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Witholding and Pension Taxes

The functionality allows to charge certain operations with whithholding (WHT) and pension (PF) taxes. Appropriate set up was created for witholding and pension tax percent and accounts indication for automatic calculation of WHT/PF amounts and posting WHT enries. The functionality applies to Purchases, Business Trips and Item Shipments for item write-offs in specific cases.

WHT Posting Groups Setup​

  1. WHT Product Posting Groups should be defined with indication Code and Description.

  2. WHT Business Posting Groups should be created with indicating Code, Description and Residency. Non-Resident should be marked only when the Vendor is not a Resident.

    The Legal Entity field should be marked for legal entities.

    • If "Legal Entity"=TRUE when retrieving Income Tax Declaration -> the first name= Organization Form from Vendor Card and the Last Name=Full Name from Vendor Card
    • If "Legal Entity"=FALSE when retrieving Income Tax Declaration -> the first name= the first word of Full Name from Vendor Card is used and the Last Name=the text after space of Full Name field from Vendor Card.

  3. Setup WHT Posting Setup for the WHT Business Posting Groups and WHT Product Posting Group combination:

    • Define WHT%,
    • Indicate WHT Account and Expense Account No-s,
    • Choose Government Vendor for which liability will be created when WHT is posted,
    • Indicate if the specific WHT combination is for Resident or Non-Resident,
    • Define Pension Fund % and choose an appropriate vendor for liability posting,
    • Indicate PF Expense Account,
    • Mark PF by Buyer if the company pays both 2% of PF amounts, company and vendor parts.

  4. Select WHT Posting Groups on the Item and Vendor Cards accordingly:

    • Select WHT Product Posting Group on the Item Card,
    • Select WHT Business Posting Group on the Vendor Card,
    • If Prices should by default include WHT, then mark WHT Prices Including WHT on the Vendor Card, which will be imported in the Purchase document when such Vendor is selected.

  5. On Countries/Regions page, mark Double-taxation Agreement if double-taxation agreements between countries exist, which defines whether Non-Resident Tax can be exempted. Specify if Double Taxation Agreement (DTA) exists for the Vendor Agreement Card.

    • When creating Agreement for vendor by default field Double Taxation Agreement (DTA)=NO, which can be modified.

    • If in the Countries/Regions the Double Taxation Agreement field=TRUE and in the Vendor Agreement card Double Taxation Agreement (DTA)=TRUE -> when creating a Purchase Order or Purchase Invoice -> the Double Taxation Agreement field will have a default value of TRUE with the ability to edit.

    • If one of the Double Taxation Agreement checkboxes (Countries/Regions or Vendor Agreement card) is set to FALSE when creating a Purchase Order or Purchase Invoice -> the DTA value will be FALSE with no ability to edit.

For countries, option for marking Internal Business Trip is possible, which is then imported in the Advance Statement Line Types.

Note: If Double-taxation agreement is YES in Posted Purchase Invoice, Double Taxation checkbox will be also YES in WHT Entries. Also, system will calculate fields:

  • Exemption Amount for DTA (LCY) - The amount of the tax subject to exemption on the basis of an international agreement in LCY- Calculate as Base Amount (LCY) * WHT %
  • Benefit Amount for DTA - Indicated benefit amount for the DTA purposes, same as Amount Exc. WHT (LCY)**

Related columns (N and I) will be also filled in Income Tax Declaration report.

WHT Calculation in Purchase Order​

  1. Create Purchase Order and fill out the header information. For more information, see Create Payment.
  • WHT Business Posting Group and Country/Region will be imported from the Vendor Card, which are editable and can be changed.
  • If the selected Vendor has indicated WHT Business Posting Group, where the Non-Resident field is marked and Country/Region Code has Double Taxation Agreement ticked, it will automatically be imported on the Purchase Document, which can be changed.
  1. Select the item in the purchase lines and fill out the line information:
  • WHT Posting Group will be imported from the item card if indicated,
  • WHT and PF amount will be calculated according to the WHT settings.

