Talk to Experts
Appointment

Tax Advisory Services

We Resolve KRA Tax Assessments, Tax Audits, Tax Objections, Tax Appeals & Penalties, So You Can Focus on Growing Your Business.

Top Tax Consultants in Kenya | KRA Tax Dispute Specialists

Search

Categories

Privacy Policy

Sample of a Memorandum of Appeal in a Tax Case

Sample of a Memorandum of Appeal in a Tax Case

Looking for an MOA sample for a tax case?

Here’s a brief sample:

———————————————————————————————————————

REPUBLIC OF KENYA

THE TAX APPEALS TRIBUNAL AT NAIROBI               APPEAL NO………OF 20….

SKYFONT ENTERPRISES LIMITED                  APPELLANT

Versus

COMMISSIONER OF REVENUE, KRA          RESPONDENT

MEMORANDUM OF APPEAL

The Appellant, Skyfont Enterprises, is aggrieved by the decision of the Commissioner of Revenue, KRA.

GROUNDS OF OBJECTION

  1. The Commissioner erred in law and fact in holding that the funds in the Diamond Trust Bank account no. 1234556672345 were all taxable.
  2. The Commissioner erred in law in failing to consider that the penalties were unfair.
  3. The Commissioner erred in law by concluding that Skyfont Enterprises is liable for tax fraud.

RELIEF SOUGHT

The Appellant prays that this Honourable Tribunal be pleased to:

  1. Allow the appeal.
  2. Set aside the decision dated 10/1/2024.
  3. Grant the cost of this appeal to the appellant.
  4. Any further relief this Hounorable Tribunal deems fit.

Dated at Nairobi, this 25th day of September, 2025.

—————————————

Gichuri & Partners

Tax Agent for Skyfont Enterprises

Address: College House, University Way, Nairobi.

———————————————————————————————————————

Get Professional Support in Drafting and Filing a Tax Appeal

The tax appeal process in Kenya follows strict guidelines that determine whether your case succeeds or fails. It’s a lengthy process, from conducting legal research and filing an appeal notice to writing a compelling memorandum of appeal. Partnering with a legal expert or a tax agent simplifies the process, raising your chances of winning the appeal. At Gichuri & Partners, we provide comprehensive tax appeal assistance, including drafting a compliant MOA and representing you before the TAT and higher courts. We will help you write a befitting MOA for your tax case, file the appeal on time, save on costs, and argue the grounds of appeal. Let us handle your tax litigation issues so that you can focus on your business.

READ MORE
KRA Tax Appeal

How To Write a Memorandum of Appeal in a Tax Case 

Legal processes follow specific guidelines and rules that must be followed. Failure to follow these requirements can have your tax case dismissed, which will not be in your favor. These guidelines include mandatory documents required to appeal, whether to the High Court, Court of Appeal, or the Tax Appeals Tribunal (TAT). One such document is the memorandum of appeal (MOA). This legal document is one of the mandatory documents that an appellant must submit as part of the tax appeal process. This post seeks to explain what a memorandum of appeal is in a tax case and how to write one in Kenya.

What is a Memorandum of Appeal in a Tax Case?

A memorandum of appeal is a legal document filed by an appellant in a tax case to a higher court or tax tribunal. This memo states the grounds under which the appellant is asking the higher court/tribunal to overturn or vary the decision made by a lower court or KRA. To understand where a memorandum of appeal comes in in a tax dispute, let’s recap what happens when a taxpayer is involved in a tax dispute with the KRA. Here’s a summary of what happens when a KRA assessment or audit escalates into a tax dispute:

  • Step 1: KRA states the amount of tax payable, penalties, and interests after their audit and assessment.
  • Step 2: The taxpayer accepts the decision and pays the tax/penalties/interest. If the taxpayer objects to the KRA decision, they object.
  • Step 3: The taxpayer lodges an objection with KRA.
  • Step 4: KRA accepts the objection and adjusts the taxes due, penalties, interests, etc. If KRA is not satisfied, it offers an objection decision.
  • Step 5: If the taxpayer is not ready to give in to KRA’s objection, they can appeal the case with the TAT. They need to file a notice of appeal. Fourteen days after filing the notice of appeal, the taxpayer must file a memorandum of appeal, statement of facts, and the tax decision by the lower authority.

Now that we have an idea of where the memorandum of appeal comes in during the tax appeal process, let’s discuss what it entails. A memorandum of appeal is a procedural requirement under the Tax Appeals Tribunal Rules, the Income Tax Rules, and the Court of Appeals Rules. It must meet the following requirements:

  • Must be signed by the appellant or their representative tax agent.
  • It must set out concisely (without arguments or narrative) the grounds of appeal.
  • The appeal grounds should be numbered consecutively under distinct heads.
  • Must contain an index of all documents in the appeal, with the number of pages on which they appear in the appeal.
  • Must be accompanied by a copy of the tax decision and notice of appeal.

