Withholding VAT

Under the Nigeria Finance Act, a payer must withhold VAT at source on specific types of payments and remit it to the Federal Inland Revenue Service (FIRS) by the 21st of the following month.

In Zoho Books, you can create transactions, apply withholding VAT, record payment for the remaining amount, and track transactions where withholding VAT is deducted.

Enable Withholding VAT

To deduct withholding VAT in your transactions, you must first enable it in your organisation.

Here’s how:

Go to Settings.
Select Taxes under Taxes & Compliance.
Select Withholding VAT Settings in the left pane.
Enable the toggle next to Withholding VAT.
Select for whom you want to enable withholding VAT in the Enable Withholding VAT Settings For field. You can choose Customers, Vendors, or both.

Click Save.

Withholding VAT will now be enabled for your organisation.

Enable Withholding VAT for Customers and Vendors

To enable withholding VAT for a customer:

Go to Sales on the left sidebar and select Customers.
Click + New in the top right corner and enter the required details.
To enable it for an existing customer, select the required customer and click Edit at the top of the customer’s Details page.
In the Other Details section, enable Apply Withholding VAT for this customer.
Click Save.

Withholding VAT will be enabled for your customer.

Similarly, you can enable withholding VAT for a vendor:

Go to Purchases on the left sidebar and select Vendors.
Click + New in the top right corner and enter the required details.
- To enable it for an existing vendor, select the required vendor and click Edit at the top of the vendor’s Details page.
In the Other Details section, enable Apply Withholding VAT for this vendor.
Click Save.

Withholding VAT will be enabled for your vendor.

Create Invoices and Record Payment

When you create invoices with withholding VAT, your customer can deduct withholding VAT and pay the net amount.

To create an invoice with withholding VAT:

Go to Sales on the left sidebar and select Invoices.
Click + New in the top right corner.
In the New Invoice page, enter the required details.
Select the 7.5% withholding VAT rate at the top of the item table.
In the Items table, click the More icon next to the line item and select Show Additional Information from the dropdown. Ensure that the Deduct Withholding VAT option is checked for the line item.
- To apply withholding VAT for all the line items, click Bulk Actions above the Item Table and select Bulk Update Line Items, and then select Apply Withholding VAT.

Click Save and Send or Save as Draft.

To record payment for the invoice:

Open the invoice for which you want to record payment.
Click Record Payment at the top of the invoice’s details page.
Enter the required details.
Select Yes next to Withholding VAT Deducted?.
Enter the withholding certificate number in the Reference# field, if available.
Click Record Payment.

The payment will be recorded for the remaining invoice amount.

View Customer Statements

Once you’ve recorded payment for your customer’s invoices, you can view the customer’s statement, which also includes the withholding VAT amount.

To view the customer statement:

Go to Sales on the left sidebar and select Customers.
Select the customer for whom you want to view the statement.
In the customer’s Details page, navigate to the Statements tab.

You can view the statements for the transactions, including payments recorded, payments received, and the VAT amount withheld by the customer.

Similarly, you can view statements for your vendors in the Vendors module.

Create Bills and Record Payment

If you are a withholding agent, you can create bills with withholding VAT and record the net payment.

To create a bill with withholding VAT:

Go to Purchases on the left sidebar and select Bills.
Click + New in the top right corner.
In the New Bill page, enter the required details.
Select the 7.5% withholding VAT rate at the top of the item table.
In the Items table, click the More icon next to the line item and select Show Additional Information from the dropdown. Ensure that the Deduct Withholding VAT option is checked for the line item.
- To apply withholding VAT for all the line items, click Bulk Actions above the Item Table and select Bulk Update Line Items, and then select Apply Withholding VAT.

Click Save as Draft or Save as Open.

To record payment for the bill:

Open the bill for which you want to record payment.
Click Record Payment.
Enter the required details.
Select Yes next to Withholding VAT Deducted?.
Enter the withholding certificate number in the Reference# field, if required.
Click Save as Paid.

The payment will be recorded for the remaining bill amount.