TAXATION
Tax Expectations For The Next Quarter
By CPA Nicholas Gachara
The Government of Kenya has had a massive pressure in the collection of revenue to fund its expenditure which is tabled through the budget . The 2020 / 2021 budget totals to 2.91 Trillion Shillings of which 1.89 Trillion Shillings is expected to be collected internally and majority will be through the Kenya Revenue Authority ( KRA ).
A number of measures and tax legislations were put in place to ensure that the ambitious collection target is achieved as I have outlined in this column with the hope that it adds value to your tax knowledge .
Minimum Tax
Effective January 1st 2021 , companies should submit and pay to the revenue authority either a quarter of the projected profits for the year or 1 % of the Gross turnover . The 1 %, called the minimum tax , is also payable if it ’ s higher when compared to the expected profit for the year . This was meant to expand the tax base and in specific target the companies that were in perpetual losses .
It ’ s important to know that , through the automated Itax system , the Kenya Revenue Authority , is able to auto assess a tax payer who will not adhere to this requirement .
Incomes excluded from this provisions are from employment , residential rental income , income subject to turnover tax , income subject to capital gains tax and insurance business . Returns should be done by the 20th of every fourth , sixth , ninth and twelfth month after the year end .
Minimum Tax was introduced to ensure that every person makes a fair and just contribution to the provision of government services regardless of the person ’ s profit position .
Balance of Tax
Companies with a December year end should ensure that they have paid the Balance of tax on or before the 30th of
Effective January 1st 2021 , companies should submit and pay to the revenue authority either a quarter of the projected profits for the year or 1 % of the Gross turnover . The 1 %, called the minimum tax , is also payable if it ’ s higher when compared to the expected profit for the year . This was meant to expand the tax base and in specific target the companies that were in perpetual losses .
April 2021 . Balance of tax is any tax that was not covered by the instalment taxes paid within the year 2020 . The basis of this is that management of those companies have the actual performance of the 2020 and hence they can correctly determine the tax payable . As minimum tax was not effective in 2020 , those companies in genuine losses are not expected to pay any corporation tax for the year 2020 .
Voluntary Tax Disclosure Programme
Effective January 1st 2021 , tax payers have an opportunity to declare income which was not previously declared without the possibility of suffering penalties and interest for that income . This program runs three years up to 31st December 2023 . It applies to all tax liabilities such as Value Added Tax ( VAT ), Rental Income , corporate and individual incomes amongst others . Tax liabilities five years prior 1st July 2020 are can be disclosed under this programme .
If a tax payer takes advantage of this programme within the first year ( 2021 ) 100 % of remission of penalties and interest is earned . The second year ( 2022 ) would entitle the tax payer to 50 % while it reduces to 25 % by the third and final year ( 2023 ). Note that the condition is that the principal tax is paid within the period it ’ s disclosed .
Application of this programme is through the itax platform in a prescribed return for the specific tax head under disclosure . Ensure that you get an acknowledgment slip once you make the application . I would advise that you use a tax consultant , such as myself , for this application .
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