RELIEF OF PENALTIES

KRA urges taxpayers to utilise voluntary disclosure programme

Persons who make full payment of disclosed taxes in 2021 will get 100 per cent relief in penalties and interest

In Summary
  • The programme seeks to grant relief on penalties and interest on any tax liability disclosed in respect to the period of 5 years from July 1 2015 to June 30 2020.
  • In addition to the waiver of penalties and interest, a person granted relief under the programme shall not be prosecuted for the disclosed tax liabilities.
The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

Taxpayers will now get full or partial relief of penalties and interest on undisclosed taxes for the last five years.

This will be effected through the Voluntary Tax Disclosure Programme which aimed at providing relief to taxpayers due to the impact of the Covid-19 pandemic on the economy.

The Commissioner for Domestic Taxes Department said the programme is also aimed at enhancing tax compliance through disclosure of unpaid taxes.

The Voluntary Tax Disclosure Programme (VTDP) introduced vide the Finance Act, 2020 commenced on January 1 2021 and shall run for three years to December 31 2023.

The programme seeks to grant relief on penalties and interest on any tax liability disclosed in respect to the period of 5 years running from July 1 2015 to June 30 2020.

Persons who make full payment of disclosed taxes in 2021 will get 100 per cent relief in penalties and interest while those who pay in 2022 and 2023 shall get relief at a rate of 50 and 25 per cent respectively.

The programme applies to all tax liabilities accrued/derived in the specified period including individual Income Tax, Corporate Tax, PAYE, Withholding Income Tax, Capital Gains Tax, Value Added Tax, Withholding VAT, Excise Duty, Monthly Rental Income Tax and Turnover Tax.

In addition to the waiver of penalties and interest, a person granted relief under the programme shall not be prosecuted for the disclosed tax liabilities.

Further those granted relief in accordance with the provision of the VTDP shall not appeal or seek any other remedy with respect to the taxes, penalties and interest remitted by KRA.

The settlement of taxes under the programme will be executed through an agreement with the Commissioner and taxpayers are encouraged to ensure compliance with payment agreements contained therein.

Taxpayers are allowed one amendment of the original declaration of return at any time before the lapse of agreement.

A taxpayer will not be eligible to apply for relief under the programme if he/she is under audit, compliance verification or investigation, has been served with a notice of intention to investigate or is a party to an ongoing litigation in respect to the tax liability or any matter relating to the tax liability.

Relief under the programme shall only apply in respect to a disclosure resulting in payment of taxes.

Taxpayers will be issued with a VTDP certificate, which will serve as evidence that the person took advantage of the programme in relation to the taxes specified in that certificate.

The KRA’s pursuit of tax debt comes in the wake of an economic fallout due to the Covid-19 pandemic which has hit businesses and households, piling pressure on revenue performance.

With  the first half of the 2020/21 financial year ended, the Kenya Revenue Authority continues to face revenue shortfalls into the new year.

Tax collections for five months through November fell Sh100.72 billion compared with a similar period a year ago, reflecting the impact of Covid-19 economic hardships.

The taxman  collected Sh527.73 billion in the July-November 2020 period, a 16.03 percent drop compared with Sh628.46 billion a year ago.

KRA however  remains optimistic about the second half of the financial year, as the economy slowly regains its ground.

Treasury had in June last year, during the current financial year budget presentation, given KRA a target of Sh1.63 trillion ( ordinary revenues) for the financial year 2020/21 banking on elimination of duty exemptions, nabbing tax cheats and collecting unpaid penalties.