Accounting Treatment and Process of Expense Vouchers
Accounting Treatment and Process of Expense Vouchers
How to calculate an expense voucher, determine the related tax obligations, and record the transaction in the accounting system are common questions for businesses. In this article, we explain the steps involved in preparing an expense voucher, calculating withholding tax, and understanding applicable rates.
When goods or services are purchased from individuals who are not registered taxpayers, the document used to formalize and record the transaction in place of an invoice is called an expense voucher.
What Is an Expense Voucher?
An expense voucher is an official document treated as an invoice for purchases made from individuals who do not have tax registration. It enables the business to properly record such expenditures in its accounting system. Moreover, when customers return goods to a business, an expense voucher must also be issued.
You can review a sample expense voucher to understand its layout and required fields
How to Calculate an Expense Voucher?
There are two primary methods used when calculating the amounts on an expense voucher:
- Gross-to-net calculation: Withholding tax is deducted from the gross amount to determine the net payment.
- Net-to-gross calculation: The net amount agreed upon is converted into a gross figure by factoring in the withholding rate.
Let’s illustrate these methods with an example.
Example of Expense Voucher Calculation
Assume a business hires a plumber to replace water pipes in its office space. The service fee is agreed as a gross amount of 5,000 TRY.
A withholding tax of 10% must be deducted from this amount, and the remaining net amount is paid to the service provider.
Gross-to-net calculation:
- Gross Amount: 5,000 TRY
- Withholding Tax: 5,000 × 10% = 500 TRY
- Net Payment: 5,000 – 500 = 4,500 TRY
If the net amount were determined first, the calculation would be:
Net-to-gross calculation:
- Net Amount: 4,500 TRY
- Gross Amount: 4,500 / (1 – 10%) = 5,000 TRY
Recording an Expense Voucher in the Accounting System
Based on the example above, the accounting entry for the expense voucher would include:
- Total Service Expense: 5,000 TRY
- Withholding Tax Deducted: 500 TRY
- Net Payment to Provider: 4,500 TRY
What Is Withholding Tax?
Withholding tax refers to the portion deducted from a payment and remitted to the tax office on behalf of the recipient. The individual from whom tax is withheld may later offset this amount in their income tax return.
Withholding Tax Rates for Expense Vouchers
When determining the withholding rate, two main factors are evaluated:
- Whether the activity is occasional or continuous,
- Whether the individual qualifies for artisan exemption.
If the individual benefits from the artisan exemption:
- For goods or services related to production and for scrap purchases: 2%
- For other goods purchased: 5%
- For other service purchases: 10%
If the individual does NOT have artisan exemption:
- If the activity is continuous and resembles employee-like work, withholding follows the progressive income tax brackets: 15%–35%.
- If the individual is a self-employed professional and the work falls under Article 18 of the Income Tax Law: 17%; otherwise: 20%.
- If the service is provided regularly, a self-employment receipt (not an expense voucher) must be issued.
