There are four different situations when you will use taxes in Operate:

You can find out more about the first three situations here. However, this article will focus on Withholding Tax for Brazil.

Withholding Tax is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient.

Unlike VAT tax, which is assigned at the product level, WHT is applied at the account level.

There are three withholding tax rates in Brazil.

In the Accounts module under Billing Details, you can find a a withholding tax dropdown which consists of the three tax rates above. By default, WHT on the account is set to not specified.

When one of the WHT rates highlighted above are selected and saved to the account, any purchases made from this account should override the Tax (VAT) defined at product level.

Scenario 1 - Operate As-Is with tax defined at product level

A meeting room product has a 20% tax rate applied to it. When this user purchases a product and does not have WHT applied to their account, tax is calculated as it has always been in Operate - see example below

Net (product list price) + Tax (VAT defined at product level) = Gross (Total now due)

i.e. ($1000 + $200 = $1200)

Scenario 2 - WHT applied at account level and no product tax defined

No tax is applied at the product level. The account has a Regular Companies 6.15% (IR 1.5% and PCC 4.65%) WHT applied to it. See the calculation below:

Gross (product list price) - WHT (applied at account level) = Net (Total now due)

i.e. ($1000 - $ 61.5 = $938.50).

Note that a WHT of 6.15% is withheld or deducted from the income due to the recipient.

Note that Gross is now displaying the product list price and Net is now the total due to the Operator.

Scenario 3 - WHT defined at account level and product tax defined

A product has 20% tax applied to it. WHT is applied to the account with the rate Regular Companies 6.15% (IR 1.5% and PCC 4.65%). A user purchases this product and the calculation is as follows:
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Gross (product list price) - WHT (applied at account level) = Net (Total now due)

i.e. ($1000 - $ 61.5 = $938.50).

Note that WHT now overrides the tax applied at product level.

There are a few areas in Operate where WHT is evident.

You will see the new tax calculations when you preview and print invoices.

Below is an example of how an invoice will be previewed.

​Meeting Room R$ 1,500.00
​IR 1.5% R$ 22.50
​PCC 4.65% R$69,75
​Total now due R$1,407.75
​Total WHT: R$92.25

Note that for Regular Companies, IR and PCC is calculated and displayed separetly. This is because if a WHT rate is below R$10 for Regular Companies & Simples Nacional, it should be considered with no withholding tax - no invoice line. See below examples.

Scenario 1 – both IR and PCC > 10
​Meeting Room R$ 1,500.00
​IR 1.5% R$ 22.50
​PCC 4.65% R$ 69,75
​Total now due R$ 1,407.75
​Total WHT R$ 92.25

Scenario 2 – IR < 10 and PCC > 10
​Meeting Room R$600.00
​PCC 4.65% R$ 27.90
​Total now due R$ 572.10
​Total WHT R$ 27.90

Note that IR 1.5% is below the R$10 threshold, so it counts at zero tax.

Scenario 3 – both IR and PCC < 10
​Meeting Room R$ 200.00
​Total now due R$ 200.00

Note that both IR 1.5% and PCC 4.65% is below the R$10 threshold, so it counts at zero tax.

Withholding Tax changes are mostly reflected in the Payment section of Accounts Receivables.

The Payment section displays the following:

The WHT total should stay open in Accounts Receivable until the client pays greater than the WHT total or the full outstanding amount.

For pro-rated payments, always deduct the WHT total first. See below scenarios for some examples.

​Scenario 1 - full payment received

Scenario 3 - Pro-rated payments

This is an extended cash report that includes withholding tax so you can see how much money clients have directly paid to the government for each product purchase.

The report consists of the following columns and rows.

For single allocations in AR, the report will display the WHT for that single invoice line.

For multiple allocations in AR, the report will display the total WHT of both or more invoice lines.

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