There are following modifications made to the existing field calculation logic for including WHT and PF in the amounts:

ScenarioFormula
VAT over WHT = Yes; Non-Resident = Yes on WHT Business Posting Group;
Prices Including VAT = Yes;
Prices Including WHT = No		Total VAT = Sum of [Line Amount Incl. WHT x VAT %]
Line Amount Incl. WHT = Quantity x [Direct Unit Cost Incl. VAT / (1 + VAT %)] x (1 + WHT % on that line)
VAT over WHT = Yes
Non-Resident = Yes on WHT Business Posting Group
Prices Including VAT = Yes
Prices Including WHT = Yes		WHT Amount in Purchase Lines = [Line Amount / (1 + VAT %)] - [Line Amount / (1 + VAT %)]/ (1 +WHT % ) (from chosen WHT % on that line)]
Total Excl. VAT = Sum of [Line Amount incl. VAT / (1 + VAT %)]
Total VAT = Sum of [Line Amount Incl. WHT x VAT %]
Prices Including WHT = No
Non-Resident = No in WHT Business Posting Group		WHT Amount in Purchase Lines = [Line Amount / (1 + PF %) – (Line Amount / (1 + PF %) x PF %)] x WHT % (from chosen WHT % on that line)
Direct Unit Cost Incl. WHT = Direct Unit Cost Excl. VAT / (1 - WHT % on that line) / (1 – PF %) + PF % x [Direct Unit Cost Excl. VAT / (1 - WHT % on that line) / (1 – PF %)]
Pension Amount = Line Amount / (1 + PF %) x PF % x 2
Amount Incl. WHT = Total Excl. VAT + WHT Amount + PF Amount
Total Incl. VAT and WHT = Total Incl. VAT + WHT Amount + PF Amount
Prices Including WHT = Yes
Non-Resident = No in WHT Business Posting Group		Direct Unit Cost Incl. WHT = Direct Unit Cost Excl. VAT
WHT Amount in Purchase Lines = [Line Amount / (1 + PF %) – (Line Amount / (1 + PF %) x PF %)] x WHT % (from chosen WHT % on that line)
Pension Amount = Line Amount / (1 + PF %) x PF % x 2
Total Incl. VAT and WHT = Amount Incl. WHT

Note: VAT Base for calculation for all VAT Entries is [Direct Unit Cost Excl. VAT x (1 + WHT%), if WHT Business and Product Posting Group is not empty for Vendor and Item, for cases when WHT Business and Product Posting Groups are empty is standard calculation.

Note: For Non-Resident Vendor type in the WHT Business Posting Group, if Prices Incl. WHT is set to Yes, the checkbox for the VAT Over WHT field is marked automatically and is non-editable.


When Business Posting Group and Product Posting Group are indicated, where Vendor Type = Resident, Prices Incl. VAT should not be enabled. Also, an error pops up, if VAT% on posting is > 0% for Vendor Type = Resident.

For Physical Persons and Individual Entrepreneurs, there are 2 WHT taxes – Income Tax and Pensions Tax.


Note: If the PF by Customer field in WHT Posting Setup = Yes, in Pension Fund calculation formulas where x2 is used, the given formulas are applied, if value in this field is No, in calculation the formula is removed x2.

  1. Post Purchase Order. Upon Posting Purchase Order, no WHT Entries are created.

Note: WHT Entries are created upon posting Bank Payment through Bank Payment Journal.


  1. Create Payment. For more information, see Create Payment.

  • Indicate Posting Date, Document Type – Payment, Account Type – Vendor, choose a vendor from the posted purchase document, then click Apply Entries.

  • Select the posted purchase invoice and Set Applies-to ID.

  • Post the Bank Payment Journal. WHT and PF amount will be posted according to the Purchase Document in proportion to the indicated Payment Amount, if after Apply Entries the amount is changed.

  • Check the WHT Entries Table for created records.


