Withholding Tax Deposit Deadlines in Khyber Pakhtunkhwa

Withholding tax is a crucial aspect of tax system, ensuring a portion of taxes are collected at the source of income. The Khyber Pakhtunkhwa Revenue Authority (KPRA) plays a key role in this process, and understanding the deposit deadlines for withheld taxes is essential for businesses operating in the province.

Understanding the Rules:

The KPRA regulations outline specific timelines for depositing withheld tax amounts, depending on the withholding agent's registration status. Here's a breakdown of the key points:

• Registered Service Providers: If you're a withholding agent registered exclusively with the KPRA as a service provider, you have two options: Deposit by the prescribed due date of the month you claim input tax credit for the service received (mentioned in Annex-A of your monthly sales tax return). Deposit on the date of payment to the service provider.
• Registered with FBR under Sales Tax Act 1990: If you're not registered as a service provider with KPRA but are registered under the Sales Tax Act 1990 with the FBR, the deposit deadlines are similar to registered service providers.
• Deposit by the prescribed due date of the month you claim input tax credit in your FBR sales tax return (Annex-A).
• Alternatively, deposit on the date of payment to the service provider.
• The six-month rule also applies here. If you don't claim input tax credit within six months or lack proof of payment, you must deposit the withheld tax by the earlier of:

• The last day of the six-month period from the invoice date.
• The date of payment to the service provider.
• Other Withholding Agents: ?

If you don't fall under the categories above, the deposit deadline is simpler: deposit the withheld tax amount by the 15th day of the month following the month of payment to the service provider.

Example:

Let's say you're a KPRA-registered service provider who hires a consultant in June 2024. The consultant's invoice is PKR 100,000, with a withholding tax of PKR 15,000. You plan to claim input tax credit for this service in your July 2024 sales tax return.

In this scenario, the prescribed due date for your July sales tax return is likely the 15th of August 2024. So, you have two options:

1. Deposit the PKR 15,000 withheld tax by the 15th of August 2024 (assuming that's the prescribed due date for your July return).
2. If you make the payment to the consultant before the 15th of August, you can deposit the withheld tax on the same date as the payment.

Consequences of Late Deposits:

Failing to deposit withheld taxes within the stipulated timeframe can result in penalties and fines imposed by the KPRA. These penalties can accrue significant interest, adding to your financial burden. Staying compliant with KPRA's withholding tax deposit deadlines is crucial for businesses. By understanding the applicable rules and adhering to the timelines, you can avoid unnecessary penalties and ensure a smooth tax filing process.

This article was published at When to Deposit Withholding Tax in KPRA?