Tax Season

Kenya's financial year is coming to an end. We are counting days to the deadline. I know most of us are always wondering why we need to file returns yet it has been deducted in form of PAYE or withholding tax by the employer. First, it is a legal requirement by the government in Kenya since Kenya is a self assessment regime where everyone is required to declare the income earned during the year and pay any due taxes.

Second, filing returns enables someone to see whether your employee filed correctly and if you have any tax due or even tax refund!

Finally, filing tax returns enables the Kenya revenue authority reconcile accounts of the employer and employee. KRA verifies what the employer filed is really what was deducted. This enhances accountability.

Who then needs to file tax returns? Filing returns applies to everyone with a Kra pin.

• Employed individuals (PAYE)

• Self-employed persons (sole proprietors, freelancers)
• Business owners (SMEs and companies)
• Landlords and investors (rental income, capital gains)
• Individuals with no income (they must file Nil Returns if registered with KRA)

Failure to file returns for the above categories will lead to penalties of 2000 for individuals and 20,000 or 5% of tax bill (whichever is higher) for companies.

Steps to take while filing returns:

• Log into iTax Portal
• Select “Returns” > “File Return”
• Choose the return type (Income Tax – Resident Individual or Nil Return)
• Upload your documents (Excel or .zip file depending on the form)
• Submit and download the acknowledgment receipt

The Kra user guide offers a more detailed process.