Secured Advance
In the Open Standard
Shahzad MunawarMember for 23 years 3 months
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In mostly Contracts, the Contractor claims secured advance @ 75 % of total material value at Site in his Interim Invoices which is paid and then deducted from next invoices but the Contractor bears additional tax in this respect .
Example is as under:
Material at Site : $ 500,000
Previous Bill : $ 200,000
Material at Site This Bill: : $ 300,000
Less withholding tax @ 1 % : $ 3,000
Net payable Amount : $ 297,000
Does the Contractor bear the losses of 1% of additional tax from his each invoice when he claims Secured Advance or get benefit of 75% advance each month .
Example is as under:
Material at Site : $ 500,000
Previous Bill : $ 200,000
Material at Site This Bill: : $ 300,000
Less withholding tax @ 1 % : $ 3,000
Net payable Amount : $ 297,000
Does the Contractor bear the losses of 1% of additional tax from his each invoice when he claims Secured Advance or get benefit of 75% advance each month .
3 replies
Oldest first- 0Shahzad Munawar ·In my view, payment against advance of 75 % of total material at Site is an advantage for the Contractor to smooth its cash flow despite the Contractor realizes that by claiming secured Advance in each month, he has to pay excessive withholding tax against this head. So Contractor should think about the benefits given by the Employer.
Expert opinion is still awaited
- 0Andrew Flowerdew ·Shahzad,
The sums aren’t too difficult to work out if an estimated cashflow has been compiled. Simply the value of the 1% tax versus the cost of the additional cashflow if the 75% is not paid.
I would guess - and it is only a guess not knowing the material proportion of the total project - that taking the 75% is the better deal.
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