The Khyber Pakhtunkhwa Revenue Authority (KPRA) plays a vital role in collecting taxes within the province. One crucial aspect of this system is withholding tax, where a portion of the payment made for certain services is deducted and deposited with the KPRA. But when exactly is this withheld tax due? This article demystifies the deposit deadlines based on your registration status with the KPRA.
The Three Scenarios:
The KPRA regulation outlines three scenarios for withholding tax deposit deadlines:
Scenario 1: Registered Service Provider with KPRA
- Early Deposit: If you’re registered as a service provider with the KPRA and claim input tax credit (adjustment against taxes paid on purchases) for the service you provided in your monthly sales tax return (Annex-A), you must deposit the withheld tax by the prescribed due date of that month.
- Payment Determines Deadline: Alternatively, if the payment for your service is made earlier than the due date mentioned above, the withheld tax needs to be deposited on the date of payment.
Important Note: There’s a safety net in place. If you haven’t claimed the input tax credit within six months of issuing the tax invoice or cannot claim it due to missing proof of payment, you have until the earlier of these two dates:
- Payment Date: The date you make the payment to the service recipient.
- Six-Month Deadline: The last day of the six months following the invoice date.
Scenario 2: Registered with FBR, Not KPRA
- FBR Deadline Followed: If you’re not registered as a service provider with the KPRA but are registered under the Sales Tax Act, 1990 with the Federal Board of Revenue (FBR), the deposit deadline aligns with the FBR’s prescribed due date for claiming input tax credit in your monthly sales tax return (similar to scenario 1).
- Payment Determines Deadline: Similar to scenario 1, if the payment for the service is made before the FBR due date, the withheld tax needs to be deposited on the date of payment.
Six-Month Safety Net Applies Here Too: Just like in scenario 1, if you haven’t claimed the input tax credit within six months or cannot due to missing proof of payment, the deposit deadline is the earlier of:
- Payment Date: The date you make the payment to the service recipient.
- Six-Month Deadline: The last day of the six months following the invoice date.
Scenario 3: Not Registered with KPRA or FBR
- Simpler Deadline: If you don’t fall under either of the categories above (not registered with KPRA or FBR), the deposit deadline is simpler. You must deposit the withheld tax by the 15th day of the month following the month in which you make the payment to the service provider.
Example:
Let’s say you’re a KPRA-registered service provider who completed a project in June 2024. You receive payment from the client in July 2024. The prescribed due date for your July sales tax return (where you claim input tax credit) might be August 20th, 2024.
- Early Deposit: According to scenario 1, you can deposit the withheld tax by August 20th, 2024 (if you claim input tax credit).
- Payment Determines Deadline: Alternatively, if you receive the payment on July 15th, 2024, you can deposit the withheld tax on that same date.
Remember, late deposits can result in penalties! It’s crucial to adhere to the deadlines outlined above to avoid any complications with the KPRA.
By understanding your registration status and following the corresponding deadlines, you can ensure timely deposit of withheld taxes and avoid any potential tax fines. If you have any further questions, consulting with a tax advisor is always recommended.