What’s the Significance of a Memorandum of Appeal in a Tax Case?

Filing a memorandum of appeal in a tax case is crucial and serves various purposes. Here’s why you need to write a memorandum of appeal:

  • It’s a procedural requirement: As we mentioned earlier, every appellant is required to file a memorandum of appeal. It’s a legal procedural requirement as laid down by TAT, Income Tax, and Court of Appeal rules.
  • Shows grounds for appeal: Why do you think the lower authority’s decision/judgment is unfair? What factual errors can you present that the court could use to overturn or vary the previous judgment? A memorandum of appeal states these grounds concisely, giving the respondent and courts issues to be argued.
  • For record keeping and case management: Filing legal documents allows the court clerks to prepare your appeal records, list grounds of appeal, and set hearing dates.

How to Write a Memorandum of Appeal in a Tax Case

A memorandum of appeal is a structured document, and you ought to follow the given format. Sticking to the provided structure is key to compliance. However, the structure may vary, depending on whether you are filing with the TAT, High Court, or the Court of Appeal. Here are the essential components of a memorandum of appeal in a tax case in Kenya:

  1. Court or tribunal heading.
  2. File or case number.
  3. The name of the appellant/their tax agent or advocate, and the respondent, e.g, taxpayer vs KRA.
  4. Title.
  5. Reference to the tax decision appealed against.
  6. Appeal grounds, numbered consecutively.
  7. Prayer or Relief being sought through the appeal. E.g., setting aside the previous decision or remitting the case back to KRA.
  8. Appellant, their tax agent, or advocate’s signature, address for service, and date.

Now that we know the structure, what tips and tricks should you follow to write a compliant MOA in a tax case?

Let’s discuss them below.

Practical Tips and Strategies for Writing a Memorandum of Appeal in a Tax Case

Follow these strategies to avoid pitfalls and errors when writing an MOA for a tax case:

  • Confirm the applicable rules for your specific MOA: Who is your MOA addressed to? An MOA to the TAT is different from an MOA to the High Court or Court of Appeal. Review the particular rules that apply to your tax case.
  • Be concise and avoid arguments in the grounds for appeal: Use single-sentence grounds and complaints, saving long arguments for submissions.
  • Be clear about your prayer/relief: What is the goal of your appeal? Use practical wording to describe what relief you seek through the appeal. E.g., The appellant prays that the honorable court set aside the decision dated 10/1/2024.
  • Include the accompanying appeal papers: Remember to include the tax decision, notice of appeal, and statement of facts as required by the law.
  • Proofread before submission: A memorandum of appeal is a serious court document that could shape the direction of your tax case. Please proofread to ensure everything is clear and concise, and the required signatures and dates are included.
  • Honour the deadlines: The law provides specific deadlines for filing the MOA, depending on whether you are filing the document in court or a tribunal. For the MOA to the TAT, the appellant must file the document within 14 days after filing the Notice of Appeal. On the other hand, an appellant has up to 30 days after filing the Notice of Appeal to file an MOA with the Court of Appeal or High Court.

Get Professional Support in Drafting and Filing a Tax Appeal

The tax appeal process in Kenya follows strict guidelines that determine whether your case succeeds or fails. It’s a lengthy process, from conducting legal research and filing an appeal notice to writing a compelling memorandum of appeal. Partnering with a legal expert or a tax agent simplifies the process, raising your chances of winning the appeal. At Gichuri & Partners, we provide comprehensive tax appeal assistance, including drafting a compliant MOA and representing you before the TAT and higher courts. We will help you write a befitting MOA for your tax case, file the appeal on time, save on costs, and argue the grounds of appeal. Let us handle your tax litigation issues so that you can focus on your business.

READ MORE
Privacy Policy

Manual KRA Waiver Application

KRA also accepts a manual waiver application. This method is suitable for tax penalties and interests that preceded the iTax service portal and cases that require hands-on handling by a KRA Tax Consultants. For instance, if the penalties resulted from a filing error on your part or a system glitch on KRA’s side, a manual application is suitable. To manually apply for a KRA waiver, do the following:

  • Write a waiver application letter
  • Attach supporting documents
  • Make a copy of both the letter and the supporting documents
  • Make sure any outstanding principal tax is paid in full
  • Present the application at your nearest Tax Service Office (TSO) Debt Unit
  • The receiving officer will stamp the original and the copy
  • Retain the stamped copy and leave the original with the officer
  • Follow up with the office for your waiver application status
  • You’ll receive an approval or rejection letter via your provided postal address, and a copy will be sent to your email address

Tips and Tricks For A Successful KRA Waiver or Penalty Relief Application

Receiving a rejected waiver application is frustrating and demoralizing. Apply the following tips and tricks for a successful KRA waiver application:

Be Truthful and Clear in Your Application

Please provide accurate, clear, and truthful accounts of why you are applying for a waiver. Additionally, ensure the supporting documents back up your reasons. Don’t say you experienced economic hardships while your financial statements show otherwise.