Business Trips

Georgia legislation sets norms for business trips, on the other hand company norms can be set by company policy. Business trip expenses proved by documents, within state limits are not taxed and can be deducted from taxable income. Expenses over the state limit or not proved by document are taxed by personal income tax, that is withheld and paid by the company.

Setup​

  • Business Trip Setup:
    • In WHT Setup, the WHT Method should be set for Accrual,
    • Add all Cities with appropriate Countries,
    • Set Business Trip Limits: Per Diem Limit, Accommodation Limit, Per Diem Limit on Over 30 Days, Organization Limit on Per Diem,Organization Limit on Accommodation, Currency per country and city and validity dates of Starting Date, Ending Date limits.
    • Select Expense Types and Expense sub-types.
    • Specify percentage by which Per Diem Amount should be reduced due to included meals in Tax Setup GE.

    If expense type is Per Diem and Meals Included is enabled, then Tax Limit and Per Diem Limit Long Term days are calculated according to the formula: Per Diem Limit x (1 - Tax Setup GE.Per Diem Limit with Meals).
    • Define Per Diem Long Term After in WHT Setup.

Advance Statement​

  • Create an Advance Statement document.

  • Indicate Responsible Employee, Country, Business Trip City, Scheduled Start Date, Scheduled End Date, Real Start Date, Real End Date and WHT Business Posting Group in Advance Statement header.

  • Mark the Business Trip checkbox.

  • Choose Advance Type in lines, which is filtered according to Country and Currency.

  • Selected Advance Statement Line Type information will be imported in advance statement lines.

  • Indicate WHT Product Posting Group in lines.


All calculable fields will be calculated according to the formulas:

  • Total calendar days - Travel End date - Travel start date +1; if Type = Accommodations, then Travel End date - Travel start date.
  • Tax limit total - Total calendar days x Tax limit, if Total calendar days > Long Term After then Tax Limit Total = (Per Diem Long Term After X Tax Limit) + (Total Calendar days - Per Diem Long Term After) X Per Diem Limit Long Term.
  • Organization limit (total) - Total calendar days * Organization limit.
  • Per Diem Limit Long Term - Filled only when Total Calendar Days > WHT setup Per Diem Long Term After field.
  • Documented Expense Amount - if the Documents submitted checkbox is set, documented expense amount field is automatically defaulted from the Line Amount Excluding VAT value, which is editable. The value cannot be more than the Line Amount Excluding VAT amount.
  • Taxable Amount - If Document exp. > Tax limit total, then: Line Amount Exc. VAT – Tax limit total.

If Document exp. < Tax limit total, then: Line Amount Exc. VAT -Document exp.

Note: If Expense type = Flight ticket and flight class = Business, then taxable amount = line amount excl. VAT.

  • WHT and PF is calculated according to the selected WHT Posting Group Setup.

Factboxes have been added to the Advance Statement document and Posted Purchase Invoice document, where information regarding selected purchase/advance statement is displayed.

Tax Only​

Type Tax Only has been added to advance statement line options, which allows to select purchase invoices in lines and tax them without reflecting the whole invoice amount in transactions when posting advance statment document.

Gen. Prod. Posting Group in Purchase Advance Statement lines filled in with the Gen. Prod. Posting Group from the first line of the selected posted purchase invoice where Quantity<>0 with the ability to change.

Direct Unit Cost is retrieved based on the currency code from Amount or Amount (LCY) fields of the selected Purchase Entry No. in lines with the ability to change.

Based on the combination of Gen. Bus. Posting Group and Gen. Prod. Posting Group in lines the WHT Balancing Account is retrieved from WHT Posting Setup.

WHT and PF are calculated from the Taxable Amount (LCY) field where Taxable Amount (LCY)= Direct Unit Cost * Exchange rate. In addition, if needed Exchange Rate can be manually specified on the Currency Code field.

