Yes. KRA or the taxpayer can apply for ADR.  The purpose of ADR is enable the parties to engage and arrive at an amicable solution to the tax dispute. It’s a win –win situation.

Bankruptcy proceedings are filed in the High Court and there is an elaborate process involved. The person seeking to be declared bankrupt must inform its creditors of the bankruptcy proceedings. The legal team would ensure that the KRA is listed as a creditor during the bankruptcy proceedings and further ensure that the tax owed is listed in priority to other creditors.

We have not had cases where a taxpayer moves to be declared bankrupt following a court case. However we have had instances of company’s being dissolved and for that we have the Insolvency Act to guide us. 

We have a number of strategies:

1. The lawyers work hand in hand with the tax auditors who raise assessments to ensure that they are aligned on the issues being addressed. In KRA cases we have witnesses who are tax experts testifying in the cases and this ensures that technical questions are given first hand answers to the Tribunal or judge.
2. All cases are evaluated by a Technical Evaluation Committee that ensures the KRA case is airtight if the case is to be litigated. If the case is weak the committee recommends settlement of the case by KRA. This ensures we only litigate strong cases that are likely to result in revenue collection.
3. Within the litigation division, cases are handled by teams of lawyers as opposed by an individual counsel. This ensures objectivity, creativity, and support in the litigation process.
4. KRA lawyers go on trainings from time to time to build capacity as both technical tax lawyers and in trial advocacy.
5. KRA is a member of the Court users Committee which is a forum bringing together litigants to deliberate on the best ways to fast track the hearing and determination of cases.

The law allows taxpayers to keep records for a period of five (5) years so that KRA is able to assess taxes for the same period. However, where fraud is detected the law allows KRA to go back as far as possible for purposes of prosecution of the offenders and the recovery of the taxes.

Foreign income is income earned outside Kenya which would have been taxable in Kenya under Kenyan tax laws if it had been accrued or derived in Kenya or deemed to have accrued in or derived in Kenya.

Kenya operates a source based tax system, meaning that income is only subject to tax in Kenya if it accrued in or was derived from Kenya.

However, there are a few exceptions to this rule such that income earned outside Kenya is taxable in Kenya. 

1.  In the case of employment income earned outside Kenya by a Kenyan resident individual
2. In the case of business income where a Kenyan person carried on their business partly in Kenya and partly outside Kenya.

Every person with a KRA PIN is required to file their returns and pay their taxes via iTax on or before the due date.

Where the income earned and taxed outside Kenya is taxable in Kenya as explained in Question 2 above, the taxpayer should declare that income and file their return via iTax.

Section 16(2)(c) of the Income Tax Act allows for the deduction of income tax or tax of a similar nature paid on income which is charged to tax in a country outside Kenya, to a certain extent.

Where there is a Double Tax Agreement in effect between Kenya and the other country, Section 42 provides for a foreign tax credit.

Where the foreign income of a resident is taxable in Kenya, the resident tax rates imposed on similar income under the Income Tax Act will apply.

Double taxation refers to the imposition of tax on the same income by multiple jurisdictions.

1. Juridical double taxation occurs where tax is imposed in two or more states on the same taxpayer in respect of the same income.
2. Economic double taxation occurs where tax is imposed on two different persons in respect of the same income.

Double taxation arises as a result of the overlapping of tax systems of different jurisdictions.

It is mainly avoided when countries enter into bilateral or multilateral treaties for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital (Double Tax Agreements).

The Double Tax Agreement (DTA) will include an Article which sets out the method to be adopted for elimination of double taxation using either the exemption or credit method.

Double taxation can also be avoided through a domestic provision for unilateral relief. This is a provision in the income tax law of the country that gives a taxpayer relief for foreign tax against the domestic tax  even in the absence of a DTA. This relief will be given in the form of an allowable deduction on the foreign tax paid.

This is an agreement between two or more countries for the avoidance of double taxation and the prevention of fiscal evasion with respect to income and capital.

The agreement sets out terms and rules of how income or profits of cross border transactions are to be treated by the two countries so that the taxpayers do not end up paying tax twice on the same income.

1. Canada
2. Denmark
3. France
4. Germany
5. India
6. Iran
7. Norway
8. Korea
9. Qatar
10. Seychelles
11. South Africa
12. Sweden
13. United Arab Emirates
14. United Kingdom
15. Zambia

Section 16(2)(c) of the Income Tax Act allows for the deduction of income tax or tax of a similar nature paid on income which is charged to tax in a country outside Kenya, to the extent to which that tax is payable in respect of and is paid out of income deemed to have accrued in or to have been derived from Kenya.

Here is how to file your tax returns with foreign income. Watch video below:

https://www.youtube.com/watch?v=ZL4cB1LACLo

Log on to iTax, go to the payment tab, generate a new payment and select the tax head, and sub-head of the tax you are supposed to pay and submit. An e-slip will be sent to your email and you will use the Payment Slip to pay the tax.

Yes, the exchange rates at the time of payment will be considered.

This is a programme that has been introduced to give an opportunity to taxpayers who have undisclosed tax liabilities to disclose the same to the Kenya Revenue Authority (KRA) without facing any legal consequences such as prosecution. By so doing, KRA will grant such taxpayers a waiver on penalties and interest that have accrued on the undisclosed tax liabilities.     

This is a programme where a taxpayer confidentially discloses tax liabilities that were previously undisclosed to the Commissioner for the purpose of being granted relief of penalties and interest of the tax disclosed.