Every individual with a Personal Identification Number (KRA PIN) given by the Kenya Revenue Authority (KRA) is expected to file tax returns in Kenya. Filing returns helps you to know how much KRA owes you, if any. It also lets you know if you have any pending tax and, if so, how much. So, what are the penalties for not filing tax returns?
The Kenya Revenue Authority (KRA) is responsible for the oversight, collection, and accounting of taxes on behalf of the national government. Money collected from Kenyans through KRA helps the national government to fund its projects, including infrastructural development like building schools, roads, hospitals, etc.
Deadline for filing tax returns in Kenya
When are tax returns due? Every Kenyan with an iTax account is expected to submit their declaration by 30th June (six months after the year ends). Or else they’ll get a penalty.
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Note: Tax on employees is paid by withholding from their monthly salaries and benefits under the PAYE system. But other tax liabilities are based on one's self-assessment.
Penalties for not filing tax returns
Every lawfully registered business and individual in Kenya must honour the deadline for filing KRA returns. Otherwise, they'll have committed a tax offence which will attract punitive interests and penalties. These include;
1. Late filing of PAYE tax
What is the penalty for filing PAYE late? If you fail to file your PAYE returns on time, you will pay a penalty of Ksh. 10,000 or 25% of the tax due. In addition, late payment of PAYE tax also incurs a 5% fine on the amount due, plus an interest fee of 1% monthly.
2. Penalty for small business
In 2006, KRA introduced a "simpler" tax system for small and micro enterprises, Turn Over Tax (TOT), to boost overall revenue collection. This tax applies to small businesses that achieve gross sales of between Ksh. 1,000,000 – Ksh. 50,000,000 yearly.
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Small and micro businesses that fail to file Turn Over Tax (TOT) by the 20th of every following month will pay a fine of Ksh. 1,000 monthly. On the other hand, late payment of TOT results in a penalty of 5% of the tax due and 1% interest on the principal amount owed.
3. Income tax penalty
Regarding income tax partnership or company returns, late filing results in a hefty fine of Ksh. 20,000 or 5% of the tax due. Additionally, the penalty for late payment of income tax for non-individuals is an interest of 1% monthly and 5% of the tax due.
4. Withholding tax penalty
In Kenya, the fine for late filing of withholding tax is 5% of the tax payable or Ksh. 20,000, depending on which figure is higher. The penalty for failure to deduct withholding VAT and Rental Income Tax is 10% of the amount due. The fine for late payment of withholding tax, be it income tax, VAT, or Rental Income tax, is 5% of the tax due.
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5. Late filing of MRI returns
If you are an individual and fail to file your MRI returns on time, you will pay a fine of Ksh. 2,000 or 5% of the tax due. For non-individuals, the penalty is Ksh. 20,000 or 5% of the unpaid tax. In case of late payment, you’ll be charged 5% of the tax due and 1% interest monthly.
6. Excise duty tax KRA penalty
The penalty for late filing of excise duty tax is Ksh. 10,000 or 5% of the tax due. On the other hand, the fine for late payment is an interest of 1% monthly or 5% of the tax not paid.
After the deadline for filing returns in Kenya, most people are usually interested in learning about the penalties for not filing tax returns. Filing returns is a legal requirement, and failure to do so will lead to punitive penalties and interests.
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7. Late filing of VAT returns in Kenya
What is the penalty for late filing of VAT returns in Kenya? VAT is a consumer tax on the importation and supply of taxable services or goods manufactured in Kenya. All VAT-registered businesses are expected to submit returns on the 20th of the following month, failure to which they'll get a penalty of Ksh. 10,000 or 5% of the tax due.
8. Penalty for not filing individual tax returns in Kenya
What is the penalty for not filing individual tax return in Kenya? You should submit individual tax returns on or before 30th June. If you miss filing this tax, you'll get a penalty of ksh.2000 or 5% of the due tax.
9. Penalty for not filing nil returns
Every Kenyan with a KRA PIN must file returns yearly, regardless of income. If you earn no income and thus have nothing to declare, you should file a nil return.
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What is the penalty for not filing nil returns? The penalty set for an individual that hasn't filed nil returns is Ksh. 20,000, and for companies is Ksh. 20,000
How to pay your KRA penalty for nil returns
KRA M-payment service is the easiest and most convenient way to pay your KRA penalty for nil returns. Here are the simple steps to follow:
How do you know if you have KRA penalties?
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Did you have trouble filing KRA returns and are unsure whether you have penalties? Well, it's easy to check if you have KRA penalties. Here are the steps.
What is the KRA penalty waiver?
Sometimes, circumstances beyond the taxpayers contribute to non-filing or late filing. If this happens, you can apply to KRA for the set penalties or interests to be forgiven or waived. As a taxpayer, you'll address a letter to the commissioner explaining why you want the penalties waived.
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FAQs about KRA and filing returns
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DISCLAIMER: This article is not sponsored by any third party. It is intended for general informational purposes only and does not address individual circumstances. It is not a substitute for professional advice or help and should not be relied on to make decisions of any kind. Any action you take upon the information presented in this article is strictly at your own risk and responsibility!
Tuko.co.ke published a post on how to file KRA nil returns. Any registered business or individual with a KRA PIN must file returns yearly – including employed and unemployed people. However, some people miss out on filling their returns because of its complicated process. So, In case you're having any trouble while filing your returns, you should check this article for guidance.
Source: TUKO.co.ke
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