Are you a commercial vehicle owner or looking to register your vehicle for business purposes? Then read through, this is for you.

Any person who owns a commercial vehicle is required to pay a tax known as Advance Tax which is payable every year of income at the specified rates on or before 20th January.

Looking at some of the definitions as per the Income Tax Act Cap 470;

An owner of a commercial vehicle in this context refers to registered owner as indicated in the registration certificate issued by the registrar of motor vehicles in this case National Transport and Safety Authority (NTSA).

For a vehicle to be classified as COMMERCIAL by the Commissioner it should be;

1. Manufactured for the carriage of goods and so used in connection with a trade or business; or
2. A motor omnibus i.e. a public service vehicle having seating accommodation for more than 25 passengers exclusive of the driver; or
3. Used for the carriage of members of the public for hire or reward.

I’m sure by now you can think of one or two commercial vehicles, the matatus, taxis, tour vans, and many more.

So, what are the current advance tax rates?

The current advance Tax rates are as follows;

1. For vans, pickups, trucks, prime movers, trailers & lorries; Kshs. 1,500 per ton load capacity per year or Kshs. 2,400 per year whichever is higher.
2. For saloons, station wagons, mini-buses and coaches, Kshs. 60 per passenger capacity per month or Kshs. 2,400 per year whichever is higher

Exemptions

It will be important to note that tractors or trailers used for agricultural purposes are exempted from paying Advance Tax.

Commercial vehicles registered in the name of public institutions and organisations are also exempted from paying Advance Tax. For public institutions, they must produce appropriate evidence of their exemption status to the Commissioner

Steps on how to pay Advance Tax

To pay your advance tax, here is a step by step guide:

1. Log onto iTax with your PIN and password
2. Under ‘Payments’ tab select ‘Payment Registration’ option
3. Under:

• “Tax Head” select “Income Tax” 
• “Tax Subhead” select “Advance Tax
• “Payment Type” select “Self-Assessment Tax”
• Select the relevant “Tax Period” from the drop down menu.

The advance tax details can be captured either using the excel upload functionality (Where there are many vehicles) or using the web form functionality (Where the vehicles are few)

        4. Enter the following Advance Tax Details

• Vehicle registration number
• Select the type of vehicle as either Passenger Carrying or Luggage Carrying from the drop down menu
• For passenger carrying vehicles, capture the body type, make and passenger carrying capacity.
• For luggage carrying vehicles, capture the body type, make and load capacity(tonnage).
• Based on the details captured in (iii) and (iv) above, the system will calculate and populate the amount payable.
• Click on the add button.

1. Once all details are captured, select the preferred Mode of payment from the options - Other Payment Mode or RTGS
2. Click on the submit button
3. The system will generate a Payment slip which you will download and use to make the payment. A copy of the payment slip is sent to the taxpayer’s registered email address.

You can choose to present the payment slip at any of the listed banks and make the payment or pay via M-pesa using the Paybill number 572572, Account number is the Payment Registration Number, enter amount, MPESA PIN, press OK to complete the payment.

Is Advance Tax a final tax?

Advance Tax is not a final tax, this means that you will still be required to file your annual income tax return with a self- assessment of your tax from all your sources of income.

The advance tax however will be credited to your account and used to reduce any tax liability payable for that year of income.

Payment of advance tax is also a prerequisite to registration or transfer of ownership, licensing or inspection of a commercial vehicle. To successfully complete any of the above processes, you will be required to provide the respective government agencies with evidence of payment of advance tax or income tax exemption certificate where applicable.

Penalties & Interest

Late payment of advance tax will attract a penalty of 5% of the tax due and payable and a late payment interest at a rate equal to 1% per month on the amount unpaid from the period the tax becomes due until the tax is fully paid.

Record Keeping

Any person who is liable to pay advance tax should keep the following records which are necessary for the determining and ascertaining of advance tax:

1. Registration certificates
2. Vehicle inspection reports
3. Previous advance tax receipts
4. And such documents or records as the Commissioner may from time to time direct.

Did you find this Blog helpful? Leave us a comment below.

By: Sophie Marami