Upon posting the following transactions appear:

• (DR) WHT Balancing Account – (CR) Accrued WHT GL Account

• (DR) WHT Balancing Account – (CR) Accrued PF Vendor GL Account

• (DR) WHT Balancing Account/Payable PF Expense G/L Account – (CR) Accrued PF Company GL Account

• (DR) Accrued WHT GL Account – (CR) Payable WHT GL Account

• (DR) Accrued PF Vendor GL Account – (CR) Payable PF Vendor GL Account

• (DR) Accrued PF Company GL Account – (CR) Payable PF Company GL Account

*Note: If in Advance Statement lines, Type = Tax only, then both WHT accrual and payment postings have to take place at the same time.

Employee Purchase​

The type Employee Purchase is used to handle transactions where an employee makes a purchase on behalf of the company. The system allows the selection of a purchase invoice in the lines and tax calculations are performed accordingly on the remaining amount.

This functionality of taxation is only available for local currency transactions (i.e., transactions in the same currency as the company’s base currency)

Posting Transactions

When the transaction is posted, the following journal entries occur:

  1. Reconciliation of Employee and Vendor Payable accounts o Debit (DR): Payable account for the employee’s vendor group. This represents a liability the company owes to the employee or a vendor. o Credit (CR): Payable account for the vendor specified in the purchase line. This represents the company's obligation to pay the actual vendor the employee made the purchase from.
  2. Withholding Tax (WHT) o Debit (DR): Accrued WHT G/L account based on the WHT posting setup. This represents the company's accrued withholding tax liability. o Credit (CR): Payable WHT G/L account for the government vendor, again based on the setup in the WHT posting configuration.
  3. Pension (Company) o Debit (DR): Accrued PF Company G/L account from the WHT posting setup. o Credit (CR): Payable PF G/L account for the PF vendor from the WHT posting setup.
  4. Pension (Vendor) o Debit (DR): Accrued PF Vendor G/L account from the WHT posting setup. o Credit (CR): Payable PF G/L account for the PF vendor from the WHT posting setup.

Posting Advance Statement Document​

Posting Advance Statment Document reflecs the total amounts indicated in the document lines (except Tax Only amounts) and posted WHT and PF taxable amounts on accrual accounts indicated on setup for selected document WHT posting groups.

Application of Payment to Posted Advance Statement Document​

Application can be done through Bank Payment Journal by Apply Entries functionality or Vendor Ledger Entry by using the apply entries function and selecting posted Advance Statement document.


Upon application, the WHT and PF accrual accounts will be closed and WHT and PF payable account transactions will appear. If there is an exchange rate difference, the system will reflect the gain/loss accordingly on preset accounts. WHT entries will be created in WHT Entries Table.

Note: WHT entries are always posted in the local currency.

Creating Payment from Advance Statement Document​

  • Create Payment by following the steps:

    • After filling out Advance Statement document, click Create Payment.
    • Choose General Journal Template and batch, then click OK.
    • All necessary fields will be filled out from the advance statement document, payment is posted as Advance Payment.

Application from Bank Payment Journal to Purchase Invoice with Marking Prices Including WHT​

  1. Create a Bank Payment Journal Line:

    • Fill out the payment information.

  2. Apply Entries to the Bank Payment Journal Line:

    • Click Apply Entries and choose Posted Purchase Invoice, click Process and then Set Applies_to ID.

If Invoice has the Prices Including WHT mark, then the Net Amount field value is calculated as follows: Sums up the Line Amounts Excl. VAT from Posted Purchase Invoice and calculates Net Amount as Sum Line Amounts Excl. VAT - WHT Amount - PF Amount.



When applying amount partially from the Posted Purchase Invoice which has the Prices Including WHT mark, then the Net Amount field value is calculated as follows:

  • Percent of applied amount is calculated: (Amount to Apply/Remaining Amount) and Net Amount is calculated as Applied Amount – (resulted percent X sum (WHT Amount and PF Amount)).


