Tax withholdings
Tax withholding is a tax liability which refers to the transfer of ownership of the tax payment that government institutions (federal, state and local) adopt to anticipate and/or ensure receivables.
In practical terms, tax withholding refers to the reduction in value you will be receiving from a client due to a service provision, since it will be him who will have the responsibility to pay for a task that belongs to you.
This reduction does not impact your business results since the amount you are not receiving for the sales will be deducted from the total amount you will have to pay in tax afterwards.
Example
- You have R$ 4.000,00 to receive from your client.
- You need to pay R$ 300,00 of taxes from this amount, leaving R$ 3.700,00 for you.
- At the time of payment, you see there are withholdings, and your client pays you only R$ 3.860,00.
- However, at the end of the month, the R$ 140,00 not received from your client are deducted from the tax amount to pay. So, you pay only R$ 160,00 (300 – 140), keeping with the same R$ 3.700,00. (3.860 – 160) with you.
Withholding happens only when your customer is a company (Legal Entity), and their calculation is in accordance with the Tax System of your company and the company of your client. If some of this company is included in the "MEI" Tax System, there will be no retention.
As this is a complex process, the tax retention occurs only when your client is a company. Additionally, the calculation is related with the tax regime from both your and your client’s company. If one of them is classified at the tax regime called “MEI”, the tax withholding will not exist.
OnBalance does all these verifications and calculates the tax withholding when it exists, deducting its amount from the bottom line of your sale and making the receivables installments with the correct values. The withholdings are also exported for your accountant, who reduces the amount from the tax amount that you will have to pay afterwards, preventing duplicated tax payment.