Did you wait for the tax returns filing deadline of June 30 to file your returns and in the process decided to take a shortcut and file nil returns to avoid penalties? The Kenya Revenue Authority (KRA) will soon catch up with you as it has started assessments on iTax based on tax returns for the year 2018.
All Kenyans with a KRA PIN and registered companies are usually required to file their tax returns by June 30 every year, failure to which, they are eligible for a penalty.
Most Kenyans however are so used to the last-minute rush that they cause the iTax portal to be jammed because of the huge number of people rushing to beat the deadline, resulting in nil returns even from those that were receiving taxable income.
KRA expected that about nine million registered taxpayers would, as expected, voluntarily file their returns but by June 30 2019, only 3.5 million people had done it.
For those that filed nil returns, KRA has given notice that it needs to verify that indeed these individuals and companies did not receive any income for the year in question.
One is required to file nil returns only if they do not earn any income, or receive a low income that by law is not subjected to taxation.
KRA has invested in data analytics which can easily compare the taxpayer’s return against their transactions with third parties making the verification process a lot easier.
The Kenya Revenue Authority (KRA) is also planning on coming up with an electronic tax register, Tax Invoice Management System (TIMS), to help with tracking tax defaulters.
TIMS system will give KRA visibility of the invoicing process by suppliers at an earlier stage and in some way to link purchases to sales to ensure full disclosure of income by taxpayers, making it difficult for business owners to file nil returns.
There will be a Tax Compliance Certificate offered to taxpayers, but only after scrutiny. If one will be found to have filed nil returns when they actually received taxable income, then they will be expected to file an amendment return declaring the correct state of affairs.
The amendment will then have to be approved by KRA, in the process needing more information from the taxpayer.
If the authority does not agree with the nil return declaration the taxpayer needs to respond to the authority demonstrating their grounds for filing a nil return.