Withholding tax

[stebunting]

I receive cashback on a USD account, which has 30% withholding tax in Belgium deducted before I receive it. I think that I should use account 8311 for the amount that I receive, but what account should I use for the tax paid?

[Joachim E]

Hi 

Cashback is not considered as an interest so 8311 is not the correct account. Cashbacks are consideras as a Bonus/discount and should reduce your costs for the specific purchase that genereated the cashback.

i will explain this through an example.

 1, First you make a purchase from a supplier with the amount 10 000 SEK. You account for it in this case like below.

1930 Bankaccount Credit 10 000
5460 Consumables Debet 8 000
2641 Incoming VAT Debet 2 000

2. A week later you recieve a 1 000 kr cashback. That cashback will be accounted for in the following way.

1930 Bankaccount Debet 1 000
5460 Consumables Credit 800
2641 Incoming VAT Credit 200 

This will reduce the cost you had on the purchase.

It can also be accounted for against account 4732 quantity discounts obtained. Just remember to reduce the VAT as well

Have a really nice day
JOachim
 

[stebunting]

Hi Joachim,

Thanks a lot for the detailed answer. The cashback is not actually related to purchases, they call it 'Balance Cashback', and is a percentage on the balance held in the account, which is why I originally treated it as interest.

Do you have any idea how to deal with the withholding tax?

Thanks,

Steve.

[Joachim E]

Hi 

It should be handled in the same way even though it's not ralated to a specific purchase. I would then recommend the account 4732. 

Not entierly sure what you mean with withholding tax? Can you explain in more detail what you mean with this exactly?

Regards
Joachim

[stebunting]

Thanks again Joachim, then I will use account 4732!

The withholding tax (källskatt in swedish maybe?) is a 30% tax, retained by the Belgian government, as that's where the bank operate for tax purposes. I guess I could claim this back, but I will look into that later. I just can't work out how to account for it right now.

https://wise.com/help/articles/b8sVSdAzytqVamfajSirb/how-does-balance-cashback-work

[Joachim E]

Hi

When you use account 4732 it will reduce your cost and automatically lower your profit wich will make tha tax lower all togheter.

So it will be enough to just account for the cashback against 4732.

Best regards
Joachim

[stebunting]

Ok great Joachim, thanks again for taking the time to answer.

Just to clarify, a cashback transaction of 1000kr with 300kr withholding tax removed would look like this...

1930 Bankaccount Debit 700
4732 Quantity Discounts Credit 1000

4732 Quantity Discounts Debit 300

Or directly without itemising the tax removed...

1930 Bankaccount Debit 700
4732 Quantity Discounts Credit 700

Thanks,

Steve.

[Joachim E · Accepted solution]

Hi

The second alernative will be enough to do in this case. The result will be the same in both cases so simplify it by just account for the 700 directly against 4732.

Best regards
Joachim