Stay Compliant in Other Periods and Tax Obligations

Your overall tax compliance influences the decision of your waiver application. If you show compliance in other obligations and tax periods, KRA will see you as deserving of the waiver. Please pay other taxes promptly, ensure the principal tax is paid in full, and file Nil returns in case of no income.

Use Specific Reasons

Another aspect that can break or make your application is the reason for the waiver application. Why do you want a penalty relief, and why should KRA give it to you? Generic reasons are a recipe for rejection. Be as specific as you can and tailor the application to suit your special case.

Track Your Waiver Application Status

Hundreds of taxpayers are applying for services in KRA’s Debt Unit. Please remind the officers of your application and follow up on the status of your application. That way, you’ll know where you stand, if they need additional documents, or are working on your application.

Seek Expert Assistance

Navigating the waiver or penalty relief application and tracking process is not easy. It involves a lot of visiting the KRA offices, checking in with KRA customer care, and properly preparing needed documents. This can be daunting and time-consuming. An experienced tax consultant with help you easily navigate the whole process. You can even stay back and handle your business as the expert handles communication with KRA on your behalf.

Wrapping Up

To get a KRA tax waiver or penalty relief, you need to apply formally to the commissioner. You can do so online via the iTax portal or manually present your application at your nearest KRA tax services office. Contact us if you need professional assistance with your KRA waiver application.

READ MORE
Privacy Policy

KRA Waiver Application Letter Sample

A KRA waiver letter is everything because it tells the commissioner whether you deserve a waiver or not. It can make all the difference and determine if you’ll get an approval or an approval. In this KRA waiver letter sample, we show you how to write a good waiver application letter for a better chance at approval.

KRA Waiver Application Letter Sample

——————————————————————————————————————————-

John Samuel Wafula,

P.O. BOX 18-10900,

Kakamega, Kenya.

wafulajs@gmail.com

+254 707 234 234

 

The Commissioner,

Domestic Taxes,

Kenya Revenue Authority,

P.O. Box 48240-00100,

Nairobi, Kenya.

 

Dear Sir/Madam,

 

RE: APPLICATION FOR WAIVER OF PENALTIES AND INTERESTS

I am writing to formally request a waiver of penalties and interests charged on my individual income tax (monthly rental income), for the tax period (s) Jan 2024-Dec 2024.  The penalties and interests arose due to  (give credible reasons like financial constraints, iTax system glitches, unexpected emergencies, etc). I have since taken the right measures to correct the issue and am committed to staying compliant going forward through timely tax filing and payments.

I have attached supporting documents to validate this application, including:

  • Bank statements
  • Medical records
  • Proof of hardship (layoff letter, financial statements)
  • Police abstract
  • System-generated errors (screenshots)
  • Court documents
  • Compliance certificate for other tax obligations or previous tax periods

I have already made plans to settle the principal tax. I look forward to your kind consideration and promise to stay compliant with KRA regulations and laws moving forward.

Yours faithfully,

John Samuel Wafula

KRA PIN- A007234234R

——————————————————————————————————————————-

READ MORE
KRA Tax Appeal

How to Handle a KRA Tax Assessment

Kenya Revenue Authority (KRA) relies on taxpayers’ self-assessment to declare and pay taxes. KRA’s trust in the taxpayers sustains this system. If the KRA has reasons to believe you are being untruthful, they can demand a tax assessment. This assessment usually comes alongside a demand for unpaid taxes.

Receiving a tax assessment demand from KRA can be stressful, especially if you aren’t aware of any discrepancies between your tax declaration and KRA’s expectations. If you have received a tax assessment demand from KRA and don’t know where to start or how to respond, you’re on the right page. We’ve prepared this article to show you how to handle a KRA tax assessment.

What is a KRA Tax Assessment?

A KRA tax assessment is an official declaration by KRA that you owe them more tax than you declared and paid. Before KRA presents a tax assessment to a taxpayer, they engage with them to find out why there is a discrepancy between the taxpayer’s tax declaration and their records. They will request supporting documents like bank statements, sales records, and payslips to verify the taxpayer’s self-assessment.

If KRA identifies a gap between their estimation and the taxpayer’s self-assessment, they impose a tax liability on the taxpayer. They then communicate about this liability to the taxpayer orally and in writing. The taxpayer is offered time to respond to the issues before an official assessment and demand for taxes is made. If an agreement is not reached, KRA issues a demand for taxes and assessment.

