In the Nepal localization of Microsoft Dynamics 365 Finance and Operations (D365 FO), withholding tax (TDS) is not being calculated when a vendor invoice is posted. Instead, the system is calculating TDS only at the time of payment. This is not correct as per Nepal’s tax rules.

According to Section 87, 88, 89, 89A and Section 24(2) of the Income Tax Act, 2058 of Nepal, and the circular issued on 2073.09.28, the rule is:

"TDS should be deducted at the time of booking the expense or making the payment – whichever happens first."

So, if the invoice (expense) is recorded before payment, TDS must be deducted at the time of invoice posting.

Problem: Currently, D365 FO does not calculate or deduct TDS when an invoice is posted. It only deducts TDS at the time of payment. This goes against Nepal's tax law and can cause compliance issues for companies.

Request: Please update the Nepal localization so that:

1. TDS is calculated and posted when the invoice is recorded.
2. The system follows the rule of “booking or payment, whichever is earlier.”
3. There is an option in setup to choose when TDS should be deducted based on local laws.

This change is very important for businesses in Nepal to follow local tax rules properly.