Withholding Taxes: Implementation Activity

By performing this implementation activity, you will learn how to configure a withholding tax.

Story

Suppose that SweetLife Fruits & Jams started purchasing services from a company located in Europe. Payments made to a foreign vendor are subject to withholding tax that has not yet been implemented in the system. Acting as an implementation consultant, you need to prepare the system entities for the creation of the new type of tax as follows:

  • Create a GL account for withholding taxes in the chart of accounts
  • Update the settings of the tax agency
  • Update the settings of an existing tax report
  • Create a tax category and update the settings of a tax zone for the withholding tax
  • Create the withholding tax

Configuration Overview

In the U100 dataset, the VAT Reporting feature has been enabled on the Enable/Disable Features (CS100000) form.

Process Overview

In this activity, you will create a GL account on the Chart of Accounts (GL202500) form. On the Vendors (AP303000) form, you will update the settings of a tax agency to make it possible to create new revisions of a tax report for closed periods. On the Reporting Settings (TX205100) form, you will update the configuration of a tax report and on the Reporting Groups (TX205200) form, you will add report lines to the Withholding group. For the withholding tax, you will create a tax category on the Tax Categories (TX205500) form and update the settings of a tax zone on the Tax Zones (TX206000) form. Finally, on the Taxes (TX205000) form, you will create a withholding tax.

System Preparation

To prepare the system, do the following:

  1. Launch the MYOB Acumatica website, and sign in to a company with the U100 dataset preloaded. You should sign in as an implementation consultant by using the gibbs username and the 123 password.
  2. On the Company and Branch Selection menu, on the top pane of the MYOB Acumatica screen, select the SweetLife Head Office and Wholesale Center branch.
  3. As a prerequisite activity, in the company to which you are signed in, be sure you have configured the VATTAX tax agency as described in Tax Agency: To Set Up a Tax Agency for VAT.
  4. As a prerequisite activity, in the company to which you are signed in, be sure you have configured a tax report as described in Tax Report Configuration: To Create a Tax Report for VAT.

Step 1: Creating a GL Account

To create a GL account for withholding taxes, do the following:

  1. Open the Chart of Accounts (GL202500) form.
  2. On the form toolbar, click Add Row and specify the following settings for the new row:
    • Account: 24210
    • Account Class: TAXESPAY
    • Type: Liability (inserted automatically)
    • Description: Withholding Tax Payable
    • Control Account Module: TX

    This account will be used for accumulating the withholding tax amounts to be paid to a tax agency in a tax period.

  3. On the form toolbar, click Save.

Step 2: Updating the Tax Agency Settings

To update the tax agency settings, do the following:

  1. Open the Vendors (AP303000) form.
  2. In the Vendor ID box, select VATTAX.
  3. On the Tax Agency tab, select the Update Closed Tax Periods check box.

    With this check box selected, you can prepare new revisions of tax reports for closed periods that will include documents processed in a particular tax period after the period was closed.

  4. On the form toolbar, click Save.

Step 3: Updating the Configuration of the Tax Report

To update the configuration of the tax report, do the following:

  1. Open the Reporting Settings (TX205100) form.
  2. In the Tax Agency box, select VATTAX.
  3. On the Report Lines tab, click Add Row and specify the following settings:
    • Description: Purchases Subject to Withholding Tax
    • Update With: Taxable Amount
    • Update Rule: +Output-Input
  4. Click Add Row again and specify the following settings for another row:
    • Description: Withholding Tax
    • Update With: Tax Amount
    • Update Rule: +Output-Input
  5. On the Reporting Groups tab, click Add Row and specify the following settings:
    • Name: Withholding
    • Group Type: Output
  6. On the form toolbar, click Save.

Step 4: Specifying the Report Lines for the Withholding Group

To specify the report lines for the withholding group, do the following:

  1. While you are still on the Reporting Settings (TX205100) form with the Withholding group selected, click Group Details on the table toolbar.
  2. On the Reporting Groups (TX205200) form, which opens, click Add Row on the table toolbar, and add the following lines:
    • Report Line: 9 - Tax Amount Payable
    • Report Line: 10 - Purchases Subject to Withholding Tax
    • Report Line: 11 - Withholding Tax
  3. On the form toolbar, click Save.

Step 5: Creating a Tax Category and Updating a Tax Zone

To create a tax category and update the settings of a tax zone for the withholding tax, do the following:

  1. Open the Tax Categories (TX205500) form.
  2. On the form toolbar, click Add New Record and specify the following settings:
    • Tax Category ID: WITHHOLD
    • Description: Withholding
  3. On the form toolbar, click Save.
  4. Open the Tax Zones (TX206000) form.
  5. In the Tax Zone ID box, select FOREIGN.
  6. In the Default Tax Category box, select WITHHOLD.
  7. On the Applicable Taxes tab, remove the VATIM tax.
  8. On the form toolbar, click Save.

Step 6: Creating a Withholding Tax

To create a withholding tax, do the following:

  1. On the Taxes (TX205000) form, create a new record.
  2. On the Tax Settings tab, specify the following settings:
    • Tax ID: WTH
    • Description: Withholding Tax 15%
    • Tax Type: Withholding
    • Calculation Rule: Inclusive Line-Level (inserted by default)

      This setting means that the tax is already included in the line amount and should be subtracted from it. By default, the system selects this rule for taxes with the Withholding type.

    • Cash Discount: Does Not Affect Taxable Amount
    • Tax Agency: VATTAX
  3. On the Tax Schedule tab, click Add Row on the table toolbar, and specify the following settings:
    • Start Date: 1/1/1900 (inserted by default)
    • Tax Rate: 15
    • Reporting Group: Withholding
  4. On the GL Accounts tab, in the Tax Payable Account box, specify 24210 - Withholding Tax Payable.
  5. On the Categories tab, click Add Row on the table toolbar, and select WITHHOLD in the Tax Category column.
  6. On the Zones tab, click Add Row on the table toolbar, and select FOREIGN in the Tax Zone ID column.
  7. On the form toolbar, click Save.