Common Causes of KRA Tax Assessment

Several issues may prompt KRA to issue a tax assessment to a taxpayer. They include:

  • Under-declaration of income: KRA trusts every taxpayer to truthfully declare their total income, including salaries, wages, rental income, corporate income, and business profits. Underdeclaration of income breaks this trust, leading to tax assessment.
  • Claiming ineligible expenses: Tax laws allow taxpayers to deduct eligible expenses from their taxable income to lessen the tax burden. Claiming ineligible expenses, such as personal expenses and expenses not supported by proper documentation, is a ground for tax assessment.
  • Late filing of returns: If you’re always filing your tax returns late or missing deadlines, KRA may issue a tax assessment on you and your business.
  • Data mismatch between your declared tax and third-party sources: KRA pulls data from various sources to gauge whether taxpayers are truthfully declaring their taxes. These include bank statements and withholding tax certificates. If there are discrepancies between these records, KRA may issue a tax assessment.

How to Handle a KRA Tax Assessment

What’s the way forward after receiving a tax assessment from KRA? Take the following steps:

1.     Study the Tax Assessment Notice

Before you respond to the notice, learn what it’s all about. Read the notice carefully and note the following details:

  • Tax head- PAYE, VAT, Monthly Rental Income (MRI), Income Tax, etc.
  • Due tax/assessment.
  • Deadline for payment, objection, or appeal.

2.     Review Your Records and Compare

Review your records to identify the data mismatch and understand why KRA is demanding an assessment. You could seek a tax expert’s help to review your invoices, payslips, filed returns, receipts, and other tax records.

3.     Communicate with KRA

After reading the notice and reviewing your records, reach out to KRA and explain your case. You can do so via iTax or visit your nearest KRA Tax Service Office. After clarification, you can then decide on the next step- whether you’ll pay the demanded tax or file an objection.

4.     Make a Decision

All the above steps lead to this last step- making a decision based on the circumstances. If you’ve reviewed your records and realized KRA’s claims are true, you should pay the assessment right away. KRA provides a deadline, 30 days from the date of the assessment notice. Failure to honor this deadline attracts more penalties and interest.

On the other hand, you can object if the claims made by KRA are unsubstantial, or you have a good explanation. You have up to 30 days after receiving the assessment notice to file your objection via iTax. We will discuss how to file a tax assessment objection in the next section.

How to File a KRA Tax Assessment Objection via iTax

Follow these steps to file a KRA tax assessment objection on iTax:

  1. Go to https://itax.kra.go.ke/.
  2. Enter your KRA PIN and click Continue.
  3. Enter your password and the security stamp, and click Login.
  4. Once you’ve logged in to your account, go to Assessment Disputes.
  5. Select Objection Application.
  6. Fill out the Request for Objection Application form, including Assessment Number and Type. Upload supporting documents and arguments.
  7. Click Submit.
  8. You’ll get an Acknowledgment Receipt. Click on the provided link to download the document.

What Happens When KRA Rejects Your Tax Assessment Objection?

There are three possible outcomes following a tax assessment objection from a taxpayer:

  • KRA will reject the objection
  • KRA will adjust the tax assessment
  • KRA will cancel the tax assessment

In case of rejection, the taxpayer is entitled to file an appeal with the Tax Appeals Tribunal.

What is the Tax Appeals Tribunal?

The Tax Appeals Tribunal (TAT) is an independent legal body that resolves disputes between KRA and taxpayers. You can take your tax assessment case to this tax court if you aren’t satisfied with KRA’s rejection.

Here are tips and tricks for a successful appeal with TAT:

  • File the appeal early: Appeal KRA’s decision within 30 days of receiving the tax assessment rejection.
  • Back your case: Ensure you have a strong case against KRA by preparing supporting documents, records, facts, and legal provisions.
  • Be present at the tribunal hearings: Personally attend the case hearings or hire a tax agent/legal counsel to represent you.

TAT will hear your appeal and deliver a judgment.

Do You Need Help Handling a KRA Tax Assessment? We Got You

Handling a KRA tax assessment on your own is possible. However, some perks come with hiring an experienced tax agent or consultant. The expert helps you:

  • Handle complex tax assessments spanning multiple tax periods and obligations.
  • File objections grounded in factual data and solid evidence.
  • Appeal with the TAT and attend the hearings on your behalf.

At Gichuri & Partners, we handle all kinds of tax consultancy and advisory services, including KRA tax assessments. Let our experienced team of experts handle your tax assessments to save you time and energy. We will review your assessment, prepare an objection if need be, and follow through until the case is resolved. Contact us to get started.

