Penalty For Filing Returns Late Dropped In Proposed Law

KRA Tax Penalties

Proposed changes regarding filing return to Kenya Revenue Authority will see to it that penalty for failing to file annual tax returns past June 30 deadline dropped in a bid to encourage savings among individuals and businesses that keep time.

If the amendment of Tax Procedures Act 2015, is approved by Members of parliament and assented into law by the president, individuals and businesses will be paying the fines based on the amount which has not been paid to the Kenya Revenue Authority (KRA), unlike the to the current law where the penalty for late filing of returns is based on the total tax that was due in the previous year.

“The amount of tax payable or due under the return shall be reduced by the amounts already paid and withholding tax credits,” reads the proposed amendment to Section 83 of the Tax Procedures Act through the Finance Bill 2019.

According to Elizabeth Meyo, Commissioner for Domestic Taxes Department proposed changes to the law is an incentive to taxpayers who file returns on time lessening the burden on employees and businesses. Calculations shall be based on the amount not paid to the KRA, reducing the current liability where the taxman uses total tax which was payable the previous year

“Previously, taxes were imposed on all due liabilities without giving credit of withholding tax already paid. The iTax system will now impose a penalty only on unpaid taxes and not on the tax payable, which appears in the return,” she said.

As per the proposed law,  an employee taxed Sh22,656.30 on his Sh100,000 monthly pay will, for example, pay a Sh2,000 fine under the proposed law if she misses the June 30 deadline for filing return

Currently, individual taxpayers who fail to file returns are fined Sh2,000 or five percent of the annual tax payable for the preceding year, while companies face a  penalty of Sh20,000 or five percent of the tax payable in the year the return is meant to capture, or whichever is higher.

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