30 June 2024 is fast-approaching. This is the deadline for filing corporate income tax returns for individuals and for entities with December year end.
It is important to understand that Kenya operates a self-assessment regime, meaning, taxpayers are required to self-assess their taxes and file the same with KRA. This includes employees, who have their PAYE filed by their employers. It is the responsibility of the employee to file their own returns despite the PAYE remittance by their employers.
All filings are to be done online via iTax.
Filing of returns by employees
Employees should reach out to their employers for their P9 forms, which provide for tax deductions for the year. If the employee’s only source of income is employment income, the employee can file simplified employment return. However, if the employee has other sources of income, the individual can download, populate and file the IT1 Individual Resident Return.
Any amount paid to Non-Resident individuals in respect of any employment with or services rendered to an employer who is resident in Kenya or to a permanent establishment in Kenya is subject to income tax charged at the prevailing individual income tax rates.
Kenyans living abroad are taxed on worldwide earned income and are also required to file non-resident return on iTax.
Filing of returns by companies
For companies and businesses, whose accounting period runs from 1 January to 31 December, they are allowed up to 30 June of the following year to file their Income Tax - Company Return.
Companies are required to populate the IT2C Return and file together with financial statements. For entities that have related party transactions, they are also required to be declare these transactions in the return template.
Multinational entities with turnover of over approx. KES 95billion are also required to file their master and local files (transfer pricing policies). The Country-by-Country (CbC) report will be due for filing with KRA by December.
Penalties
Failure to submit a self-assessment return - 5% of the tax balance or KES 20k whichever is greater (Section 83, Tax Procedures Act, TPA)
Failure to submit an individual return – 5% of the amount of tax payable under the return or KES 2,000 whichever is higher (Section 83, TPA)
*Please note that currently there is no waiver of penalties and interests arising from late filing of the returns
Extension of time to file return
Section 25 of the TPA allows a taxpayer to apply to the Commissioner for extension of time to submit a return. For purposes of this annual return, the taxpayer is required to make this application 30 days before the due date of 30 June 2024.
The Commissioner may grant an application if satisfied that there is reasonable cause and shall notify the applicant accordingly at least five days before the due date. If the Commissioner does not respond, the application shall be deemed to have been granted.
Tax Amnesty
The Finance Act, 2023 introduced Section 37E to the TPA which has granted a tax amnesty on penalties and interest on tax debt for periods up to 31st December 2022.
A person qualifies for the tax amnesty on penalties and interest where the person:
has no principal taxes owed but there are penalties and interest for periods up to 31st December, 2022; and
fully pays any outstanding principal taxes accrued up to 31st December, 2022, by 30th June, 2024.
The following do not qualify for tax amnesty:
interest and penalties imposed under Section 85 (tax avoidance) of the TPA, shall not qualify for the amnesty; and
all penalties and interest relating to tax debts accrued for the periods after 31st December 2022, shall not qualify for the amnesty.
eTIMS compliance
The Finance Act, 2023, amended Section 16 of the Income Tax Act to provide that all deductible expenditure in assessing taxable income must be supported by invoices generated through eTIMS/TIMS unless they are exempted under the TPA.
Therefore, beginning 1 January 2024, all taxpayers are required to ensure that all expenses they intend to deduct to arrive at their taxable profit is eTIMS compliant.
Conclusion
In summary, the following are the key points to note:
please file and submit returns early since, nearer the filing deadline, the systems tend to get busy;
please consider taking advantage of tax amnesty deadline of 30 June 2024; and
please ensure eTIMS compliance for 2024 to ensure the deductibility of the expenses when filing returns for 2024.
Found this helpful? Here’s how we can assist you!
Compliance with these recommendations is highly recommended to avoid penalties as a result of non-compliance.
Our team is ready and eager to assist with the seamless integration and adoption of eTIMS as an approved eTIMS integrator ensuring a smooth transition for you and your business enabling you to meet the latest legal requirements.
Contact us today for further assistance. Email us at info@namiri.tech or call or Whatsapp 0112685368.
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