READ MORE
Privacy Policy

How to Get a KRA Tax Waiver or Penalty Relief

What happens when you make an error that could lead to tax penalties when filing your KRA returns? Or a system bug created a glitch in the KRA system, giving you wrong tax obligations or penalties. Other times, you may have accumulated penalties and interests unknowingly, and you’d like to be forgiven so that you can afford the principal tax payment.

Let us introduce you to KRA waivers. They are also referred to as penalty reliefs and, in some instances, tax amnesties. In simple terms, these words describe the forgiveness of some taxes, penalties, and interests following a formal application to KRA, requesting the same. In this guide, we will show you how to get a KRA tax waiver or penalty relief.

Glossary for Important Terms in KRA Tax Waiver Application

You’ll come across these terms when applying for a KRA waiver. Here is an explanation of what each term means:

  • Waiver: The official cancellation of owed taxes, penalties, and interests by KRA under approved circumstances.
  • Tax Amnesty: A special government program that forgives all penalties and interests for taxpayers, allowing them to pay the due principal taxes only.
  • Tax Relief: A provision, such as a deduction, credit, or exemption, that reduces the tax amount a taxpayer owes KRA.
  • Principal tax: The original tax owed to KRA before adding penalties and interests.
  • Penalty: A fine imposed by KRA on a taxpayer for late filing of returns, late tax payment, or other forms of non-compliance.
  • Interest: A charge applied to an overdue tax or penalty until payment is made.
  • Waiver application: KRA only grants waivers and penalty reliefs upon request. The process of placing this request is called a waiver application.

An Overview of the KRA Waiver Application

KRA imposes penalties on taxpayers for non-compliance, including late tax payments, late filing of returns, and unpaid taxes. It then applies additional charges for overdue penalties and taxes for every passing tax period, and the interest piles up.

Under special circumstances, you can apply to the KRA commissioner for the forgiveness of these penalties and interests. The commissioner will examine your justification and accompanying evidence to approve or reject your waiver application. Furthermore, they may offer a partial waiver depending on your circumstances.

Note: Waiver is only applicable to payable penalties and interests, and not the principal tax. The principal tax must be paid in full even after the waiver has been approved. Also, penalties and interests charged for tax fraud or evasion aren’t eligible for waiver.

How to Get a KRA Tax Waiver or Penalty: Step-by-Step Guide

You can apply for a KRA tax waiver in two ways:

  1. Via the iTax portal
  2. Manual application presented to the nearest KRA Tax Service Office (TSO)

I’ll discuss the online application first, and later show you how to manually apply for a penalty waiver.

Let’s get started.

Here is the step-by-step process for applying for a KRA tax waiver or penalty relief on the iTax portal:

Step 1: Log in to the iTax Portal

  • Open a web browser and go to https://itax.kra.go.ke/KRA-Portal/.
  • Navigate to the login section. Enter your KRA PIN/User ID and click Continue.
  • Enter your login password and security stamp, and then click Login.

Step 2: Navigate to the Debt and Enforcement Tab

  • Click on Debt and Enforcement.
  • Select Request for Waiver of Penalties and Interests.
  • You’ll be taken to an online waiver application form page.

Step 3: Fill in the Waiver Application Form

  • Upload your KRA waiver letter. (You should write this letter beforehand and save a copy on your computer.)
  • Upload other supporting documents like bank statements, medical records, and evidence of hardship.
  • Select the tax obligation associated with the penalties and interests.
  • Select whether it’s penalty, interest, or both under Tax Type.
  • Review Section A and click Add All if the details are correct.
  • Go to Section B and review the details.

Step 4: Submit the Waiver Application

  • Once you’ve confirmed all details in sections A and B are correct, click Submit.
  • Choose OK when the system asks if you want to submit.

Step 5: Download the Acknowledgement Receipt

  • Upon successful waiver application, you’ll receive an acknowledgment message.
  • It reads “Your request for waiver has been completed successfully.”
  • Click on the provided link to download the acknowledgment receipt.
  • Note your waiver application number because you’ll need it when tracking the application status.

That’s how you apply for a KRA tax waiver or penalty relief online.

READ MORE
Privacy Policy

Mistakes Businesses Make During VAT Filing

VAT tax is one of the most important business taxes in Kenya. It contributes heavily to the Kenyan economy, and various kinds of enterprises are expected to remit their VAT every month. Although it’s one of the simplest income taxes, many businesses make avoidable mistakes that lead to overpayment, underpayment, penalties, and interest.

The mistakes can also be a cause for KRA audits, which are seen as punitive and invasive. The mere thought of a KRA audit sparks anxiety for many business owners. This post seeks to identify the top mistakes businesses make during VAT filing in Kenya. We will also tell you how to avoid them to stay compliant, save on taxes,  and avoid KRA penalties.

