Monday, September 28, 2015

AX 2012 | Withholding Sales Tax

In this post we will discuss how to set up and calculate the withholding tax in Dynamics AX. Withholding tax is due on non-inventory deliveries (services), that a supplier delivers.

Buyer is legally responsible for paying withholding tax therefore The buyer is responsible for withholding a certain percentage of the invoice amount at the time of payment. (Net amount = invoice amount - withholding tax) is paid to the supplier. 

The tax withheld posts to a ledger account for withholding tax, and periodically is paid to the TAX authorities.

To to set up withholding tax perform the following steps:

1- Go To General Ledger > Setup > Withholding tax > Withholding tax codes. Click New, Enter Enter withholding tax codes and Description, Select the withholding main account (withholding Is a liability therefore only balance sheet accounts or liability accounts are valid accounts for posting withholding tax). click Values.

2- Enter The Tax percentage. Close the form

3- Go To General Ledger > Setup > Withholding tax > Withholding tax Groups. Click New Enter withholding tax group name. Click Add in the setup tab to attach the relevant withholding tax code that we created in step 1.

4- Go To Accounts Payable > Common > Vendors > Select vendor then click Edit > Go to Invoice and delivery Tab select the Calculate
withholding tax check box and a Withholding tax group to activate the calculation when a payment is entered in a journal for this Vendor.

6- Go To Accounts Payable > Journals > Invoices > Invoice Journal > Create Invoice journal, select the vendor account that is set up to calculate withholding tax. for the purpose of this example i will create 1000 USD invoice journal, post the invoice.

7-To Calculate and post withholding tax in the payment journal go to Accounts Payable > Journals > payments > payment journal. Create new payment select the vendor account that is set up to calculate withholding tax. Click Functions > Settlement.

8- Select the invoice which we had created in step 6. Verify the Infolog information about the calculated withholding tax and close the Infolog. Then Close the form.

10- The payment amount on the journal line is reduced by the withholding tax amount (Net Amount = 1000 - 100 ).

11- Post.

12- Click Inquiry > Voucher. to Verify the Voucher information about the calculated withholding tax. Click Related Voucher then click Voucher.

13- Note that Withholding tax was posted to the main account that we set up in step 1.