Withholding Tax is a Tax deducted at source from every payment above a particular threshold on behalf of the State/Government.
The calculation of WHT is different depending on which country you find yourself in West Africa.
Eg. in Ghana the Calculation for with WHT on an Invoice that is VAT inclusive is done using the ff
formula Invoice Total Plus VAT (VAT 15%) = $ 2,000.00
(a) ( 2,000.00 * 115/100) = 1,739.13
(b) = (1,739.13 *5/100)
(c) = 86.96
The above derived amount is taken out off the original bill of $2,000.00 (15% VAT inclusive)
(d) (2,000.00 - 86.96) = 1,913.04
The amount 1,913.04 is what is paid to the Supplier finally and remaining is withheld till the end of the month and remitted to the State as WHT returns.
This is a big selling Point for every person marketing Sage in West Africa, Sage can be disqualified in any competitive bidding if a solution is not provided immediately.
by: Enoch M. | over a year ago | Financial Management
Comments
Yes, the issue of Withholding Tax (WHT) is a BIG SELLING POINT IN WEST AFRICA. Every client and/or prospect you talk to in West Africa will ask you this question about WHT; and it such a painful and frustrating experience that we are unable to provide straight answers. Selling Sage 300 ERP is thus made difficult.
In Nigeria WHT deducted at source is based on the original invoice amount (before VAT is charged); and it is either 5% or 10% depending on the nature of service rendered or goods supplied.
Let us assume a VAT exclusive invoice of $2,000. The invoice total would be $2,100, that is, $2,000 + $100 VAT. VAT in Nigeria is 5% flat across the country.
At the time invoice is due for payment, the law says WHT must be deducted at source and remitted to the govt. WHT is based on the original invoice amount before VAT was charged (i.e., $2,000).
A) If WHT deducted was 10%, the system should do the below calculations:
Withholding Tax:
$2,000 x 10% = $200
Amount Paid:
$2,000 less $200 WHT plus + %100 VAT = $1,900
WHT Liability Remitted To Govt:
$200
B) If WHT deducted was 5%, the system should do the below calculation:
Withholding Tax:
$2,000 x 5% = $100
Amount Paid:
$2,000 less $100 WHT plus + %100 VAT = $2,000.
WHT Liability Remitted To Govt:
$100.
IMPORTANT NOTES:
1) If the $2,000 invoice was VAT inclusive, the system must divide the value by 1.05 or 105% (in the Nigerian case) in order to first remove the VAT element before calculating the WHT. Invoice amount before VAT would be $1,904.76 approx. The WHT calculations would then be applied on $1,904.76 as explained above.
2) WHT deduction at source and subsequent remittance is the responsibility of the paying party. That means the WHT deduction facility will be activated in the A/P module. However, the party that suffers deduction is expected also to make the entries in his books when he receives payment, otherwise his books will never balance. That also means the WHT deduction facility will be activated in the A/R module.
It will be a great selling point for us in Nigeria (and indeed all Sage resellers in West Africa) if we are able to resolve the very important legal/financial issue.
Thank you.
Im Malawi the WHT is calculated on the Total invoiced amount. Say If an Invoice was 2100.00 where 2000 is the amount of the goods and 100 in VAT then the with 10% WHT the supplier will be given (2100-210)= 1890 in which case the bank credited with 1890 and WHT Payble Account will be Credited by 210 and the Creditors control account will be debited by 2100
This is a very important functionality that is required now.
Ghana Civil Aviation for an example we had to use the AP terms field to
cater for the withholding to eventually arrive at the desired result of expected value ..I think its a big issue which we strongly suggest SAGE should into for west africa especially Ghana
hughes
The WHT is now a requirement in Jamaica
The WHT is also an issue in East Africa.Kindly assist on it immediately.
WHT is also an issue in Lesotho.
WHT is also a significant issue in Lesotho
I sumit the need for the WHT
The WHT is a major Challenge for us in Nigeria. We need it ASAP.
We (Nigerian) need update on WHT implementation or possible work around.
We need the WHT on Sage 300 or it's possible work around. Clients are growing increasingly frustrated around this.
its one of the major concern for us in Nigeria.