Withholding Tax on Receivables

Question

Hi ,
How to make setup for Withholding Tax and the JE as following :
DR.AR
DR.Withholding Tax
CR.Revenue
CR.Sales Tax
Thanks
Mohammed Moustafa

Answer 1

Octavio,
This does raise an interesting point. In Accounts Payable, we are seeing more cases of having to withhold tax from a payment to a supplier. At least that is the case in the United States. So in Oracle Payables we have the ability to define a withholding tax and reduce the payment amount to the supplier by the amount of the payment. Say for example we are scheduled to pay the supplier $100. But we have to withold say 15% and remit to the U.S. IRS. So our entry becomes something like this -
Debit AP Liability $100
Credit Cash $85
Credit W/H Tax $15
Well that transaction then creates an issue on the Receivables application for the supplier. Should not Oracle be coming up with a way to handle withholding tax in the Oracle Receivables application? Are there perhaps any plans to handle withholding tax in Oracle Receivables in the future? From the Receivables Application, I can see the Receivable entry being something like this -
When the receivable transaction is recorded -
Debit Receivables $85
Debit W/H Tax $15 (so a tax expense/asset, as you can then claim as already paid on the tax return)
Credit Revenue $100
Then when the payment is received -
Debit Cash $85
Credit Receivables $85
Today we have to handle this as a receipt write-off. Which gets the job done, but is a bit of a pain. So today you end up with something like this for the receipt -
Debit W/H Tax Writeoff $15
Debit Cash $85
Credit Receivables $100
Just something to think about.
John Dickey