WHT on Vendor Payments
Withhold tax before paying vendors. Record the liability. Remit to the tax authority separately.
Withholding tax (WHT) is a mechanism where the payer deducts a percentage of the payment before remitting to the vendor. The withheld amount is not kept — it is a tax liability that you collect on behalf of the government and remit separately. The vendor receives the net payment. The tax authority receives the withheld amount.
In Trabalance, withholding is applied on the payment voucher, per bill: the Tax column of the Apply to Bills row lists your Payment WHT rates. The rate and the liability account it posts to are yours to define under Settings → Taxes; the platform has no country-specific rates built in.
How WHT Works in Practice
Example: Bill for 20,000 consulting services. Applicable WHT rate: 10%.
- Bill portion settled: 20,000
- WHT (10% of the bill's pre-tax amount): 2,000 withheld
- Net cash paid to vendor: 18,000
- Liability to the tax authority: 2,000
The vendor is fully settled in the AP ledger (20,000 cleared). The 2,000 does not disappear — it is credited to the liability account configured on the WHT tax code and is remitted at the next remittance cycle.
Step-by-Step
Settings → Taxes → add a tax of type Payment WHT with the rate and the liability account it should post to. Only Payment WHT taxes appear in the payment voucher's Tax dropdown.
Save the bill for 20,000. No WHT at this stage — the bill records the full obligation.
DR Consulting 20,000 — CR Accounts Payable 20,000
Procurement → Payment vouchers → New. Select the vendor, add the bill in Apply to Bills, enter 20,000 in Amount (the bill portion, before withholding) and pick the WHT rate in the row's Tax column. The totals show Amount Payable 20,000, Tax −2,000, Amount Paid 18,000.
Verify that 18,000 is what left the account. The Amount Paid figure is what the bank leg posts.
The journal below posts. AP is fully cleared (20,000 debit). Bank is reduced by 18,000. 2,000 is credited to the WHT liability account.
At the remittance date, pay the authority from the liability account: a journal entry DR the WHT liability account, CR Bank. The liability clears.
Journal Entries
| Account | Debit | Credit | Description |
|---|---|---|---|
| Consulting (expense account) | 20,000.00 | — | Full cost recognized in the period |
| Accounts Payable | — | 20,000.00 | Full vendor obligation created |
| Account | Debit | Credit | Description |
|---|---|---|---|
| Accounts Payable | 20,000.00 | — | Full AP cleared. Vendor is fully settled in the ledger. |
| Bank / Cash | — | 18,000.00 | Net cash paid to vendor after 10% withholding |
| WHT liability account (from the tax code) | — | 2,000.00 | 10% withheld. Liability to the tax authority — not a cost to the business. |
| Account | Debit | Credit | Description |
|---|---|---|---|
| WHT liability account | 2,000.00 | — | Liability cleared on remittance |
| Bank / Cash | — | 2,000.00 | Cash paid to the tax authority |
What the Rate Applies To
Withholding is computed on the bill's own pre-tax amount, never grossed up from the cash. If the bill carried purchase tax, the base is the net figure the bill was built on. A cash (settlement) discount entered in the row's Discount column is separate: it also reduces the cash and posts to Discount Received.
| Figure on the voucher | How it is derived |
|---|---|
| Amount (row) | The bill portion you are settling — what clears Accounts Payable |
| Tax (row) | WHT rate × the bill's pre-tax base |
| Amount Paid (total) | Amount Payable − Tax − Cash discount — the bank leg |
WHT is a statutory obligation. Failing to withhold, or withholding but not remitting, can result in penalties assessed against your business — not the vendor. Ensure that every payment category subject to WHT is identified, withheld correctly, and remitted on time. The WHT liability account should clear at each remittance cycle. A growing balance is a compliance risk.
WHT Exemptions
Some vendors are exempt from WHT — typically because they hold an exemption certificate issued by the tax authority. When a vendor presents one:
- Record the certificate number in the vendor's Notes
- Leave the Tax column at "— none —" on their payment rows
- Keep a copy of the certificate — you may need it to justify the non-withholding in an audit
Exemption certificates expire. Review vendor exemption certificates annually. An expired certificate means WHT is due — failure to withhold after expiry is treated the same as any other WHT non-compliance.
Evidence for the Vendor
The vendor is entitled to know what was withheld. The payment voucher shows the WHT line and the net cash; download the voucher PDF from its detail page and send it with your remittance. The vendor records the withholding on their side as Receipt WHT when they apply your payment.
Related
- The row the rate is picked on: Matching a payment to bills.
- Recording the payment itself: Manual payment.
- Setting the rates up: Withholding tax.
- Remitting what you withheld: Tax management.