Customizing Index Interest Rates and Tax Rates
  • 14 Jun 2022
  • 3 Minutes To Read
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Customizing Index Interest Rates and Tax Rates

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There are three different types of index and tax rates you can set up for managing your loan and deposit products:

  • Interest rates
  • Value-added tax rates
  • Withholding tax rates

These values are configured under Administration > Financial Setup > Rates. The process of creating, updating, editing, and deleting index rates for each of these is the same.

Please Note
This element can also be configured using Configuration as Code (CasC). For more information, see Configuration as Code.

The Rates section under Administration > Financial Setup > Rates

Interest rate

An index interest rate is an interest rate determined periodically by an external entity such as a central bank. It's a common practice in some organizations to fix their internal interest rate to an index interest rate.

For more information on managing interest rates for your products and where index interest rates can be applied, see Interest Calculation Methods in Loans and Changing the interest rate.

Value-added tax

Many countries require organizations that offer loan accounts to pay taxes on the interest, fees, or penalty income generated on those accounts. These taxes are generally called value-added taxes (VAT), because they are collected on revenues.

For more information on how VAT is applied when setting up loan products, see Setting Up New Loan Products - Taxes.

Withholding tax

It is a regulatory requirement in many countries that organizations offering deposit accounts have to pay taxes on the interest generated by those accounts and paid to clients. These are generally called withholding taxes because they are deducted from the interest paid to the client.

For more information about how withholding taxes are applied when setting up deposit products, see Setting Up New Deposit Products.

Creating a new index rate

To create a new index rate you first have to define the rate source and then you can specify the rate value(s).

To create a new index rate:

  1. On the main menu, go to Administration > Financial Setup > Rates.
  2. Next to the Rate Source dropdown, select the Add icon .
  3. Enter a Name (required), ID (optional), and Notes (optional).
  4. Using the Type dropdown, select either Interest Rate, Value Added Tax, or Withholding Tax depending on the type of rate you're adding.
  5. Select Save Changes.
  6. Select either Add Index Interest Rate, Add Value Added Tax, or Add Withholding Tax depending on the type of rate you're adding.
  7. Enter the New rate value and the Valid From date.
  8. Select Save Changes.

Create New Rate Source dialog

Updating index rates with new values

When the index rate updates, you will need to update the value in your system and define from what date onwards you want to use the new value.

To update an index rate with a new value:

  1. On the main menu, go to Administration > Financial Setup > Rates.
  2. Next to the Rate Source dropdown, select the rate source for which you want to update the index rate value.
  3. Select either Add Index Interest Rate, Add Value Added Tax, or Add Withholding Tax depending on the type of rate you're updating.
  4. Enter the New rate value and the Valid From date.
  5. Select Save Changes.

Store Rate dialog

Editing index rates

To edit the rate source of the index rate:

  1. In the Rate Source dropdown, select the rate source you want to edit.
  2. Select the Edit icon .
  3. Make any changes in the Edit Source dialog.
  4. Select Save Changes.

To edit one of the index rate values for a particular rate source:

  1. In the Rate Source dropdown, select the appropriate rate source.
  2. In the list of index rate values, find the value you want to edit and select Actions > Edit.
  3. Make any changes in the Store Rate dialog.
  4. Select Save Changes.
Please Note

Index rate values that are used by active accounts cannot be edited if the start date is in the past.

Deleting index rates

To delete the rate source of an index rate and therefore all of its accompanying values:

  1. In the Rate Source dropdown, select the rate source you want to delete.
  2. Select the Delete icon .
  3. In the Delete dialog, select Delete.

To delete one of the index rate values for a particular rate source:

  1. In the Rate Source dropdown, select the appropriate rate source.
  2. In the list of index rate values, find the value you want to edit and select Actions > Delete.
  3. In the Confirm Deletion dialog, select Delete.

You will receive a warning if you attempt to delete rate sources for index rates that are currently in use.

Warning dialog about deleting rate sources for index interest rates that are in use.

Please Note

Index rate values that are used by active accounts cannot be deleted if the start date is in the past.


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