around the world) would be updated too? Thanks.
This would be helpful for Mexico as well
Thank you for your feedback! The bulk of our users are based in North America but we're always searching for better ways to serve our global community. In the meantime, and as @Charlotte highlighted above, the workaround is to calculate the tax manually, add it as a line item with a negative amount, and then move that amount from the income account it would be assigned to, to the appropriate tax payable liability account.
@KelseyRodricks can you provide specific instructions or a walkthrough for "moving that amount from the income account it would be assigned to, to the appropriate tax payable liability account?"
Currently it seems the negative amount listed on my invoice is debited from my income account, but I don't see a credit with this amount to any other account such as Accounts Receivable or Cash on Hand. Where should I find the double entry for a negative income?
In order to "move the amount from income to a liability account" would I manually add an expense to the transactions list? If so, I would need to know which account to debit as it seems the entry does not appear in my Cash on Hand account, so it doesn't seem appropriate to credit it if there is no existing debit to cancel out.
Ok so after looking at how this is done in several other accounting software and looking at the details regarding how Waveapps handles this, I may have come up with a solution.
The thing I didn't like about the solution @Charlotte proposed was that it required me to go back and modify all my invoices such that the line items for the withholding taxes would be a positive amount. This doesn't make sense as then the client see's a total on the invoice that they are not actually supposed to pay. Having a negative line item is required to have a total on the invoice which is actually representative of the amount the client is to pay.
The solution proposed by @KelseyRodricks on the other hand allowed for the negative line item, but this still didn't make sense as the tax payable liability would be with the client, not me.
I had already put negative line items on my invoices, and had consumption tax also mixed in, so the invoice had three items:
- Work Total Price
- Consumption tax (as a tax item attached to Work Total Price)
- Negative withholding tax (as separate line item)
So I had to come up with a solution that worked around this. After digging into the General Ledger, I found that this was split between all sorts of accounts making it very convoluted in my opinion. As far as I can tell it added four separate journal transactions:
- The Work Total Price was credited to an Income account called "Consulting Income".
- The Work Total Price minus the Consumption Tax was debited to the assets account called "Accounts Receivable".
- The consumption tax was credited to a liability account called "Consumption Payable"
- The Withheld amount was debited to my "Consulting Income" account.
The fact that I had to trail and error my way around the General Ledger in order to find all of this seems absurd to me. Is there no way to show how an invoice payment was handled behind the scenes other than to guess?? When you open the Journal Transactions page, there is nothing. I would expect this to show ALL transactions, i.e. all debits and all credits to all accounts. Make it read only by default if you are worried about people messing up their balanced account, but just hiding everything from the user is just another item to add to the list of why I should be using another software suite. At the very least there most definitely should be some button that shows how an invoice payment was split into the various accounts. The current setup makes finding errors nearly impossible to track.
So, my solution deals with this debited or "negative income" journal entry. As it stands, Waveapps just leaves me with a balance lacking all the withheld taxes. If I left it as it stands by default, I would be liable to pay all the taxes owed by my clients as this tax liability would be not be documented in the books anywhere, and I would have less income to boot! Simply unacceptable. If I credited the income account and debited a liability account as suggested by @KelseyRodricks I'd be in a slightly better but still poor situation as it would now appear that I earned the money associated with the withheld taxes, but still owe all the money associated with the withheld taxes rather than the client owing it on my behalf!
I'm no accounting expert myself, but according to several other sources, and what makes sense to me, is that the negative line item for withheld tax should result in a debit to an asset account (not a expense or liability) as claimed by @KelseyRodricks. I call this account "Withheld Taxes Receivable" as it operates similar to the Accounts Receivable account other than it also represents an amount that can be used later at tax time to offset any tax liabilities. This Withheld Taxes Receivable asset account would then be credited once the client provided evidence that they had paid the withheld tax on your behalf.
So I used the Journal Transactions interface to credit this debited income, and then debit my Withheld Taxes Receivable account.
In summary for those who want to replicate my solution:
- In Accounting -> Chart of Accounts create a new Asset account titled something like "Withholding Tax Receivable". Waveapps apparently doesn't like you to create custom accounts, so you will have to find something like Asset -> Current Asset -> Other Current Assets -> Other Current Asset in order to add a custom account.
- Add withholding tax as separate line item on your invoice as a negative amount.
- Find account associated with the income for the invoice. This will depend on the income account associated with the chargeable line item. (You set this when you create any new line item). If you are unsure which account this was on an existing invoice, you can either open up and edit the invoice and there is a button to check this, or you can locate the line item in your "Products and Services" and edit it to see the "Income account".
- Go to Reports -> General Ledger and open the account associated with the line item income account you previously located. You may have to adjust the dates to show what you want as it defaults to the current year.
- Verify that the withholding tax was debited to this income account for the amount you specified in the invoice. I located this by matching the invoice date and dates listed in the account as well as by the amount.
- Go to Accounting -> Journal Transactions and credit the income account, and debit the withholding receivable asset account you created earlier.
-Done
-- Rant Warning --
Well...after all these hours of troubleshooting, I feel I have a much better understanding of how accounting should work...I will be getting my taxes done and shortly after abandoning Waveapps. This is ridiculous. This whole workaround is all because you can't add a minus sign to something. Just another item to add to this ongoing list of "features" that will "soon be available". Regardless of the core issues like the fact that none of this represents a solid audit trail as you can just add/remove/edit transaction entries on a whim, I've been waiting a year and a half for SUPER simple updates like adding a simple button to attach a receipt (image) to a transaction...Still can't search transactions...this is a database right??? These seemingly ultra simple things that I can make in Access or LibreOffice Base in a few hours time is ... after a year and a half .. still not done.
-- Rant Over --
Having the same problem..really wanted to use Wave but the lack of this one feature means I'll have to look elsewhere..
I began writing my invoices to start this new account and was disappointed to find this issue. Not sure the workaround is warranted for such a simple task as a negative tax. We have WT in New Zealand as well
Another vote for this to be added, please!!
may I dare asking for an update on this ?
When will the issue of withholding tax be solved? it is very frustrating to have unpaid invoices yet its the Tax that was withheld.
When will the Feature will be added? (Kenya)
Same here in New Zealand - we're desperately waiting for this feature to be added
At least let us know if your dev team has a record in their backlog - perhaps something like this
Thanks and hope to hear from you soon!
This is indeed a disappointment. However, I consider this problem minor. While I also wish the withholding tax to be presented in the invoice, I can live with the workaround procedure for now and hope that the developers of the program find this functionality essential.
Hi @Liyah_Wangari05 @holeczek @JakeIdris
In full transparency, so far we haven't heard of any updates on this in particular, but our team has been doing a lot of work on the back end of the invoicing section in order to make new improvements. Again unfortunately we haven't heard of this coming up in the future. We appreciate you using the workaround with Journal Transactions and I understand it's a bit frustrating, but our team is aware of this and we have not been given a timeline for this feature.
I'm struggling with the same problem as well in Italy. Unfortunately, The workaround suggested above doesn't solve the issue of tax withholding when applied to invoices I have to pay to some of my service providers, that is when I am on the other side of the transaction. I can easily apply the relevant VAT tax to an invoice payment, but can't make sense of the amount of money that is temporarily withheld (and will have to be paid next, on a quarterly basis). Journal transaction doesn't help either. That makes wave rather useless for users in countries with this kind of tax system. I hope you can find a solution soon (The world of small companies who need your support doesn't end in north America....)