Withholding Tax on Resident: Payment of Rental on behalf employee
Mr.A is employee of ABC Company. He signed the personal apartment rental agreement directly with the landlord, but ABC Company will make the rental payments to the landlord on his behalf. Landlord’s invoice issued to ABC Company name. Apartment rental fee is $1,000 per month, but 90% of this rental fee is contribution by company.
Required:
1. Calculate Withholding tax on rental if any.
2. Calculate tax on fringe benefit and assume ToFB as company’s responsibility.
3. Make accounting record
Solution
1.Withholding tax on renal
Withholding tax on rental = $1,000 x 10%=$100 **
**Any resident taxpayer (ABC Company) carrying on business who makes payment in cash or in kind for rental fee to a resident person is required to withhold tax at 10% before making such payment.
Though Mr.A signed contract directly with the landlord and ABC Company only recorded 90% of the rental as its expenses, but ABC Company is the payer, so company is required to withhold 10% WHT on the total rental amount paid to the landlord on employee’s behalf.
2. Fringe Benefit
Tax on fringe benefit=1,000 x 90% x 20%=$180
3. Make accounting record
Dr.Other Receivable….100 ( will claim back from Mr.A)
Dr. Expense………………1,000 ( 900+100, and 100$ as withholding tax )
Cr.Cash…………………………….1,000
Cr. Withholding tax payable ….100