Withholding tax is a tax on vendors, which does not create sales tax transactions. Withholding tax calculated on vendor payments is a liability. Therefore only balance sheet accounts or liability accounts are valid accounts for posting withholding tax.

Withholding tax is reported in fixed reports.

1. Click Administration> Setup> System> Configuration.

2. Expand the General ledgernode and select the Withholding taxcheckbox.

3. Click General ledger> Setup> Withholding tax> Withholding tax codes .

4. Create withholding tax codes with values and limits.

5. Click General ledger> Setup> Withholding tax> Withholding tax groups .

6. Create withholding tax groups and attach the relevant withholding tax codes on the Setuptab.