Witholding and Pension Taxes

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. 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 Vendor is not Resident

3. Setup WHT Posting Setup, per 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 will be created liability when WHT is posted
   • Indicate specific WHT combination is for Resident or Non-Resident
   • Define Pension Fund % and choose 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 Item and Vendor Cards accordingly

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

5. On Countries/Regions mark Double-taxation Agreement if double-taxation agreements between countries exist, which defines whether Non-Resident Tax can be exempt or returned. For countries, option for marking Internal Business Trip is possible, which is then imported in Advance Statement Line Types.

WHT Calculation in Purchase Order

1. Create Purchase Order and fill header information.For more information, see Create Payment.

• WHT Business Posting Group and Country/Region will be imported from Vendor Card, which are editable and can be changed
• If selected Vendor has indicated WHT Business Posting Group, where field Non-Resident is marked and Country/Region Code has Double Taxation Agreement ticked, it will automatically be imported on Purchase Document, which can be changed

2. Select item in purchase lines and fill line information

• WHT Posting Group will be imported from item card, if indicated
• WHT and PF amount will be calculated according to WHT setups

Note: If field Double Taxation Agreement = YES, then all WHT calculations and entries will be ignored.

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

Scenario	Formula
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 Vendor type Non-Resident in WHT Business Posting Group, if Prices Incl. WHT is selected to Yes, automatically checkbox for field VAT Over WHT is marked, without ability to edit.

When Business Posting Group and Product Posting Group are indicated, where Vendor Type = Resident, it is not allowed Prices Incl. VAT to be ticked. Also, 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 field PF by Customer 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 formula is removed x2.

3. Post Purchase Order. On Posting Purchase Order, no WHT Entries are created.

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

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

• Indicate Posting Date, Document Type – Payment, Account Type – Vendor, choose vendor from 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 Purchase Document in proportion to indicated Payment Amount, if after Apply Entries amount is changed

• Check WHT Entries Table for created records

Business Trip Setup

1. Indicate Business Trip Expense Sub-Types ** ** Code and Description.

2. Indicate Code and City Description* in Business Trip Cities.

3. Set in Business Trip Limits Per Diem Limit, Accommodation Limit, Per Diem Lint on Over 30 Days, Organization Liit on Per Diem, Organization Limit on Accommodation and Currency per country and city.

4. Specify percentage by which Per Diem Amount should be reduced due to included meals in Tax Setup GE.

5. Add Advance Statement Line Types, indicate code, description, quantity, unit of measure, country, city and currency. Limits will be imported according to trip code, country, and currency.

6. Select Expense Types and Expense sub-types.

If expense type is Per Diem and Meals Included is marked then Tax Limit and Per diem Limit over 30 days are calculated with formula: Per Diem Limit x (1 - Tax Setup GE.Per Diem Limit with Meals).

Per Diem Limit with Meals is imported from Tax Setup GE - Per Diem Limit with Meals, which is editable.

Advance Statement

1. Create Advance Statement document

2. Indicate Responsible Employee, Country, Business Trip City and WHT Posting Group in Advance Statement header.

3. Choose Advance Type in lines, which is filtered according to Country, Business Trip City and Currency.

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

5. Indicate WHT Product Posting Group in lines.

WHT and PF will be calculated according to the formulas listed below.

• If Documents Submitted is marked for each line, then the amount in Base Amount for Taxation is calculated with the following formulas:

Scenario	Formula
If Quantity </= 30, and Direct Unit Cost > Tax Limit	Quantity x (Direct Unit Cost - Tax Limit)
If Quantity </= 30, and Direct Unit Cost </= Tax Limit	Value = 0
If Quantity > 30, and Direct Unit Cost > Tax Limit	30 x (Direct Unit Cost - Tax Limit) + (Quantity -30) x (Direct Unit Cost – Per Diem Limit on Over 30 Days)
If Quantity > 30, and Direct Unit Cost </= Tax Limit but Organization Per Diem Limit > Per Diem Limit on Over 30 Days	(Quantity - 30) x (Direct Unit Cost – Per Diem Limit on Over 30 Days
If Quantity > 30, and Direct Unit Cost </= Tax Limit and Organization Per Diem Limit </= Per Diem Limit on Over 30 Days	Value = 0

• For Type of Expenses: Flight Ticket:

Scenario	Formula
If field Class = Business	(Direct Unit Cost – Tax Limit) x Quantity
If field Class = Economy	Value = 0

• For Type of Expenses: Transportation, Visa, Telecommunication Services, Additional Meal, Business Lunch

Scenario	Formula
If Direct Unit Cost > Tax Limit	Quantity x (Direct Unit Cost – Tax Limit)
If Direct Unit Cost </= Tax Limit	Value = 0

Note: Base Amount is always NET Amount to be paid to Employee for Business Trip, i.e. it is deemed that Prices Including WHT = No.

