Perhaps the best investment KRA has
made is in the itax portal. This is an online
system that has simplified the process of
filing and paying taxes. The system is able
to give feedback on a variety of reports
such as history of taxes paid, any penalty
and interest imposed.
Filing on the system is very easy.
Application of tax waivers can also be
done through the system. The system
allows KRA to send automatic reminders,
default assessments and other demands
to a large number of tax payers effectively
reducing the cost of collection.
What are the various forms
of taxes?
In an effort to expand the tax base to
include more people in paying taxes, the
following are some of the taxes levied in
Kenya:
Presumptive Tax
This is a tax paid by small and medium
enterprises whose annual turnover does
not exceed five million shillings. It is
payable when applying for the business
permit by a county government. The rate is
fifteen percent and is payable at the time
of payment of the business permit. As
such, the payment is only once a year and
is paid through itax, which is an online
tax tool. This became effective as from 1st
January 2019. The exceptions to this are
management/professional services, rental
income and incorporated companies.
Marketing services would fall under
professional services and thus would not
qualify for this.
Turnover Tax
This is also targeted at small and medium
enterprises whose turnover does not exceed
five million in a year. The rate is 3% of the
gross sales and is filed on a monthly basis
by the 20th of the following month. You
are allowed to offset the presumptive tax
you had earlier incurred while renewing
the business permit. The exemptions are
for persons registered for VAT, rental
income and management/professional
services. No other tax is expected once
Turnover tax is fully accounted for and
paid.
Value Added Tax (VAT)
If your business earns above five million
shillings in any year of income then you
60 MAL34/20 ISSUE
As we start a new decade take deliberate ef-
fort to pay your fair share of taxes to be not
only patriotic but also avoid the consequenc-
es of not complying. The coming decade will
see KRA get more aggressive in the collec-
tion of tax revenues as their collection tar-
get gets more ambitious.
should register for VAT. This is guided
by the VAT act 2013 which also specifies
the exempt supplies in the first schedule.
This is due and payable by the twentieth
of the following month. The rates of tax
are zero percent, eight percent and sixteen
percent. Exportation of goods and services
attracts vat at the rate of zero percent, fuel
products are charged at eight percent while
other goods and services at the standard
rate of sixteen percent. Importation of
goods and services into Kenya should also
be charged VAT.
Pay As You Earn (PAYE)
This is chargeable on the employed on
all gains and benefits from employment.
The employer is required to deduct the
PAYE and remit to KRA by the 9th of the
following month. PAYE is calculated on
a graduated scale with rates varying from
10% to the highest 30% depending on
levels of income.
I want to emphasize that the taxman would
seek to get all gains from employment
which would include airtime, car
allowance, gifts and any un-receipted cash
given to employees. As an employee, you
are required to file returns annually with
your P9 slip provided by your employer
by the 30th of June every year. The 2019
returns are due by 30th of June 2020.
Corporation Tax
This is for corporate bodies and is at
the rate of 30% of the profit. The body
corporate would need to have audited
accounts to file and pay the correct tax.
The tax is paid in four equal instalments
within the year of income which fall on
the 4th, 6th, 9th and 12th month. In case
there is any balance of tax to be paid then
it should be paid by the end of the fourth
month following the close of the financial
year. Careful consideration should be
taken care of not to include expenses not
allowed. I would advise, engage a qualified
accountant.
Implications of not paying
taxes
I would advise you to pay your equitable
share of taxes lest you face hefty fines.
Failure to pay taxes in time attracts
penalties and interest. Late submission of
employment income attracts a penalty of
twenty-five percent with a minimum of
ten thousand shillings. For turnover tax
it is five thousand shillings while for any
other tax it is five percent of the amount
payable or a minimum of twenty thousand
shillings. Further an interest of 1% per
month would be chargeable per month for
the duration the tax is outstanding.
KRA has various options to recover tax
outstanding. They can recover the tax by
suit in a court of law naming the defaulter
as the defendant with the amount of tax
which would include penalty and interest.
The Taxman can use your property as
security for the assurance that tax will be
paid. The taxman can also issue distress
orders which would mean your property is
seized until the tax is paid fully. If the tax
is not paid within the specified time in the
order then the property can be auctioned
to recover the debt.
Conclusion
As we start a new decade take deliberate
effort to pay your fair share of taxes to
be not only patriotic but also avoid the
consequences of not complying. The
coming decade will see KRA get more
aggressive in the collection of tax revenues
as their collection target gets more
ambitious.
I wish you a prosperous decade ahead.
CPA Nicholas Gachara is a Tax
and Accounting Consultant. You
can commune with him on this
or related matters via email at:
[email protected].