Withholding Tax Overview
Withholding Tax (WHT) is a tax deducted at source before payment is made to a supplier or service provider.
Formula:
WHT = Taxable Amount × Applicable WHT Rate
Net Payment = Invoice Amount − WHT
Exercise 1 – Service Provider
Digital Ltd received an invoice from a consultant.
| Description |
Amount (FRW) |
| Consultancy Services |
2,500,000 |
Assume Withholding Tax Rate = 15%
Required
- Calculate Withholding Tax.
- Calculate Net Amount Payable.
- Explain why WHT is deducted.
- Identify who remits WHT to RRA.
Exercise 2 – Supplier Payment
ABC Ltd purchased goods from a supplier.
| Description |
Amount (FRW) |
| Goods Purchased |
8,000,000 |
Assume WHT Rate = 3%
Required
- Calculate WHT.
- Calculate amount paid to supplier.
- Calculate amount remitted to RRA.
- Prepare a simple accounting entry.
Exercise 3 – Multiple Transactions
Holy K Ltd made the following payments during June:
| Description |
Amount (FRW) |
WHT Rate |
| Consultancy Services |
3,000,000 |
15% |
| Transport Services |
1,500,000 |
15% |
| Goods Purchased |
10,000,000 |
3% |
Required
- Calculate WHT for each transaction.
- Calculate Total WHT.
- Calculate Total Net Payments.
- Prepare a WHT Summary Report.
Exercise 4 – WHT Credit
Digital Encyclopedic Tech Ltd provided services worth:
5,000,000 FRW
The client deducted WHT of 15%.
Required
- Calculate WHT Credit.
- Calculate amount received.
- Explain how WHT Credit reduces Corporate Income Tax.
- Explain the importance of WHT certificates.
Interview Questions
- What is Withholding Tax?
- Why is WHT deducted at source?
- Who remits WHT to RRA?
- What is a WHT Credit?
- How does WHT affect Corporate Income Tax?
- What documents prove WHT deduction?
- What happens if WHT is not declared?
- How would you teach WHT to beginners?
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