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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 Invoice, 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 and select Taxes.
  • Select Withholding VAT Settings in the left pane.
  • Enable the toggle next to Withholding VAT.
  • Click Save.

Withholding VAT will now be enabled for your organisation.

Enable Withholding VAT for Customers

To enable withholding VAT for a customer:

  • Go to Customers on the left sidebar.
  • 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.

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 Invoices on the left sidebar.
  • 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 marked 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 Customers on the left sidebar.
  • 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.

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