How to Record Rental Income Net of 5% Withholding Tax Deducted by a Corporate Tenant in Jordan
Recognizing full rental income when a corporate tenant withholds 5% and remits it to the ISTD on the landlord's behalf.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash / Bank (Net Received) | Asset (+) | 4,750.00 | - |
| Withholding Tax Receivable | Asset (+) | 250.00 | - |
| Rental Income | Revenue (+) | - | 5,000.00 |
💡 Accountant's Note
When a company pays rent to an individual or entity, it withholds 5% and remits to the ISTD. The landlord records the full rental income and the withholding as a tax prepayment asset.
Practitioner & Systems Framework
💻 ERP Architecture
In Jordan, corporate tenants are required to withhold 5% from rent payments to individual landlords and certain entities and remit it to ISTD. The landlord: (a) recognizes full gross rental income; (b) records the withheld amount as a Withholding Tax Receivable (a prepaid tax asset); and (c) receives only the net amount in cash. At year-end, the withholding tax receivable is offset against the annual income tax liability — any excess becomes a tax refund receivable. Obtain withholding tax certificates from tenants confirming the deduction.
⚠️ Audit Flags
Auditors verify that the WHT receivable is recoverable against the annual income tax computation. If the landlord is loss-making and has no income tax liability, the WHT may only be recoverable as a refund from ISTD — which can take considerable time. A WHT receivable that has been on the balance sheet for more than 12 months without recovery should be assessed for recoverability under IFRS 9.
📄 Required Documentation
Withholding tax certificate from tenant (confirming deduction, period, and ISTD remittance), rental income at gross amount, WHT receivable in the tax prepayment account, annual tax computation showing the WHT offset, any ISTD refund claim, and tenant WHT deduction compliance records.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.