Every year when the Cabinet Secretary for National Treasury takes to the floor of the August House to table new budget proposals, the country follows the proceedings with unabated optimism. While delivery of the annual budget is a mixed bag, there is always hope of a tax policy here or there that will lessen the tax burden and in the long run make tax payment a worthwhile experience.
When the 2023-24 budget was tabled in the National Assembly on June 15, 2023, it lived up to this expectation after it, among other proposals, the proposed introduction of a tax amnesty program which would see penalties and interest on principal taxes accrued for periods running up to 31st December 2022 waived.
The Finance Act, of 2023 granted the tax amnesty program by introducing Section 37E to the Tax Procedures Act, 2015. The amnesty provides for the granting of a 100 percent waiver of all penalties and interest on principal taxes accrued up to December 31, 2022. The amnesty commenced on September 1, 2023, and shall run up to June 30, 2024.
Who therefore qualifies for this amnesty? You will be eligible to enjoy the tax amnesty if you have no principal taxes owed to KRA but there are outstanding penalties and interest for periods up to December 31, 2022. In this case, you will be entitled to an automatic waiver of the penalties and interest related to that period and will not be required to make an amnesty application.
The second level of eligibility is where you have not paid all the principal taxes accrued up to December 31, 2022. In this case, you will be required to apply for amnesty and propose a payment plan for any outstanding principal taxes which should be paid not later than June 30, 2024. It is instructive to note that any amount that remains unpaid after the aforementioned grace period will be subject to enforcement measures as provided for in the law. Additionally, eligibility for tax amnesty is only on penalties and interest on tax debts.
In alignment with our sustained efforts and vision to simplify tax processes, the tax amnesty application process has been digitised and is live on the iTax platform. Taxpayers can apply by logging into their iTax portals and selecting amnesty application under the debt and enforcement tab. In order to accommodate all eligible taxpayers irrespective of their financial abilities, the tax amnesty allows for a flexible payment plan which relieves financial strain on the taxpayer.
The scope of tax heads that qualify for the amnesty is limited to tax laws under the Tax Procedures Act, of 2015. Customs duties administered under the East Africa Community Customs Management Act (EACCMA) do not qualify for the amnesty.
In almost all spectrums of life, second chances are rare to come by and when they do, they are always welcomed with the warmth of open hands. This is what any tax amnesty is to taxpayers who might have for one reason or the other tripped along the way on their tax compliance journey.
Just like any other tax amnesty, this year’s tax amnesty is a big win for not only qualifying taxpayers but also for the government. For the former, it translates to a financial relief which goes a long way in giving the taxpayer a second chance to put their tax records in order. In some instances, the penalties and interest may exceed the principal tax owed. Waiving the said penalties and interest in entirety is therefore a significant deal to any taxpayer who qualifies for the program. It also bolsters tax morale and reassures taxpayers that all is not lost.
The amnesty on the other hand provides the government an opportunity to collect revenue that would have otherwise taken longer to recover. We project to collect Sh51 billion by the time this programme closes. By mid-October, KRA had collected Sh3.4 billion through the tax amnesty program, with more than 17,000 taxpayers having applied.
Unlike enforcement measures which mostly lead to adversarial and strained relations between the taxman and the taxpayer, the amnesty offers a conducive ground for voluntary tax compliance. This is therefore a win-win situation for KRA and the taxpayer.
It is therefore imperative for all eligible taxpayers to grab this opportunity to reset their tax records and start over on a clean slate. KRA is at hand to support and guide all applicants through our various support frameworks in place.
The writer is the Commissioner General of Kenya Revenue Authority
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