Note: If field Document Submitted = No, the formula for calculation in field Base Amount for Taxation, despite Tax Expense type and all above mentioned conditions, should be following: Direct Unit Cost x Quantity.

Base Gross Amount in document lines is calculated with the following formulas:

• For Type of Expense: Per Diem (When Meals Included = No):

Scenario	Formula
If Quantity </= 30, and Direct Unit Cost > Tax Limit	Base Gross Amount in Purchase Lines = [Quantity x (Direct Unit Cost – Tax Limit) / (1 - WHT % on that line) / (1 – PF %) + PF % x [Base Amount / (1 - WHT % on that line) / (1 – PF %)]
If Quantity </= 30, and Direct Unit Cost </= Tax Limit	Base Gross Amount in Purchase Lines Value = 0
If Quantity > 30, and Direct Unit Cost > Tax Limit	Base Gross Amount in Purchase Lines = [30 x (Direct Unit Cost – Tax Limit) / (1 - WHT % on that line) / (1 – PF %)] + PF % x [30 x (Direct Unit Cost – Tax Limit )/ (1 - WHT % on that line) / (1 – PF %)] + [(Quantity -30) x (Direct Unit Cost – Per Diem Limit on Over 30 Days) / (1 - WHT % on that line) / (1 – PF %)] + PF % x [(Quantity -30) x (Direct Unit Cost – Per Diem Limit on Over 30 Days) / (1 - WHT % on that line) / (1 – PF %)]
If Quantity > 30, and Direct Unit Cost </= Tax Limit but Direct Unit Cost > Per Diem Limit on Over 30 Days	Base Gross Amount in Purchase Lines = [(Quantity -30) x (Direct Unit Cost – Per Diem Limit on Over 30 Days) / (1 - WHT % on that line) / (1 – PF %)] + PF % x [(Quantity -30) x (Direct Unit Cost – Per Diem Limit on Over 30 Days) / (1 - WHT % on that line) / (1 – PF %)]
If Quantity > 30, and Direct Unit Cost </= Tax Limit and Organization Per Diem Limit </= Per Diem Limit on Over 30 Days	Base Gross Amount in Purchase Lines Value = 0

• For Type of Expense: Accommodation:

Scenario	Formula
If Direct Unit Cost > Tax Limit	Base Gross Amount in Purchase Lines = [Quantity x (Direct Unit Cost – Tax Limit) / (1 - WHT % on that line) / (1 – PF %) + PF % x [Base Amount / (1 - WHT % on that line) / (1 – PF %)]
If Direct Unit Cost </= Tax Limit	Base Gross Amount in Purchase Lines Value = 0

• For Type of Expenses: Flight Ticket, Transportation, Visa, Telecommunication Services, Additional Meal, Business Lunch:

Scenario	Formula
If field Class = Business (Only for Flight Ticket)	Base Gross Amount in Purchase Lines = [Quantity x (Direct Unit Cost – Tax Limit) / (1 - WHT % on that line) / (1 – PF %) + PF % x [Base Amount / (1 - WHT % on that line) / (1 – PF %)]
If field Class = Economy	Base Gross Amount in Purchase Lines Value = 0

• When Documents Submitted is not marked, then:

Field	Formula
Base Gross Amount*	Base Gross Amount in Purchase Lines = [Quantity x Direct Unit Cost / (1 - WHT % on that line) / (1 – PF %) + PF % x [Base Amount / (1 - WHT % on that line) / (1 – PF %)]
WHT Amount	WHT Amount in lines = WHT Amount in Purchase Lines = [Base Gross Amount / (1 + PF %) – (Base Gross Amount / (1 + PF %) x PF %)] x WHT % (from chosen WHT % on that line)
Pension Amount	Pension Amount = PF amount in Lines = Base Gross Amount / (1 + PF %) x PF % x 2

