Withholding on the Lines That Earn It
Where withholding tax applies to service fees and not to goods, a supplier bill that carries both has to be split before the rate is applied. Withhold on the whole bill and you have over-deducted from your supplier and over-remitted to the tax office, in one step.
Many tax systems ask the buyer of a service to withhold part of the payment and remit it directly. The rules differ everywhere, but one pattern is common: the obligation attaches to fees for services, and not to the price of goods.
That is easy to apply to a bill for consultancy. It is harder on the bill that most suppliers actually send, which carries both: the equipment and the installation, the parts and the labour, the materials and the contractor's fee.
The mistake a bill-level rate makes
If withholding is a single rate applied to a bill total, a mixed bill is withheld on its goods as well as its services. Every figure that follows is wrong in the same direction. The supplier is paid less than they are owed. The tax office receives more than is due. The supplier then has to claim the difference back or argue it out with you, and your remittance records no longer agree with your bills.
Over-withholding is not caution. It is short-paying your supplier and over-paying the tax office.
What the base is now
One bill, two kinds of line
The base is net of any sales tax on the lines. The rate is the one chosen on the bill, or the supplier's default.
Three things decide the base, and each is deliberate. Stock goods are left out, because they are goods. Service items stay in, because they are services. Free-text lines stay in, because a typed line has no type to say otherwise, and most typed lines on a supplier bill are fees. A bill made entirely of typed lines is therefore withheld on all of it, exactly as before.
The withheld amount comes off the balance you owe the supplier, so the payment you make and the bill agree, and the withheld portion waits for remittance. Turning typed fees into catalogued services, which makes the base more precise still, is covered in retiring the free-text service line.
Which rate applies
One rate per bill: the one chosen on the bill, or the supplier's default if none is chosen. Suppliers who are only ever paid for one kind of service are covered by their default. A supplier who sells you two kinds of service taxed at different rates needs the rate chosen on each bill, or the bills split.
How the bill itself reaches payment is in a three-way match for work you cannot count, and the third document that is our own is the background on supplier bills.
The short version
On a supplier bill, withholding is now calculated on the service lines and the typed lines, and never on the stock goods beside them. The rate is still one per bill, and the withheld amount comes off what you pay the supplier.
What AWRA OpsHub does today
- A withholding base that leaves stock goods out of a mixed supplier bill.
- Service and free-text lines kept in the base, so a bill of typed fees is withheld as before.
- One rate per bill, chosen on the bill or defaulting from the supplier.
- The withheld amount taken off the balance due to the supplier.
More we can add to your workspace
- A withholding rate per line or per service, for suppliers who bill two kinds of service taxed differently on one bill.
- Withholding on a direct order payment, for a services order paid without a supplier bill.
Where we point you to a specialist
- Whether a payment is subject to withholding, and at what rate, is a question of the tax law where you operate. We apply the rate you choose and we do not decide which of your payments it covers.
- We would not change the default treatment of free-text lines to save a step. A typed fee left out of the base is an under-deduction, which is the more expensive error to discover later.
Per-line rates and withholding on direct order payments can each be scoped for your workspace.
For suppliers with more than one kind of fee
The base is right. The rate can get more specific.
A rate per service
Set the withholding rate on the service itself, so a bill with a professional fee and a rental line withholds each at its own rate.
Withholding without a bill
Calculate it when a services order is paid directly.
How it works: you describe the requirement, we return a written scope, timeline and cost, and once agreed it is built into your workspace and maintained with the product.
Talk to us about withholdingThree questions for your next supplier bill run
Which bills mix goods and services?
What to check
More than you think.
Why it matters
Those are the bills that were over-withheld under a bill-level rate.
Which services are still typed as free text?
What to check
Most of them, at first.
Why it matters
They are in the base, which is right, but they cannot be reported by service.
Does any supplier bill two kinds of service?
What to check
Usually a few.
Why it matters
Choose the rate on each of their bills, or split them.
Capture a mixed bill and check the base
The feature page covers services on the purchase side.
See how service items workFrequently asked questions
Is withholding tax calculated on goods on a supplier bill?
No. Stock goods are left out of the withholding base. Service lines and free-text lines stay in it.
Why are free-text lines withheld?
A typed line has no item type, and most typed lines on a supplier bill are fees. A bill of typed lines is withheld on all of it, as before.
Which withholding rate is used?
One rate per bill: the rate chosen on the bill, or the supplier default.
Is the base before or after sales tax?
Before. Withholding is calculated on the net of the lines.
