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Taxation In Invoicing
AbdurRahman89
Member Posts: 6
I am facing difficulty in adjusting the amount of Taxation. In our region it is mendatory for the customers to deduct the Withholding Income Tax. While receiving the payments I am unable to adjust the amount of tax duducted on my invoices.
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Hi @AbdurRahman89 , thanks for your message here! It sounds like you might be trying to track sales taxes, and are having trouble. Have you set up sales taxes in Settings > Sales Taxes? Would you be able to walk me through the steps you've taken so far for the sales taxes, and also when recording your invoice payments?
You should be able to add a sales tax to an invoice in Sales > Invoices > click the invoice you want to add a sales tax to > add the tax in the Editor. You can also add sales taxes on transactions in Accounting > Transactions and click 'Include sales tax' in the transaction editor.
As well, this section on sales taxes in Wave might help!: https://support.waveapps.com/hc/en-us/sections/360004035052-Sales-tax
Sales Tax is something else. I am asking about the Withholding Income Tax.
When I make an invoice I have added the sales tax. Now I may not include the Income Tax Withholding. When customer will make a payment to me he will deduct the amount of Income Tax Withholding from the amount excluding sales tax and pay me the rest of the amount and full sales tax.
Later on I have to pay sales tax to government. (The payment of sales tax = amount of sales tax on purchases-the amount of sales tax on sales invoices.)
Attached is the invoice of Sales Tax I issued to one of my client. Now the invoice is complete and as per the Sales Tax Act 1990 of Pakistan.
The problem faced is at the point when I am receiving the payment. The customer will pay me the amount of sales tax i.e. PKR 51,680, and he will not pay the invoice amount PKR 304,000 in full. He will deduct Income Tax Withholding PKR 13,680 u/s 153 (1) (b) of Income Tax Ordinance 2001 of Pakistan; and pay it to the Federal Board of Revenue of Pakistan. He will give me PKR 290,320. How do I adjust the tax amount.
The amount paid by the customer to Federal Board of Revenue is adjusted at the annual payment of Income Tax as per the Income Tax Ordinance 2001 on annual income.
Sales Tax is an other chapter and Income Tax is totally another chapter.
@AbdurRahman89 Thanks for providing more context on the situation that you are explaining. As a worldwide platform, we aim to create a product that can be used in many areas. I acknowledge that in this case, you have some jurisdictional regulations that mean that your invoices need a more robust withholding feature. As it turns out, at the moment, this is not something that Wave offers, but I'd love to hear from other Wavers in similar situations to gauge if this is something that goes outside of just Pakistan. If we see engagement from other areas in the world, then this is something that I'd be happy to take back to the product team to consider.
@JordanD Thank you for the consideration. I am satisfied with your answer. I will then find another suitable entry or another software that I can offer to my clients for use in Tax Accounting.
My post in another thread may be helpful:
https://community.waveapps.com/discussion/8530/how-do-i-add-deductions-for-the-payments-received-to-the-invoice#latest
@KennethPenkowski thank you for you help and advice sir. May God bless you.