Exception: The following case: Prices Incl. VAT = No, Prices Including WHT = Yes, Double Taxation = No, Income Tax (WHT) = 10%, VAT = 18%, Vendor Type = Non-Resident, VAT Over WHT = No.

Invnetory Shipment​

  1. Setup

    • Indicate Profit Tax and VAT Tax Authorities on TAX Setup GE.
    • Percentage of Profit Tax should be indicated on Tax Setup GE, in Profit Tax FastTab.
    • Indicate VAT Settlment Account in VAT Posting Setup.
    • Indicate Profit Tax and VAT Tax Balancing account in VAT Posting Setup for each Bus/Product Posting Groups.

  2. Inventory Shortage is charged with VAT and Profit Taxes.

    • Create an Inventory Shipment Document
    • Indicate Inventory Shipment Document Header information, including Reason Code. When changing the reason code on the header of the document, all the lines should be changed accordingly, but the line information can be changed to different reason codes per line.
    • Choose an item in document lines.
    • Indicate Quantity, Reason Code, Unit Price and Item Tracking Information (if applicable).
    • Unit Price Including VAT will be automatically grossed up by VAT (unit cost + VAT).
    • Line Total Inc VAT, Line Total Cost, WHT Amount, PF Vendor Amount, PF (Company) amount, VAT Amount are calculated per each line.
    • Indicate Global Dimension.
    • Mark Taxable with Profit Tax and Taxable with VAT.
    • Indicate Source No and Source Type.
    • Source Name, VAT payer status, Gen. Bus. Posting Group, VAT Bus. Posting Group are filled out automatically from Vendor/Customer card when Source No is selected.
    • Select an entry from which the item should be written off.
    • Post the Inventory shipment document.

Note: All General Ledger entries will be defined from the indicated Unit Price Including VAT in document lines for VAT and WHT, and Profit tax will be calculated from unit cost per item.


  1. Calculation formula for Profit Tax:


Profit TAX: [(Quantity x Unit Cost) /(1-Profit Tax % from Tax Setup GE)*Profit Tax %

  1. Calculation formula for VAT Tax:


VAT: [(Quantity x Unit Price Incl VAT) / (1+VAT %)*VAT%] from selected VAT Business Posting Group and VAT Product Posting Group – Combination from VAT Setup]

After posting Inventory Shipment, VAT Entries will be created as well. 5. Item gifting to Physical Person is charged with VAT and Income (WHT) Taxes.

  • Create Inventory Shipment Document.
  • Indicate Inventory Shipment Document Header information, including WHT Business Posting Group.
  • Choose an item in document lines.
  • Indicate Quantity, Reason Code, Unit Price and Item Tracking Information (if applicable).
  • Indicate Global Dimension.
  • Choose WHT Product Posting Group in lines.
  • Mark the Gift(WHT Tax) and Taxable with VAT checkboxes.
  • Select an entry from which the item should be written off
  • Post the Inventory shipment document.

In Inventory Shipment document lines, multiple employees can be selected, which will split the lines according to selected quantity from employee list. Accordingly, the selected item quanity will be split by the equal amount among splitted employee lines.


  1. Calculation formula for Witholding Tax:


Amount for Income Tax (WHT) = (Quantity Unit Price ) / (1-WHT%/100) x WHT%/100 ) Amount for Income Tax (PF Vendor) = (QuantityUnit Price / (1-WHT%/100)/ (1-PF % (Vendor)/100)PF% Amount for Income Tax (PF Company) = (QuantityUnit Price / (1-WHT%/100)/ (1-PF % (Company)/100)*PF%

When the Inventory Shipment document is taxed with Withholding Tax (WHT), the entries are initially posted to the WHT Accrual and Pension Accrual accounts at first, and then transferred to the WHT Vendor and Pension Fund (PF) Vendor accounts. Additionally, Vendor Ledger Entries for both WHT and PF vendors are created. Logic of generatin G/L Entries:

