cancel
Showing results for 
Search instead for 
Did you mean: 
aayan-shahid-pk-
Level 1

In Pakistan we have to Withhold tax on behalf of the supplier while making the payment , How can i book this impact and perform a composite entry?

 
5 Comments
Rasa-LilaM
QuickBooks Team

In Pakistan we have to Withhold tax on behalf of the supplier while making the payment , How can i book this impact and perform a composite entry?

Thanks for visiting the Community, aayan-shahid-pk-.


I’ll help and point you in the right direction on how to handle your tax concern. We’ll have to make sure This tax is collected on purchases is turn on.


Here’s how:

 

  1. In your company, tap the Taxes menu on the left panel and click the Set up tax button.
  2. This will open the Set up sales tax page.
  3. From there, enter your tax information such as the tax name, agency, Business ID no., filing frequency, and Reporting Method.
  4. Enter the rate in the Sales rate field if applicable.
  5. Then, type the rate in This tax is applicable on purchases box.
  6. Click Next and OK.

 

The impact on your taxes will show once you purchase an item from your suppliers. If you wish to withhold a different one, you’ll have to add a service item.


Here’s an article that provides more insights into this process: Set up tax. It includes some links about creating a custom tax rate and a tax agency.


You can also read through this write-up about the Sales Tax feature: Set up and use tax in QuickBooks Online. It provides detailed information on how QuickBooks Online (QBO) calculates tax, input tax categories, and other tax-related activities.


Feel free to post a comment below if you have other tax concerns. I’ll get back to make sure you’re taken care of. Have a great rest of the day.

aayan-shahid-pk-
Level 1

In Pakistan we have to Withhold tax on behalf of the supplier while making the payment , How can i book this impact and perform a composite entry?

Thankyou for your reply,

But my question still exist that how can i withhold the tax on purchases e.g the double entry is

Dr. ABC professional expense 100

Cr. ABC payable 90

Cr. Income tax payable 10

so when i pay the vendor it should be paid at 90 but the expense should be booked by complete 100 in the expense head.

The method you have narrated acts as an additional tax appearing on the purchase receipt thus increasing the total expense.

I hope you get my point.

Mich_S
QuickBooks Team

In Pakistan we have to Withhold tax on behalf of the supplier while making the payment , How can i book this impact and perform a composite entry?

I'll make sure to help you today, @aayan-shahid-pk-.

 

To calculate the tax together with the total expense amount, you'd need to make sure they're tagged as Exclusive of Tax.

 

Here's how:

  1. Click on the +New icon. Then, select Expense.
  2. Choose the supplier in the Payee section.
  3. Choose the account you used to pay for the expense in the Payment account field.
  4. Select the date for the expense in the Payment date field.
  5. Choose how you paid for the expense in the Payment method field.
  6. Enter a Ref no. if you want detailed tracking. This is optional.
  7. In the Tags field, enter the preferred label to categorise your money.
  8. In the Category details section, enter the expense info. In the Category dropdown, choose the expense account you use to track expense transactions. Then enter a description. 
  9. Input the Amount and Tax.
  10. If you plan to bill a customer for the expense, select the Billable checkbox and enter their name in the Customer field.
  11. Once done, hit Save and close.

 

invoice.png

 

Please feel free to read these handy articles for your reference:

 

After that, you'll learn more about billable expenses and how to manage expenses.

 

You can always leave a comment below if you have further questions. I'm always here to help. Take care!

aayan-shahid-pk-
Level 1

In Pakistan we have to Withhold tax on behalf of the supplier while making the payment , How can i book this impact and perform a composite entry?

I think their is a communication gap...let me rephrase my question.

In my region we have to withhold a portion of tax while making the payment to the vendor, and the tax is then submitted to the authorities. so this concepts occurs with the vendors and it has nothing to do with the sales or customers. The withholding concept solely relates to the SUPPLIERS/VENDORS.

So as you mentioned earlier the Tax rate in the expense column will increase the total payable amount e.g

payment to vendor 100 plus 10 tax = 110 payment.

Instead what i want is the payment to vendor will be 90 and the 10 will e routed to tax payable and a complete 100 will be booked as a expense.

Dr. Expense 100

Cr. Vendor payable 90

Cr. Tax  payable to Authority 10

 

so lemme know is there any option available to withhold the tax upon the payment to vendor.

 

Jen_D
Moderator

In Pakistan we have to Withhold tax on behalf of the supplier while making the payment , How can i book this impact and perform a composite entry?

Thanks for sharing some more information about your expense concern, @aayan-shahid-pk-,

 

Allow me to share some insights about handling this process in QuickBooks Online. At the moment, there isn't a way to automatically withheld other tax for expenses besides GST.

 

If you need to add another amount to the expense, you can create a service item for the tax and map it to a current liability account. See the following screenshots to illustrate the process.

 

Add a new liability account to your chart of accounts

  1. Go to Settings ⚙ and select Chart of Accounts.
  2. Select New to create a new account.
  3. In the Account Type ▼ dropdown, choose an account type.
  4. In the Detail Type, select the detail type that best fits the transactions you want to track. Learn more about detail types.
  5. Add any missing information then select Save and Close.

 

Add a new product or service item:

 

  1. Go to the Gear icon and select the Products and services menu.
  2. Press New.
  3. Uncheck the tick box for I sell this product/service to my customers.
  4. Select I purchase this product/service from a supplier.
  5. Add a description. This shows on bills, purchase orders, and other forms you send to suppliers.
  6. Add the Cost. If the price changes, don’t worry. You can still enter the updated price when it’s time to buy supplies.
  7. Click on the Expense account ▼ dropdown and then add the liability account you created earlier.
  8. When you're done, select Save and close.

 

Then you can use this item on your expense in the format I will share below. I'm also adding the transaction journal, so you can see how it works.

 

 

Another option is using a journal entry posted to the liability holding account. We recommend consulting with an accounting professional for this. This way they provide proper advice on how to handle your accounting and help you record taxes withheld.

 

Update this thread if you have more questions about recording transactions or taxes in QBO. I'll be more than happy to help any time. Have a nice day!