Skip to main content
Withholding tax (WHT) is tax you deduct from a vendor’s payment and pay to a tax agency on the vendor’s behalf. Many countries require it on payments such as professional fees, contractor services, rent, or royalties. In DualEntry, you withhold tax on bills, direct expenses, and vendor credits. DualEntry records the withheld amount as a liability when the record posts, pays the vendor the rest, and tracks each withheld amount until you remit it to the tax agency. This page explains how withholding tax works. For the steps, see How to Set Up Withholding Tax, How to Withhold Tax on Bills, Expenses, and Credits, and How to Remit Withholding Tax.

​
How withholding tax works in DualEntry

Withholding tax in DualEntry runs through five stages:
  1. Rates: You define withholding rates in Tax Setup. Each rate has a country, a category name (for example, a section code such as 194J), a percentage, and the dates it is valid.
  2. Vendor defaults: On each vendor that you withhold tax from, you turn on Withholding tax applicable and set a default withholding category, a default withholding payable account, and the tax agency you pay the tax to.
  3. Records: When you enter a bill or direct expense for that vendor, DualEntry fills in the vendor’s default category on each line and calculates the withheld amount. A vendor credit linked to a bill line reverses that line’s withholding tax.
  4. Remittance: When you pay the tax agency, you create a withholding remittance and select the open withheld amounts it covers.
  5. Reporting: The Withholding Register lists every withheld amount and whether it has been remitted.
Withholding tax is available to every organization. You need the tax permission to manage withholding rates, and the vendor payment permissions to create remittances.

​
How DualEntry calculates withholding tax

DualEntry calculates withholding tax on each line, on the line’s net amount before VAT, GST, or sales tax. The withheld amount is the net amount multiplied by the rate, rounded to two decimal places (half up). The record’s withholding tax total is the sum of the rounded line amounts. The amount you owe the vendor is reduced by the withheld amount. For each line:
  • Gross is the net amount plus any VAT, GST, or sales tax on the line.
  • Withheld is the net amount multiplied by the withholding rate.
  • Payable is the gross amount minus the withheld amount.
The bill’s total, its amount due, AP aging, and vendor payments all use the payable amount. You can’t pay a vendor more than the payable amount on a bill. The table below shows a bill line of 1,000.00 with a 10% withholding rate, with and without 20% VAT. VAT doesn’t change the withheld amount because withholding tax is calculated on the net amount only. A rate applies to a record only if it is active, its country matches the company’s country, and the record date falls between its Effective Start Date and Effective End Date. Once a line is saved with a rate, it keeps that rate even if the rate later expires or is deactivated, unless you change the record’s rate, date, or company.

​
How withholding tax posts to the General Ledger

Withholding tax posts when the record posts, not when you pay the vendor. The withheld amount is credited to the withholding tax payable account on the record, which must be a liability account (Other Current Liability or Long Term Liability). The rest of the amount is credited to accounts payable on a bill, or to the bank or credit card account on a direct expense. The journal lines below are for the 1,000.00 bill line with 20% VAT and 10% withholding tax from the example above. When you pay the bill, the vendor payment clears the 1,100.00 in accounts payable. The 100.00 stays in the withholding tax payable account until you remit it. The remittance debits the withholding tax payable account and credits your bank or credit card account. A direct expense posts the same way, except that the payable amount is credited directly to the bank or credit card account instead of accounts payable. If the record is in a foreign currency, the withholding entry uses the record’s currency and exchange rate, and remittances and the Withholding Register show the amount in the company’s base currency. If the bank or credit card account on a direct expense is in a different currency from the direct expense, DualEntry splits the bank credit across the lines in proportion to each line’s payable amount.

​
How vendor credits reverse withholding tax

A vendor credit reverses withholding tax only through a link to a bill line that has withholding tax. On each vendor credit line, you choose the bill line it credits in the Credits line column. The line takes its withholding category and rate from that bill line, and you can’t change them on the credit. The reversed amount is the bill line’s rate multiplied by the vendor credit line’s net amount. It can’t be more than the bill line’s withholding tax that other vendor credits haven’t already reversed. For example, if a 1,000.00 bill line withheld 100.00 at 10%, a vendor credit line of 400.00 that credits it reverses 40.00. A later credit of 600.00 reverses the remaining 60.00. The reversal posts the opposite way to the bill: it debits the withholding tax payable account for the reversed amount and reduces the accounts payable debit by the same amount. The vendor credit’s total is the amount after the reversal, shown as Net AP reduction. The linked bill line must be on a posted bill with the same vendor, company, and currency as the vendor credit. A vendor credit line with no linked bill line has no withholding tax.

​
Remitted lines are locked

Once a withheld amount is on a withholding remittance, DualEntry locks it so the amount you paid the tax agency can’t change. The lock applies as soon as the amount is on a draft or posted remittance, and it stays until you archive that remittance. While a line is locked, you can’t make a change that would change its withholding tax. That covers the line’s withholding category or rate, a change to its net amount that changes the withheld amount, a change to its payable account, exchange rate, or currency, or removing the line. You also can’t archive the record, move it out of Posted, or change its company. DualEntry shows a message that names the remittance. To change a locked line, archive the remittance, make the change, and then create a new remittance. A vendor credit can’t reverse a bill line’s withholding tax while that bill line’s withholding tax is on a remittance.

​
Where withholding tax doesn’t apply

DualEntry doesn’t allow withholding tax in a few cases, either because no tax authority is involved or because the record can’t carry it:
  • Intercompany vendors: Withholding tax isn’t allowed on records with an intercompany vendor, and the vendor’s Withholding Tax section is hidden. These records move amounts between your own companies, so there’s no tax to withhold.
  • Tax agency vendors: A vendor of type Tax Agency can’t have withholding defaults, because it receives the withheld tax. Its Withholding Tax section is hidden.
  • Discount lines: A discount line can’t carry a withholding rate.
  • Recurring bills: You can’t add withholding tax to a recurring bill template in the app, so bills created from a template you make in the app have no withholding tax unless you add it to each bill.
  • Vendor credits without a linked bill line: A vendor credit doesn’t take the vendor’s withholding defaults. It only reverses withholding tax through a bill line it credits.
The Withholding tax applicable switch on a vendor controls only the vendor’s defaults. For a vendor without it, you can still choose a withholding category on a bill or direct expense line yourself.
Last modified on November 10, 2026