Use Withholding Tax

Withholding tax is a tax on vendors that does not create sales tax transactions. The withheld tax is posted to a ledger account and can be periodically paid to tax authorities. Withholding tax is set up in standard D365, so this guide focuses mainly on practical usage of withholding tax in Banking.

SET UP WITHHOLDING TAX CODES AND GROUPS

For setting up withholding tax, please see:

https://docs.microsoft.com/en-us/dynamics365/unified-operations/financials/general-ledger/tasks/set-up-withholding-tax

ENABLE WITHHOLDING TAX ON VENDOR

Once withholding tax codes and groups have been set up, withholding tax is enabled on the individual vendors, using the following steps:

1. Go to Accounts Payable > Vendors > All vendors

2. In the list, find and select the vendor record

3. In the list, click the link in the selected row

4. Click Edit

5. Expand the Invoice and delivery tab

6. Enable Calculate withholding tax

7. In the Withholding tax group, select the withholding tax group

8. Click Save

Use and calculate withholding tax on payments

Once withholding tax has been enabled on a vendor, withholding tax is calculated and deducted automatically on invoices with invoice number.
Please note, that withholding tax is solely calculated on invoices, so tax will not be withheld, on manual payments without settlements
DEDUCTION OF WITHHOLDING TAX WHEN USING PAYMENT PROPOSAL
Payments including withheld tax is generated, using the following steps:

1. Go to AMC Banking > Payments > Payment journal
2. Click Add > Vendor payments
3. If required, Configure the payment parameters
4. Click OK
5. In the list, select a payment proposal record
6. Click Create
   A message in the info log will inform the user, that the invoice added, results in tax being withheld. In addition, payment amount being different from the settlement amount and a small icon will indicate, that the payment includes withholding tax

DEDUCTION OF WITHHOLDING TAX WHEN ADDING SETTLEMENTS MANUALLY

1. Go to AMC Banking > Payments > Payment journal

2. Click Lines

3. Click Add > Manual payment

4. In the Account number field, select a vendor with withholding tax enabled

5. Click Save

6. In the Settlements section, click Add 7. In the list, select the open vendor invoice to add

7. In the list, select the open vendor invoice to add

8. Click OK

A message in the info log will inform the user, that the invoice added, results in tax being withheld. In addition, payment amount being different from the settlement amount and a small icon will indicate, that the payment includes withholding tax

EDIT OR REMOVE CALCULATED WITHHOLD TAX

If required the default calculated withholding tax amount can easily be changed, by using the following steps:

1. Go to AMC Banking > Payments > Payment journal

2. In the list, select a journal

3. Click Lines

4. In the journal, select a payment transaction with withheld tax

5. In the Settlements section, click Advanced

6. Change the withheld tax from the payment settlement(s) by using the designated Withholding tax amount field

7. Click OK

To remove a settlement’s calculated withholding tax completely, change the withholding tax amount to 0. Once withheld tax has been removed, the Withholding tax amount field is disabled, thus withholding tax can no longer be edited. To recalculate the settlement’s withholding tax, remove the settlement and add it again.