WHT

Dr- WHT Balancing Account from G/L Posting Setup

Cr- Accrued WHT G/L Account from WHT Posting Setup

Dr-. Ct. Accrued WHT G/L Account from WHT Posting Setup

Cr- Government Vendor (Payable account in vendor posting group) from WHT Posting Setup

PF Vendor

Dr- PF Expense G/L Acc from WHT Posting Setup

Cr- Accrued PF Vendor G/L Account from WHT Posting Setup

Dr- Accrued PF Vendor G/L Account from WHT Posting Setup

Cr- PF Vendor (Payable account in vendor posting group) from WHT Posting Setup

PF Company

Dr- WHT Balancing Account from G/L Posting Setup

Cr- Accrued PF Company G/L Account from WHT Posting Setup

Dr- Accrued PF Company G/L Account from WHT Posting Setup

Cr- PF Vendor (Payable account in vendor posting group) from WHT Posting Setup

WHT Entries Reversals​

  1. Reverse WHT Transaction

    • If transaction, which created WHT entries and corresponding transactions for Revenue Service vendor, have to be reversed from Vendor Ledger Entries, the WHT Entries transactions are not affected and must be reversed separately.
    • WHT Entries transaction needs to be selected in the WHT Entries table and selected in the Reverse Transaction process tab; after this, the entries will be reversed in the Vendor Ledger Entries and WHT entries as well.

In WHT Entries, the reversed transaction is marked accordingly, and Entry No by which it was reversed also is indicated in the entry line.

Note: Reversed WHT entries are omitted from the Income Tax declaration.


Advance Statement Document for Expenses​

  • The indicated Advance Statement document header information, including date, employee and WHT Business Posting Group.
    • Choose the Type in the document line.
    • Indicate Amount.
    • Select Documents Submitted if documents were provided by employee.
    • Select WHT Product Posting Group in document lines.
    • Post the document.

WHT and PF will be calculated according to the WHT Business Posting Group and WHT Product Posting Group combination and WHT Posting Setup.

If Documents Submitted is checked for the line, then WHT and PF will not be calculated even if the WHT Posting Setup states otherwise.

Note: WHT and PF will be reflected in accounting transactions only upon application of appropriate payment to an Advance Statement document.

Income TAX Declaration Appendix "E"​

According to the Georgian legislation requirement, Income TAX Declaration Appendix "E" has been added in current release. It reflects information about the taxes applied to individuals in the reporting month, which is related to the payment of services and is not taxed at the source of payment.

1. Setup values on the page "Type of Service"

• Purpose: To define service types for individual transactions that are registered as taxpayers.

• Fields:

o Code: Unique identifier for the service type.

o Description: Detailed description of the service type.

2. Mark “Not taxable WHT” field on related WHT Business Posting Group.

Specifies that an individual with this WHT Business Posting Group is not taxed at the source of payment.

3. Define the value of Type of Service on Vendor's Agreement.

4. Field "Not taxable WHT" added in General Journal Line and SMA Bank Payment Journal, it becomes YES, if “Not Taxable WHT” is YES on WHT Business Posting Group.

5. Modified Posting Payment Process

• If "Not taxable WHT" is YES:

o System Skips the validation of WHT entries (i.e., do not create WHT entries when WHT % and WHT Amount are 0).

o Makes a record in WHT Entries as usual, but some fields, such as WHT amount and PF amounts, are 0.

7. New Report Income TAX Declaration Appendix "E" has been added.

• Provide an appendix with the same fields as the Income Tax Declaration.

• The report is savable in Excel and XML formats.

8. New Excel Template has been added.

• Template Columns:

o Columns A-C: Match the existing fields in the Income Tax Declaration template.

o Column D: "Type of Service" from SMA WHT Entry

o Column E: Base (LCY) from SMA WHT Entry

o Column F: Vendor’s Address

o Column G: Country of Residence

Note: Added the ability to post employee payments along with related taxes from the bank payment journal, similar to the functionality already available for vendors. Also, in the Income Tax Declaration, a control has been added to prevent the generation of lines with a value of '0'.

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