## Zoho Invoice — Product, features, payments, integrations, solutions, and help Index

Access the complete documentation index at:
https://www.zoho.com/ke/invoice/llms.txt

Use this file to discover all available documentation pages before proceeding.

# Withholding Tax

Withholding tax is a direct tax deducted at source by the payer on certain types of payments, such as interest, dividends, royalties and management fees, made to residents or non-residents. The payer remits the withheld amount directly to the Kenya Revenue Authority (KRA) on behalf of the payee.

In Zoho Invoice, you can enable withholding tax, apply it to invoices at the line-item level and record payments that account for the withheld amount.

**Scenario:** Patricia runs a consulting firm. She creates an invoice for KES 170 with a withholding tax of KES 22 applied across two line items. Her customer deducts the withholding tax at the time of payment and remits it directly to the KRA. Patricia uses the withholding tax feature in Zoho Invoice to track the tax deducted, record the net payment received, and ensure her records stay compliant with KRA requirements.

## Enable Withholding Tax

Before applying withholding tax to your transactions, you need to enable it. Here’s how:

*   Go to **Settings**.
*   Select **Withholding Tax**.
*   Navigate to **Withholding Tax Settings**.
*   Slide the toggle to enable _Withholding Tax_.
*   Select for whom you want to enable withholding tax in the **Enable Withholding Tax Settings For** field. You can choose **Customers**, **Vendors** or both.
*   Click **Save**.

Withholding tax will now be enabled for your organisation.

## Create a Withholding Tax Rate

To create a new Withholding tax rate:

*   Go to **Settings**.
*   Select **Withholding Tax**.
*   Navigate to **Withholding Tax Settings**.
*   Click **\+ New Rate** and in the pop-up that appears:
    *   Enter the **Withholding Tax Name** and **Withholding Tax Rate**.
    *   Select the **Tax Type**.
    *   Click **Save**.

You can now use the newly created withholding tax rate in your transactions.

**Note:** For a complete list of applicable withholding tax types, refer to the [KRA’s official website](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/individual-withholding-tax).

## Enable Withholding Tax for Customers

To enable withholding tax for a customer:

*   Go to **Customers**.
*   [Create](/ke/invoice/help/customers/#create) or [edit](/ke/invoice/help/customers/other-actions.html#edit-contact) a customer.
*   In the _Other Details_ section, check the **Enable Withholding Tax for this Customer** option.
*   Click **Save**.

Now, withholding tax will be enabled for the customer.

## Apply Withholding Tax to Invoices

When you create an invoice for a customer for whom you have enabled withholding tax, you can apply the applicable withholding tax rate to each line item. The customer will deduct the withholding tax from the payment and remit it to the KRA.

To apply withholding tax for invoices:

*   Go to **Invoices**.
*   [Create](/ke/invoice/help/invoice/#create-invoice) or [edit](/ke/invoice/help/invoice/#edit-invoice) an invoice.
*   In the _Items_ table, select the applicable **Withholding Tax** rate for each line item from the withholding tax dropdown.
*   The _Withholding Tax_ section below the total displays each applicable withholding tax type with the rate and amount, the total withholding tax deducted and the adjusted _Balance Due_.
*   Click **Save and Send** or **Save as Draft** to send it later.

The invoice will be created and sent to your customer. The customer will deduct the withholding tax amount from the payment and remit it to the KRA.

## Record Withholding Tax Payment

After applying withholding tax to your invoices, you need to record the withheld amount during payment. This ensures that the correct net amount is recorded and the withholding tax is posted to the appropriate account.

### Record Invoice Payment with Withholding Tax

When recording payment for an invoice with withholding tax, you can also record the deducted withholding tax.

Here’s how:

*   Go to **Invoices**.
*   Select the invoice for which you want to record payment.
*   Click **Record Payment** at the top of the invoice’s _Details_ page, and select **Record Payment** from the dropdown.
*   Enter the required details in the payment page.
*   Select **Yes** next to **Withholding Tax Deducted?** The **Withholding Tax Amount** will be displayed based on the withholding tax applied to the invoice.
*   Click **Save as Paid**.

The payment will be recorded for the invoice, accounting for the withholding tax deduction.

### Apply Withholding Tax to Bulk Customer Payments

When a customer makes a single payment against multiple invoices, you can apply the applicable withholding tax for each invoice within the payment.

Here’s how:

*   Go to **Payments Received**.
*   Click **\+ New** in the top right corner, or select an existing payment and click **Edit**.
*   Enter the required details in the payment page.
*   Under the _Unpaid Invoices_ section, the **Withholding Tax Due** is displayed for each invoice in the **Withholding Tax** column.
*   Click **Add Withholding Tax** to include the withholding tax deduction.
*   Click **Clear Withholding Tax** to remove a withholding tax entry.
*   Enter the **Payment** amount for each invoice.
*   Click **Save**.

The payment will be recorded with the withholding tax amounts for each invoice.

## You might also find these helpful

[

### VAT Settings

Learn how to configure VAT settings, including enabling VAT and creating VAT rates for your Kenya edition organisation.

](/ke/invoice/help/vat-ke/vat-settings.html?src=help-other-resources)[

### VAT in Transactions

Learn how to apply VAT to sales and expense transactions in Zoho Invoice.

](/ke/invoice/help/vat-ke/vat-in-transactions.html?src=help-other-resources)[

### E-invoicing in Kenya

Learn how to create KRA-compliant e-invoices and report transactions to the Kenya Revenue Authority.

](/ke/invoice/help/e-invoicing/?src=help-other-resources)