What is VAT Filing in Kenya?

Value Added Tax (VAT) is a tax imposed on goods and services whenever value is added to them during the production and supply chain. There are various tax points from production to consumption, including import, supply, transport, and sale to the final consumer. In Kenya, any trader whose annual turnover is Ksh. 5,000,000 and above is required to pay a VAT tax to KRA and file timely returns. Businesses making less than the above amount can also opt to register for VAT. The VAT due date is the 20th of the following month. Failure to pay and file tax returns by the deadline attracts a penalty of Ksh. 10,000 or 5% of the tax due. Read our detailed guide on filing auto-populated VAT returns for a deeper understanding of VAT in Kenya.

Key VAT Terms: A Quick Glossary for Businesses to Avoid VAT Filing Mistakes

You’ll come across these terms when filing VAT returns in Kenya. Here’s a quick overview of what they mean:

  • Input VAT: This is the VAT you pay on purchases as well as other expenses that can be claimed against the output VAT.
  • Output VAT: This is the VAT a business charges on the sale of goods and services.
  • Reverse VAT: This is the VAT a business pays as the recipient of imported goods.
  • ETR: Electronic Tax Register is a device that Kenyan businesses use to generate KRA-compliant tax invoices.
  • TIMS: Tax Invoice Management System (TIMS) is a KRA software that ensures automatic reporting of invoice transactions to ensure ETR invoices are transparent and accurate.
  • Exempt Supplies: These are goods and services that are not subject to VAT
  • Zero-rated Supplies: These are goods and services that are taxed at a 0% VAT rate.
  • Nil Returns: VAT returns made even without taxable transactions/supplies during a tax period. Even if you don’t make a sale, supply goods, etc, you need to file a nil return as VAT VAT-registered business.

Top Mistakes Businesses Make During VAT Filing in Kenya (And How to Avoid Them)

Here are the top mistakes businesses make while filing VAT returns and how to avoid them:

Incorrect Calculations

Incorrect calculations impact your business in many ways. These include overpayments of VAT, penalties, and interests, risk of audits, and tainting of reputation.

How to Avoid: Luckily, Kenyan businesses can use KRA-approved ETR machines and TIMS software to automate transactions and invoices. You can go a step further by hiring professional accountants or tax consultants to handle your VAT returns and payments.

Late VAT Filing and Payment

As a business owner, it’s your duty to file and pay your VAT returns on time. Don’t let cash flow problems or forgetting deadlines lead to late payments. You’ll end up losing more money in penalties and interest and ruining your business’s reputation.

How to Avoid: Please set aside VAT collections early enough to avoid using the money for other business expenses. Also, create a VAT tax calendar with reminders to ensure you pay taxes and file returns on time.

Poor Record Keeping

Businesses must keep accurate records and documents for the purpose of VAT filing. These include sales and purchase invoices, credit and debit notes, iTax portal login details, and import and customs documents. Failure to do so will affect the VAT filing process.

How to Avoid: Maintain properly organized records, be it financial, importation, tax, or other business transactions. Also, conduct independent document audits to ensure all required files are available.

Using Outdated ETR Machines

In 2020, KRA made it mandatory for all VAT-registered businesses to update from the older ETR machines to the new models that conform to the new Electronic Tax Invoice (ETI) regulations. If your business is using outdated machines, it may cause compliance issues with KRA.

How to Avoid: Upgrade to a KRA-approved ETR Machine that meets the new ETI regulations.

Failure to Pay Reverse VAT

All businesses importing taxable services are required to pay a reverse VAT, also called VAT on Imported Services. Some businesses in this sector fail to identify this obligation due to ignorance and a lack of knowledge. This could lead to harsh tax penalties.

How to Avoid: Identify taxable imported services, register for VAT, and file returns as required.

Failure to De-Register for VAT

You should deregister for VAT when your business continuously falls below the provided KRA threshold (Ksh. 5 million annual turnover). Additionally, businesses that are closing down should deregister for VAT. Failure to deregister for VAT leads to accrued penalties and interest.

How to Avoid: Monitor your annual turnover to ensure you are still eligible for VAT. If not, deregister for VAT. If you go out of business, remember to deregister for VAT.

Incorrect Input VAT Claim

Some businesses, knowingly or unknowingly, claim ineligible Input VAT such as personal expenses, passenger vehicles, exempt supplies, and unverified invoices. Doing this may lead to tax assessments, audits, and cash flow issues.

How to Avoid: Understand KRA’s rules and regulations on  VAT Input Tax. Also, separate your business and personal expenses.

Failing to File Nil Returns

Just like any other income tax, you are supposed to file a Nil return if your business didn’t have any taxable income in a particular tax period. Failure to file the returns leads to penalties and interest.

