Overview

Tax compliance is the fulfilment of tax obligations by businesses and individuals. The four main categories of taxpayer obligations prescribed in tax laws are:

1. Registration in the tax system
2. Timely filing of declarations
3. Payment of tax liabilities on time
4. Complete and accurate reporting of information in tax declarations

The Kenya Revenue Authority (KRA) has introduced several initiatives to reduce taxpayer compliance costs, such as pre-filled tax declarations and easy access to tax systems and information through the KRA website.

Core taxes administered by KRA include:

1. VAT
2. Customs Duty
3. Excise Duty
4. Income Tax
5. PAYE

Tax Compliance Obligations

Tax compliance encompasses four key obligations that every eligible taxpayer must adhere to:

1. Tax registration: This is the process through which taxpayers (individuals, businesses, or entities) formally register themselves with KRA, providing necessary details.
2. Tax filing: This involves submitting required tax returns to KRA, detailing income, expenses, and other relevant financial information.
3. Tax payment: This involves remitting the correct amount of taxes based on filed returns on a periodic basis, depending on the type of tax.
4. Tax accounting: This involves maintaining accurate records of all transactions, including invoices, receipts, and bank statements.

Key Facts

It's helpful for every taxpayer to be aware of the following key points to ensure compliance with tax obligations:

1. The KRA PIN is a unique identification number assigned upon registration to an individual or business entity.
2. Taxpayers register their PIN according to the nature of their income.
3. Both individuals and businesses pay taxes, whether residents or non-residents, for income accrued or derived in Kenya.
4. Taxpayers should file and pay their taxes on time according to the respective due dates.

Tax Returns and Important Dates

Refer to the table below for filing and payment deadlines for various taxes:

Misinformation & Clarifications

Misinformation about tax compliance can lead to confusion and potentially result in non-compliance. Here are some common misconceptions by taxpayers:

1. KRA makes and implements tax laws: KRA only implements provisions of already written tax laws. Enactment of tax legislation is the mandate of the National Assembly.
2. KRA accounts for both collection and expenditure of taxes: KRA only accounts for the collected taxes and has no control over expenditure. The National Treasury accounts for tax expenditure.
3. Only employed persons should file tax returns: All persons earning an income from employment, business, or other sources must file their tax returns, regardless of income level. Other income types include farming, trading, and rental income.

Procedures & Guidelines

Tax compliance involves several procedures that taxpayers must follow to meet their legal obligations:

Frequently Asked Questions (FAQs)

1. What is tax compliance and who should comply?

   Tax compliance refers to adhering to tax laws, including registration, filing, and payment of taxes. All individuals, businesses, and organizations earning income or engaging in taxable activities must comply.

2. What happens if I don’t comply with tax regulations?

   Non-compliance can result in penalties, fines, interest on unpaid taxes, and legal action in severe cases.

3. Where can I go to be assisted on tax issues?

   KRA has implemented a relationship management framework, whereby a taxpayer is assigned account managers in their respective Tax Service Offices (TSOs) for guidance on any tax matters.

4. When are tax returns due?

   The due dates for tax returns are summarized in the table above.

5. Can I file all returns on iTax?

   Yes, you can log into your tax profile in the iTax system to file your returns.

6. Can I correct an error once I file a return?

   Yes. You can file an amended return within five years from the date of filing the original return.