Configuring Withholding Tax on Vendor Payments in Odoo

Withholding Tax in Odoo Accounting#

Withholding tax (WHT) requires the payer to deduct a percentage of tax from a vendor payment and remit it directly to the tax authority. Common on professional services, rent, royalties, and contractor payments in many jurisdictions (India TDS, US 1099, Philippines EWT, etc.).

Setting Up a Withholding Tax#

Accounting → Configuration → Taxes → New:

Name: WHT 10% - Professional Services
Tax Type: Purchase (applies when paying vendors)
Tax Computation: Percentage of Price
Amount: 10%
Tax Account: WHT Payable (Liability account - tracks the amount to remit to tax authority)

Configuring the Vendor#

On the vendor partner record → Sales & Purchase tab → Withholding Tax: select the applicable WHT rate.

Now all bills from this vendor will have the WHT tax applied automatically.

How WHT Appears on the Bill#

When creating a vendor bill:

The bill shows the gross amount (e.g., $1,000 professional fee)
The WHT tax line shows: −$100 (withheld)
Net amount payable to vendor: $900
Amount payable to tax authority: $100

Payment Accounting Entries#

When paying the vendor $900:

Debit: Accounts Payable $1,000 (clears the full invoice)
Credit: Bank $900 (payment to vendor)
Credit: WHT Payable $100 (withheld, payable to tax authority)

Remitting to the Tax Authority#

At month-end or as required:

Create a vendor bill for the tax authority (or a journal entry)
Debit: WHT Payable (clears the liability)
Credit: Bank (payment to tax authority)

WHT Certificate#

Some jurisdictions require issuing a WHT certificate to the vendor:

Odoo's localization modules (e.g., l10n_in for India) include WHT certificate printing
Certificate shows: gross payment, WHT deducted, net payment, period

Reporting#

Accounting → Reporting → General Ledger → filter by WHT Payable account:

Shows all WHT deductions by vendor
Running total of WHT due to the tax authority

Use this report to prepare WHT returns and ensure timely remittance.