How to Avoid: Always file your VAT returns before or on the 20th of the following month, even if they are Nil returns.

Wrapping Up

We’ve discussed the top mistakes businesses make during VAT filing in Kenya. Avoid these mistakes to ensure compliance, streamline your business cash flow, and prevent costly penalties. Keep up with changes and updates in the VAT landscape to stay compliant. If you need professional assistance, Gichuri & Partners is your go-to tax consultant in Kenya. Contact us anytime for expert guidance.

READ MORE
KRA Demand Notice

How to File Nil Returns on iTax

Did you know that every KRA PIN holder is legally required to file a tax return even without an income? Yes, KRA expects you to file a Nil return at the end of each tax period, even with no transactions to show. It doesn’t matter whether you are a student, unemployed, closed your business, or didn’t earn any income in the given period.

Failure to file a tax return attracts a penalty. To avoid these penalties, make sure you file your returns before the end of the tax period. This is usually on or before the 30th of June of the year after the tax period. For instance, the deadline for filing tax returns for the 2025 year is on or before 30th June, 2026.

For monthly returns, it’s on or before the 20th day of the month after the tax period. We prepared this guide to show you how to file Nil returns on iTax, KRA’s online service area. Let’s get into it.

What is a Nil Return?

A Nil return is a tax declaration by a PIN-holder to KRA letting them know they didn’t earn any income in a particular tax period. We pay taxes to KRA from our income, such as business profits, salaries and remunerations, and rent income. If you didn’t earn any income for various reasons, you’re eligible to file a Nil return.

You may lack an income for a certain tax period for various reasons. Maybe you got laid off, you closed your business, or you lacked tenants for your rental property. Whatever the case, you need to file your Nil return to avoid penalties.

Who Should File a Nil Return?

Here are examples of KRA PIN holders eligible to file a Nil return:

  • Students
  • Recent graduates who are yet to secure employment
  • Individuals who are unemployed and who don’t conduct any business
  • Business owners whose businesses were inactive during the tax period
  • Individuals who left employment or were fired from their jobs
  • Landlords and landladies who didn’t collect rent due to vacancies or other reasons

What Do I Need to File a Nil Return?

Filing Nil returns is straightforward. You’ll need the following requirements:

  • A browser-supported device like a computer, tablet, or smartphone
  • Internet connection
  • KRA PIN and password

With those, you are all set to file your Nil return on iTax.

Note: If you have forgotten your iTax login password, click on the Forgot Password button. You’ll get a system-generated prompt to change your password via email. Just make sure you have access to the email you used to register for your KRA PIN.

How to File Returns on iTax: Step-by-Step Process

Follow these steps to file your Nil returns on iTax:

  1. Open your web browser and go to https://itax.kra.go.ke/KRA-Portal/.
  2. Enter your KRA PIN in the provided field and click Continue.
  3. Enter your password in the provided field. Navigate to the Security Stamp option, solve the arithmetic problem, and enter the answer in the provided field. Once everything is correctly filled, click Login.
  4. Once you’re logged in, navigate to Returns.
  5. On the Returns menu, select File Nil Returns.
  6. On the next screen, navigate to Tax Obligation and select the relevant option, e.g, Income Tax Resident Individual. Click Next.
  7. Choose the Return Period From and Return Period To. For example, 01/01/2024 to 31/12/2024. Click Submit.
  8. A system-generated alert appears asking if you’re sure you want to file a Nil Return. Select OK.
  9. That’s all. You have successfully filed your Nil return on iTax. You should see a Return Receipt Generated notification on the screen, along with a link to download the receipt. Click on the Download Return Receipt link.
  10. The receipt will be downloaded to your device. Open it to review.

Benefits of Filing Nil Returns

So, why should you file Nil returns?

Compliance

Filing a Nil return in Kenya is mandatory, as directed by tax laws and regulations. You should file your returns on time to stay compliant. Failure to file these returns will have your account flagged as non-compliant, and you can’t obtain a tax compliance certificate from KRA.

Avoiding Penalties

Failure to file Nil returns on time attracts a Ksh. 2000 penalty or 5% of the tax due. Late filing is also penalized. You should file your Nil returns in the stipulated time, such as on or before the 20th of the following month for monthly returns, or on or before the 30th of June of the following year for annual returns.

