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Did you know that you can get an amnesty on your outstanding tax penalties and interest that have accrued for the period before December 31, 2022?
Professional services firm, PwC, advises that taxpayers who have already settled their principal tax obligation or are willing to settle the same by June 30, 2024, can benefit from a tax penalties amnesty by the Kenya Revenue Authority (KRA).
This provision for the amnesty is a result of the government’s need to enhance tax compliance and mobilize tax revenues to meet the National budget. It was introduced by the Finance Act 2023 and became effective on September 1, 2023.
To benefit from the Amnesty, one needs to apply through KRA’s iTax portal or physically at their nearest KRA offices.
In this blog post, we will delve deeper into what this tax amnesty entails, its benefits, and the steps you need to take to make the most of this opportunity.
What is the Tax Amnesty?
The tax amnesty introduced by the Finance Act 2023 provides taxpayers with the opportunity to regularize their tax compliance affairs.
It is specifically designed to address outstanding penalties and interest that have accrued for periods prior to December 31, 2022, for which the principal tax has already been paid or where the principal tax is yet to be paid but the taxpayer is willing to settle it by June 30, 2024.
Additionally, the amnesty covers penalties and interest arising from the amendment of returns, iTax ledger reconciliation, system issues, and tax disputes, provided they fall within the qualifying period before December 31, 2022.
However, it does not apply to penalties and interest arising from a tax avoidance assessment or those accruing from January 1, 2023, onwards.
The tax amnesty is comprehensive, encompassing Corporate Income Tax (CIT), Withholding tax (WHT), tax on capital gains (CGT), Pay As You Earn (PAYE), Value Added Tax (VAT), and Excise Duty.
Benefits of the Tax Amnesty
Upon successful application and granting of the tax amnesty, a taxpayer can enjoy several benefits:
Full Relief from Penalties and Interest: All penalties and interest accrued up to December 31, 2022, will be fully relieved, significantly reducing the financial burden on taxpayers.
Flexible Payment Plan: Taxpayers will have the option to arrange a flexible payment plan for the outstanding principal taxes due, with a deadline set for June 30, 2024. This flexibility eases the financial strain on those looking to settle their tax liabilities.
A Clean Tax Ledger: Successful applicants will achieve a clean and penalty-free tax ledger, providing peace of mind and improved financial standing.
Why Act Fast?
The tax amnesty is available for a limited time. Given that it covers a wide range of taxes, including PAYE, corporate tax, withholding tax, excise duty, VAT, and tax on capital gains, it’s essential to review all your tax obligations promptly. This proactive approach will allow you to benefit from a clean iTax ledger, free of penalties and interest.
Steps to Benefit from the Tax Amnesty
The process to benefit from the tax amnesty depends on your tax situation
Automatic Amnesty: If you have outstanding penalties and interest related to principal taxes paid prior to December 31, 2022, the amnesty will be automatic.
There is no requirement to submit an application to the Commissioner. The KRA is in the process of configuring the iTax system to clear penalties and interest where no principal tax is due.
Application Required: For taxpayers with outstanding penalties and interest related to principal taxes that are still outstanding as of December 31, 2022, you will need to submit an application to the Commissioner.
This application should include your proposed payment plan for the outstanding principal tax if you wish to settle it in instalments.
Manual Application: Taxpayers seeking to apply for the tax amnesty can do so through a manual application form rolled out by the revenue authority. This option is available while the iTax system is being configured to accept applications online.
