A quick guide to why business leaders must review their tax compliance status

A webinar hosted by Cliffe Dekker Hofmeyr (CDH) Kenya recently shed light on the intricacies of Kenya’s Tax Amnesty Programme introduced by the recently propagated Finance Act 2023.

Facilitated by CDH Partner Alex Kanyi and led by Miriam Wairimu, head of reforms and automation at the Kenya Revenue Authority (KRA), the discussion delved into the benefits of Kenya’s tax amnesty programme, its eligibility criteria, and the importance for businesses and taxpayers to take immediate action.

“Having collected significant revenue and seeing its potential, CDH urged the National Treasury to extend and enhance it: This led to the birth of the Tax Amnesty Program,” said during the online session.

Established by the Finance Act 2023, the amnesty programme offers an opportunity for taxpayers to address historical tax issues. The Programme encompasses all interest, penalties, and fines on tax debts related to periods up to December 31, 2022, including assessments raised later for those periods.

“Understanding eligibility is crucial. Even after applying for the amnesty, if any principal tax remains outstanding beyond June 30, 2024, that period will not qualify for the tax amnesty,” said Wairimu. “Importantly, debts accruing from January 1, 2023, are not eligible for amnesty or waiver, necessitating the payment or enforcement of all principal taxes, interest, penalties, and fines.”

She said this underscores the critical importance of timely action and adherence to the stipulated timelines for businesses and taxpayers seeking to benefit from the programme.

In the webinar, Ms Wairimu also addressed specific scenarios and considerations for taxpayers, such as offsetting liabilities against refund applications, changes in refund processing under Section 47 of the Tax Procedures Act, and the flexibility of applying for multiple payment plans under the amnesty program.

Over and above understanding how the programme works, Kanyi said business leaders must review their tax compliance status – either themselves or through their tax team.

“Ensure that the organisation understands all the taxes that apply to the business. Review your compliance status,” said Kanyi. “Look at all your reports, dig in, and see if any liabilities will ensure you benefit from this programme. Once you’ve done this, you can come up with a payment plan and prepare to pay the right amount before the deadline.”

As the event concluded, the emphasis was on collective efforts to ensure that every eligible taxpayer in Kenya benefits from this unprecedented opportunity. Wairimu says the Tax Amnesty Program, a strategic initiative to address historical tax issues, requires awareness, advocacy, and proactive engagement from both taxpayers and stakeholders.

“With detailed guidelines available on the official KRA website, the opportunity for a fresh start awaits those who seize it,” concluded Kanyi. 

what can taxpayers do?

Qualification and deadlines – Taxpayers with principal taxes paid up to December 31, 2022, automatically qualify for amnesty.

Those with outstanding taxes for periods up to December 31, 2022 need to apply and provide a payment plan by June 30, 2024.

Scope and applicability – Amnesty covers interest, penalties, and fines related to tax debt from periods before December 31, 2022, including voluntary disclosures and ongoing audits.

Penalties – Exclusions include duties under the East Africa Community Customs Management Act, current-year taxes from January 2023 onwards, and penalties under Section 85 of the Tax Procedures Act.

Application process –Amnesty is triggered through the application process, payment of taxes (even one shilling), and an automatic process for taxpayers without principal taxes to pay.

Engagements – Organisation should conduct regular stakeholder engagements on tax amnesty, as many taxpayers may be unaware of the opportunity. For example, most companies are not aware that they can fast-track submitted documents for reconciliation and conclusion of audits.

New debts – Companies should also avoid incurring new debts after January 1, 2023, consider alternative dispute resolution (ADR) for a faster process. Employers too are urged to facilitate employees to file returns and benefit from amnesty.