Withholding Tax - Accounting Treatment on Foreign Services

SEK is faced with multiple scenarios when accounting for WHT on foreign services, dependant on the commercial arrangem

Example for Accounting Purposes - Invoice Value $10,000

SCENARIO 1 - WHT is deducted in accordance with DRC law from supplier's invoice
Step 1 Dr Cost/Project 10,000.00 Being recording of vaue of foreign service awaiting pa
Cr GRNI/AP (10,000.00)
Step 2 Dr AP 1,400.00 Being recognition of 14% WHT deducted from supplie
Cr WHT Payable (1,400.00)
Step 3 Dr AP 8,600.00 Being payment to supplier net of WHT
Cr Bank (8,600.00)
Step 4 Dr WHT Payable 1,400.00 Being payment to DRC Govt for WHT
Cr Bank (1,400.00)

Cost Account (P&L) WHT Payable (BS)

Step 1 10,000 Step 4 1,400 Step 2 1,400

SCENARIO 2 - Invoice value is grossed up to allow WHT to be deducted correctly and supplier to be paid invoice va
Step 1 Dr Cost/Project 11,627.91 Being recording of vaue of foreign service awaiting pa
Cr GRNI/AP 11,627.91
Step 2 Dr AP 1,627.91 Being recognition of 14% WHT deducted from supplie
Cr WHT Payable (1,627.91)
Step 3 Dr AP 10,000.00 Being payment to supplier net of WHT
Cr Bank (10,000.00)
Step 4 Dr WHT Payable 1,627.91 Being payment to DRC Govt for WHT
Cr Bank (1,627.91)

Cost Account (P&L) WHT Payable (BS)

Step 1 11,627 Step 4 1,627 Step 2 1,627

SCENARIO 3 - Supplier refuses to have WHT deducted from Invoice value nor agrees to gross up invoice value for
Step 1 Dr Cost/Project 10,000.00 Being recording of vaue of foreign service awaiting pa
Cr GRNI/AP 10,000.00
Step 2 Dr WHT Expense 1,400.00 Being expensing of WHT not deductible
Cr WHT Payable (1,400.00)
Step 3 Dr AP 10,000.00 Being payment to supplier
Cr Bank (10,000.00)
Step 4 Dr WHT Payable 1,400.00 Being payment to DRC Govt for WHT
Cr Bank (1,400.00)

Cost Account (P&L) WHT Payable (BS)

Step 1 10,000 Step 4 1,400 Step 2 1,400
 ign Services
nt on the commercial arrangement agreed with the supplier

of foreign service awaiting payment

% WHT deducted from supplier invoice

er net of WHT

Govt for WHT

AP/GRNI (BS) Bank (BS)

Step 2 1,400 Step 1 10,000 Step 3 8,600
Step 3 8,600 Step 4 1,400

upplier to be paid invoice value prior to gross up

of foreign service awaiting payment

% WHT deducted from supplier invoice

er net of WHT

Govt for WHT

AP/GRNI (BS) Bank (BS)

Step 2 1,627 Step 1 11,627 Step 3 10,000
Step 3 10,000 Step 4 1,627

o gross up invoice value for WHT

of foreign service awaiting payment

T not deductible

Govt for WHT

AP/GRNI (BS) Bank (BS) WHT Expense (P&L)

Step 3 10,000 Step 1 10,000 Step 3 10,000 Step 2 1,400
Step 4 1,400
WHT Expense (P&L)