Howto do withholding tax on iTax

The new KRA iTax system has come with its challenges but it has greatly improved some of the taxpayer obligations that we have to undergo every month.

One such procedure is how to do your Withholding tax reporting and how to make the payment. Refer to this post and see how it used to be done manually then you will surely appreciate how iTax is handling it now.

Checklist

Below are some of the things you need to have done so that you can be able successfully do your Withholding tax reporting on iTax;

1. Updated your tax payer obligations on ITMS to include Withholding tax
2. Registered your company on iTax (refer to post)
3. The tax PIN of Withholdee
4. 5 minutes in preparation time and 10-30 minutes queuing time

Motivation

The payer (Agent) of the income mentioned is responsible for deducting and remitting the tax to the Commissioner on or before the 20th of the month following the period of deduction.

The consequences of Non – compliance by the Agent :-

(i) Tax which should have been recovered from the income of the payee, will be recovered from the income of the payer (Agent).

(ii) Any penalties and interest incurred on the above will now be borne by the Agent.

In other words, if you don’t withhold tax from your suppliers and remit it to KRA, then you risk having to pay their tax should they “forget” to declare everything themselves.

Procedure

On the KRA website, click on the huge iTax banner that will redirect you to the iTax login page. Using your company PIN Number and password, log into the system.

Proceed to the “Payments” tab then select “Payment registration” – Note: Withholding tax does not exist as a ‘Return’ and you will not find it by clicking on the “Returns” tab.

The logic here is that withholding tax is tax that you are paying on their behalf of someone else, not your own that you have to file – hence you go directly to payment.

The system will then show you the “e-Payment registration form” with your company details already filled out. Proceed to fill out the “Tax Head” where you will click the drop down menu and select “Income Tax”. It is an income tax as you as the company are reporting someone else’s tax on their income.

The “Tax Sub Head” should then be “(0105) Income Tax – Withholding”.

There are two options for doing a Withholding tax return:

1. You can choose to submit “By Using Excel Upload”. This option is preferable especially if you are submitting the returns of more than one consultant as it allows you to do it simultaneously as opposed to filling out many independent web forms, one at a time.

2. You can also choose to submit “By Web Form”.

The “Excel Upload” option directs you to download an excel sheet. After downloading it, proceed to fill the payment excel sheet, save and validate it and then upload it onto iTax using the browse button given.

If you choose the “Web Form” proceed to the next section where you need to select the “Nature of Transaction” from the drop down menu. All the available transactions have a different tax percentage so you need to be sure which one your supplier belongs to.

(For the purpose of this example, we are going to use a Consultant earning above 24,000KES/Month.)

Proceed to fill out the Withholdee’s PIN number and the system will fill out the rest of the details for you, ie, their full names, address and email.

Finally fill out the “Gross Amount” that you are paying them and again, the system does the rest for you.

Click the “Add” button so that that transaction is added to the list of transactions that you have/ want to have. You can continue adding new transaction lines if you have more than one supplier you are withholding for and are preparing their report.

Finally proceed to select “Mode of Payment” and the “Receiving Bank Name”, which is the bank where you will make your payment (here, we would suggest to select the smaller banks with shorter lines so as to save yourself some queuing time).

Click submit and you are more or less done!!

The system will submit your withholding details for that month and give you back a ‘download link’ where you can download your withholding tax “Payment Slip”. A copy is sent to your email address and your supplier also automatically receives their Withholding tax certificate.

You should then print the payment slip in 2 copies and take to the bank you selected to make your payment.

Highlights

My two cents: Everyone should simply try using iTax for their returns as it cannot get any easier than that!! Kudos to KRA on this one…