Payment of Service-Improper Issued Tax Invoice

Withholding Tax for Payment of Service by issuing Improper Tax Invoice

Services provided by registered companies are exemption from withholding tax (WHT) if companies ( services supplies) issued proper tax invoices to customers.

But if companies ( services suppliers) issued improper tax invoices, so customers ( companies) have responsibilities to withhold tax from services providers, so payment of services to resident companies that issued improper tax invoices are subject to withholding tax (WHT) at 10%.

For examples, services provided registered companies included office cleaning, computer repair, consulting etc.

 Example 1

ABB Company as consulting firm provides professional consulting service to XXX Company, and and company charged $3,300 (included VAT) from XXX Company.

Assume that ABB Company issued improper tax invoice to XXX Company.

Required:

Calculate withholding tax if any.

Answer 

ABB Company issued improper tax invoice, so XXX Company will withhold tax from ABB Company.

Withholding tax base = $3,300

Withholding tax (WHT) = $3,300 x 15%=$495.

Note:

• – ABB Company got cash of $2,805 (3,300-495) from XXX Company if ABB Company allowed XXX Company withhold tax of $495 from ABB Company.
• -ABB Company got cash of $3,300 from XXX Company if ABB Company did not allow XXX Company withhold tax of $495 from ABB Company, so XYZ Company will pay $495 ( WHT) on behalf of ABB Company . In conclusion, total payment is $3,795.