Creating Payment from Advance Statement Document

• Create Payment by following the steps:

  • After filling up Advance Statement document, click Create Payment
  • Choose General Journal Template and batch, then press ok.
  • All necessary fields will be filled from advance statement document, payment is posted as Advance Payment. Once posting of payment is done, proper WHT entries are created.
  • Post Advance statement Document, which should be posted with return date. Date can be changed in document header. Advance Document posting will not create WHT and PF postings, duplication is eliminated.
  • For application of Payment and Advance Statement document, enter Vendor Ledger Entries and apply the posted payments.Exchange rate will be posted accordingly.
  • When payment is posted as Advance payment, after application to posted document WHT entries are not duplicated.
  • WHt entries will be created in WHT Entries Table.

Note: WHT entries are always posted in local currency.

Advance Payment from Bank Payment Journal

• Create Advance Paymentby following the steps:

  • In Bank Payment Journal choose General Journal Template and Batch, then press ok.

  • Indicate document type – Payment, Account type – Vendor, mark Advance Payment field, Amount.

  • Post Bank Payment document.

  • Create Purchase Order document with appropriate WHT and PF entries and post the document.

  • For application of Advance Payment to Posted Purchase Invoice enter Vendor Ledger Entries and apply payment entries to the Posted Purchase Invoice. For more information, see Apply Transactions.

  • WHt entries will be created in WHT Entries Table.

Note: WHT entries are always posted in local currency.

Note: When posting payment from Bank Payment Journal Prices Incl. WHT = No always.

Selection of Advance Statement Document in PO

• Create Purchase Order

• Indicate all the information in document header and lines.

• Mark Business Trip and Documents Submitted in purchase header.

• Choose Advance Statement Document and Advance Type in the purchase lines.

• WHT and PF amounts will be calculated with exact same formulas as in Advance Statement Document.

Note: Line amount must coincide with Advance Statement line amount per Advance Statement Type.

After choosing Advance Statement Document in Purchase Order, in Advance Statement document information tab will be visible Purchase Order number, WHT, PF and document status from purchase document.

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

1. Create Bank Payment Journal Line

   • Fill the payment information

2. Apply Entries to Bank Payment Journal Line

   • Press Apply Entries and choose Posted Purchase Invoice, press Process and click Set Applies_to ID.

If Invoice has marking Prices Including WHT then 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 marking Prices Including WHT then Net Amount field value is calculated as follows:

• Percent of applied amount is calculated: (Amount to Apply/Remaining Amount) and Net Amount is compute 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.

Item 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 General Posting Setup
   • Indicate Profit Tax and VAT Tax Balancing account in General Posting Setup for each Bus/Product Posting Groups

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

   • Create Item Shipment Document
   • Indicate item Shipment Document Header information
   • 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)
   • Indicate Global Dimension
   • Mark Taxable with Profit Tax and Taxable with VAT
   • Indicate Source No and Source Type
   • Select an entry from which item should be written off
   • Post Item shipment Document

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

3. Calculation formula for Profit Tax:

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

4. Calculation formula for Profit 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 Item Shipment VAT Entries will be created as well. 5. Item gifting to Physical Person is charged with VAT and Income (WHT) Taxes.

• Create Item Shipment Document
• Indicate item 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 checkmarks Gift(WHT Tax) and Taxable with VAT
• Select an entry from which item should be written off
• Post Item shipment Document

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

6. 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) = (Quantity*Unit Price / (1-WHT%/100)/ (1-PF % (Company)/100)*PF%

• Check WHT Entries Table for created records.

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, in such case WHT Entries transactions are not affected and is required to be reversed separately.
   • WHT Entries transaction needs to be selected inWHT Entries table and in process tab Reverse Transaction clicked, after this entries will be reversed in the Vendor Ledger Entries and WHT entries as well.

In WHT Entries reversed transaction is marked accordingly and entry no by which it was reversed also is indicated in entry line.

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

Advance Statement Document for Expenses

• Indicated Advance Statement document header information, including date, employee and WHT Business Posting Group.
  • Choose Type in 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 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 Advance Statement document.