Withholding Tax
How WHT works in both directions — when customers withhold from you, and when you withhold from vendors.
Withholding tax (WHT) is a tax collected at the point of payment — not at the point of invoice. Cash moves net of the withheld amount. The gross obligation stays in the books. The withheld portion posts to a holding account (WHT Receivable or WHT Payable) until it is either recovered from the tax authority or remitted to them.
WHT operates in two directions. Understanding which direction applies to your situation is the most important step.
The Two Directions of WHT
| Direction | Tax type in Trabalance | Who Withholds | Your Ledger Account | What Happens to the Held Amount |
|---|---|---|---|---|
| WHT on receipts | Receipt (Withholding) | Your customer, from the payment they send you | WHT Receivable (Asset) | You reclaim it from the tax authority |
| WHT on payments | Payment (Withholding) | You, from the payment you send your vendor | WHT Payable (Liability) | You remit it to the tax authority on the vendor's behalf |
The rate, threshold and applicability vary by jurisdiction and transaction type. Create the code in Finance → Taxes with the rate that applies to you; the app never presets a rate.
WHT on Receipts — Customer Withholds
Scenario: You invoiced Global Trading Ltd 10,000.00 for consulting. They withhold 10% and pay 9,000.00.
Step 1 — The Invoice
| Account | Debit | Credit | Description |
|---|---|---|---|
| Accounts Receivable | 10,000.00 | — | Full invoice amount owed before any WHT |
| Sales | — | 10,000.00 | Revenue on the full value — WHT does not reduce revenue |
Step 2 — The Receipt with WHT
On the receipt, enter the amount received and pick the Receipt (Withholding) code. The withheld amount is calculated from the code, the invoice is cleared in full, and the journal splits automatically.
| Account | Debit | Credit | Description |
|---|---|---|---|
| Bank | 9,000.00 | — | Net cash received |
| WHT Receivable | 1,000.00 | — | Withheld by the customer — recoverable, supported by their certificate |
| Accounts Receivable | — | 10,000.00 | The invoice is fully settled |
Result: AR is cleared. You hold 1,000.00 in WHT Receivable — an asset, shown as Recoverable under What you owe on the Taxes page.
Recovering WHT Receivable
When the authority accepts the credit against your assessment, post a manual journal:
| Account | Debit | Credit | Description |
|---|---|---|---|
| Income tax payable (your account) | 1,000.00 | — | Offsetting the credit against the liability |
| WHT Receivable | — | 1,000.00 | Credit applied |
WHT on Payments — You Withhold
Scenario: Acme Supplies Ltd billed you 20,000.00 for professional services. You withhold 10% and pay 18,000.00.
Step 1 — The Bill
| Account | Debit | Credit | Description |
|---|---|---|---|
| Professional Fees | 20,000.00 | — | Expense on the gross amount |
| Accounts Payable | — | 20,000.00 | Full bill amount payable before any WHT |
Step 2 — The Payment with WHT
On the payment, enter the amount paid and pick the Payment (Withholding) code.
| Account | Debit | Credit | Description |
|---|---|---|---|
| Accounts Payable | 20,000.00 | — | The bill is fully settled |
| Bank | — | 18,000.00 | Net cash paid |
| WHT Payable | — | 2,000.00 | Held on behalf of the authority |
Result: AP is cleared. You owe 2,000.00 in WHT Payable — a liability, shown as You owe under What you owe.
Remitting WHT Payable
On the Taxes page, Record payment on the WHT Payable row opens the expense form; an expense categorised to WHT Payable posts:
| Account | Debit | Credit | Description |
|---|---|---|---|
| WHT Payable | 2,000.00 | — | Liability cleared |
| Bank | — | 2,000.00 | Cash paid to the authority |
Withholdings from several vendors accumulate in WHT Payable and can be remitted in one payment.
WHT Payable is not your money. Monitor its balance under What you owe before each filing deadline.
WHT Certificates
Most jurisdictions require the paying party to issue a certificate confirming the amount withheld. When your customer withholds from you, request the certificate and attach it to the receipt as evidence for your WHT Receivable claim. When you withhold from a vendor, issue one to them.
WHT at a Glance
| Item | WHT on Receipts | WHT on Payments |
|---|---|---|
| Who withholds | Your customer | You |
| Cash impact on you | Receive less than the invoice | Pay less than the bill |
| Ledger account | WHT Receivable (Asset) | WHT Payable (Liability) |
| Normal balance | Debit | Credit |
| Position on the Taxes page | Recoverable | You owe |
| Settled by | Offsetting against your assessment (manual journal) | Record payment → expense to WHT Payable |
| Tax type in the app | Receipt (Withholding) | Payment (Withholding) |
Related
- Tax Management — your position, read from the ledger
- Tax rates — defining a tax code
- System accounts — the accounts the app posts to on your behalf