[GNC] Help adding withholding tax and VAT in seperate fileds of the invoice.

[Derek Atkins]

Hi,

On Wed, January 27, 2021 8:49 am, Nikos Parafestas wrote:
> Beacuse of the taxation sytem in my country I need to add withholding
> tax and VAT in seperate fields in the invoice. This applies to every
> tansaction with a net price of 300 euro or more.

The first thing to note is that GnuCash only allows you to apply a single
Tax Table per invoice line-item, but each line item can have its own
unique tax-table.  You can (I believe) supply a "default tax table" which
gets applied.  There is no way to set a floor, meaning that you will need
to manually determine if/when the tax(es) apply.

> For example if the Net Price is 1000 euro the invoice should include
> the following:
> ---
> 1. Net Price = 1000 euro
> 2. VAT = 240 euro
> 3. Total Price 1240 euro
> 4. Withholding Tax (which is 20% of the Net Price. This amount the
> client pays directly to the goverment not to me) = 200 euro
> 5. Payable (Total - Witholding Tax) = 1040 euro
> ----
>
> 1-3  : I have managed to add them correctly
> 4 & 5: I don't have a clue how to add them.

The best way to think about your particular case is with some algebra, and
you'll need to help me a bit to fill that in.

GnuCash has two ways to compute taxes:  either they are included in the
price, or they are added to the price.

If tax is included, then the line-item price is what the user pays, and
the tax is computed in such a way that value+tax = price.  In other words,
if the price is $100 and 5% tax is included, then the customer pays you
$100, of which $4.76 is tax (because 5% of $95.24 is 4.76, and 95.24 +
4.76 == 100).

If the tax is added on, then the line-item price is the basis for the tax,
and the user pays the price+tax total.  In other words, if the price is
$100 and there is 5% tax, the user pays $105.

Now, back to the GnuCash tax tables.  You can include multiple taxes in a
tax table, but the two are independent.  So let's say you have a 5% state
tax and a 2% city tax, where the user pays a total of 7%.  This is easy,
you have two entries in the tax table, one for 5% and one for 2%.

However, there are places (e.g. Canada), where one tax includes the other.
 For example, you might have a 10% GST and a 7% PST, where the PST
*includes* the GST.  In this case, you would put the 10% GST in one tax
table line, but for PST you cannot say 7%, because the 7% includes the
10%.  This is where the algebra comes in.  To compute the PST, you're want
to compute x% where:

x% of price = 7% of (price + 10% of price)
  x * price = .07 * (1 + 0.1) price
          x = .07 * (1 + 0.1)
            = .077
            = 7.7%

So you would enter GST of 10% and PST of 7.7% to get the correct taxes
computed.

Now, back to YOUR case.  It sounds like you have:
  price = 1000
  VAT = 24% of the price
  Withholding = is 20% of price
  Invoice amount is price + VAT - Withholding

So really, the invoice amount is price + 4%.

It sounds like you need to actually show VAT and Withholding amounts on
the invoice.  Do you need to actually RECORD the VAT + Withholding
amounts, or just display them on the invoice?  What if the customer does
not actually pay the withholding to the government?  Are you still on the
hook for it?

I am asking because the answer to these questions will tell us if we need
to handle it within the tax table system, or by the invoice report.

If you are only on the hook for 4%, regardless of whether they pay or not,
then you should probably just record the 4% and update the invoice to
report the 24% and 20% values.  However if you need to actually record
that, we might have a SMALL problem, because I am not sure that GnuCash
supports a "negative" rate, which is what you would need for the
withholding.

> I hope I made it clear.

Ditto..

> ps. If you want to help I would like to ask you to provide your answers
> in a way that a novice user like me can understand.

I hope what I've written above helps you -- but you'll still need to fill
in the blanks.

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-derek

-- 
       Derek Atkins                 617-623-3745
       derek at ihtfp.com             www.ihtfp.com
       Computer and Internet Security Consultant