In Kenya, a tax compliant certificate is issued by the Kenya Revenue Authority (KRA) upon request by a taxpayer as proof of his or her compliance with remittances within a 12-month period.
Personal income tax returns are due 30 June following the end of the tax year, with any balance of tax due by 30 April.
KRA administers different types of taxes under different Laws (Acts) such as Income Tax, Value Added Tax, Custom duties and Excise Tax among many others. Hence, KRA is supposed to ensure taxpayers comply with the respective tax laws.
As a result, both direct and indirect taxes account for about eight percent of Kenya’s GDP. Among indirect taxes, Value Added Tax (VAT) accounts for about a quarter of total tax revenue according to the World Bank.
It should be noted that Kenya’s tax laws provide for the charging of additional tax and penalties equal to the defaulted amount and interest, where a client fails to adhere to its provisions.
In some instances, fines, prosecution and imprisonment may be affected depending on the nature of the default.
“Late payments of self-assessed tax are subject to a 20% penalty, plus a 1% penalty per month. A late -filing penalty of 25% of the tax due applies to a return required to be submitted because of employment income. Otherwise a 5% penalty ( minimum of Ksh 20,000) applies on any amount still owed four months after the year-end,” says Nikhil Hira, Director Bowman’s Coulson Harney LLP.
Chapter Six of the Constitution that embodies the Guiding Principles of Leadership and Integrity normally applies to anyone seeking employment from the government or wants to apply for government tenders.
However, taxpayers can avoid these unnecessary penalties by being tax complaint. Regular audits are usually conducted by KRA to check on compliance and to correct problem areas identified, as well as to educate the clients where necessary.
Costs associated with non-compliance come in various forms: Time wasting, prolonged court cases, an increase in cost and legal fees besides extra cost in additional tax and penalties.
For example, the Law Society of Kenya (LSK) has said it will not clear Prof. Tom Ojienda to vie for another term as a member of the Judicial Service Commission without a Tax Compliant Certificate.
KRA alleges that this is due to pending High Court orders barring them from reviewing Ojienda’s tax status which he has to lift first.
Ojienda sued KRA to have it compelled to issue him with a certificate for 2018-19.
Read: Why KRA should devise more efficient ways in resolving tax disputes
On the other hand, tax compliance requirements according to the income tax laws relating to businesses are: Keeping of up to date books of account by businessmen, acquiring of Personal Identification Numbers (PIN) by all potential taxpayers, determining the taxable income according to the stipulated rules and regulation, accurate determination of tax liability, filing of returns on income by the prescribed date, paying of tax dues by the prescribed date, payment of fines and penalties for overdue taxes and allowing of audit by tax collectors if deemed necessary.