Tips and Tricks to File Nil Returns on iTax like a Pro

Here are tips and tricks you should follow for quick, smooth, and error-free filing of Nil returns:

  • The Earlier the Better: Don’t wait until the last minute to file your Nil return. The iTax portal is known to freeze or crash near the deadline due to too much traffic. When you file your returns early enough, the process should take you a few minutes.
  • Save Your iTax Login Password: You can always use the Forgot Password option to reset your iTax login password. However, you’re better off saving your password securely to simplify the process.
  • Always Download the Return Receipt: Please download the e-Return Acknowledgement Receipt and review it to make sure your returns were accurately filed.
  • Use a Desktop Browser: While it’s possible to file your Nil returns on any browser-supported device, including a mobile phone, consider using a desktop. The iTax portal is not fully mobile-friendly, and filing on a wider screen helps avoid errors.
  • Bookmark the iTax KRA Portal Webpage: Add the iTax portal webpage to your favorites for quick and easy access.
  • Select the Correct Dates for the Return Period: KRA will likely reject your return if your details are incorrect. One of these details is the return period. Whether it’s a monthly or annual return, ensure you know the correct dates for the return period.
  • Know your Tax Obligation: Another area where taxpayers make mistakes when filing a Nil return is choosing their tax obligation. Is it income tax? Is it Individual or Non-Individual? Are you a resident or non-resident? Know your tax obligation and select it correctly.
  • Set a Reminder: Life might get so busy and overwhelming that you forget to file your returns on time. Avoid penalties by setting calendar reminders to file your returns.

Final Words

Filing tax returns is a legal obligation for every KRA PIN holder, with or without an income. This post explained how to file Nil returns on iTax and why you need to do it. If you need help filing your tax returns or have other tax advisory needs, chat with us at Gichuri & Partners. We are your trusted partner in tax strategy, compliance, and advisory services.

READ MORE
Annual Tax Return Filing in Kenya

Annual Tax Return Filing in Kenya

Small and Medium Enterprises (SMEs) are arguably the backbone of the Kenyan economy. They contribute a considerable percentage to the country’s GDP through taxes. Furthermore, they drive the economy through employment and innovation.

But what kind of taxes do SMEs pay in Kenya? SME taxes in Kenya are categorized into two primary types: annual and monthly. Currently, the annual tax is company income tax, also known as corporation tax. The rest of the taxes are monthly and they include Pay As You Earn (PAYE), Turnover Tax (TOT), Value Added Tax (VAT), withholding tax, and excise duty.

We will focus on the annual SME taxes in this guide. Keep reading to understand the annual tax return filing in Kenya for small and medium businesses.

Understanding Annual SME Taxation in Kenya (Corporation Tax)

The Income Tax Act of Kenya mandates taxation of a company’s annual profits. This tax is called company income tax or corporation tax. SMEs are legally required to pay corporation tax to the Kenya Revenue Authority at the end of a financial year. The tax rates for the corporation tax are divided into two categories:

  • Resident businesses/companies are taxed at the rate of 30% of annual profits
  • Non-resident (Foreign) businesses/companies are taxed at the rate of 37.5% of annual profits

This tax is payable annually, on or before the 6th month after the end of a tax period. For example, the corporation tax for the January 2024 to December 2024 accounting year is payable between January 1st, 2025, and June 30th, 2025.

Eligibility

Not all SMEs are eligible for the corporation tax. The following are exempt from paying and filing this tax:

  1. Sole proprietorships- The sole proprietor pays income tax under individual income tax.
  2. Export Processing Zones (EPZs).
  3. Partnerships- their income tax is paid through the partnership return.

Penalties for Corporation Tax Non-Compliance

Failure to pay and file the corporation tax returns attracts penalties and interest. These are:

  • Penalty for late filing: 5% of the tax due or Ksh. 20,000, whichever is higher.
  • Interest for late tax payment: 1% of the overdue tax per month, until the debt is cleared.

Annual Tax Return Filing for SMEs: Step-by-Step Process

Here’s the step-by-step guide to filing your annual corporation taxes as an SME:

Step 1: Prepare Relevant Documents

Before you commence the annual tax filing process, make sure you have all the relevant records and documents needed to validate a corporation tax return. These include:

  • Sales and purchase invoices
  • Financial statements
  • Business KRA PIN
  • Payroll records
  • Contracts and agreements
  • Bank statements

Step 2: Log in to the iTax Portal

Corporation tax returns are done online via the iTax portal. Go to the iTax portal on your web browser. Log in to your business account using the KRA PIN and password.

Navigate to Returns and select File Returns.

Select the Type of Tax Return (Non-Individual) and Tax Obligation (Income Tax-Company), and then click Next to go to the following page.

Step 3: Download and Fill the Income Tax Company Return Form (IT2C Form)

Click on the provided link to download the IT2C form onto your computer.

Access the Excel sheet on your computer and enable editing.

Read the instructions carefully before filling out the form.

Fill the Excel return form as required, including return information, bank details, auditor details, profit/surplus/loss details, and paid installments details.

Be careful to avoid errors. If you make errors, you’ll see them under the red-coloured Errors section.  Once all the details are accurately filled, click Validate. The form will be saved as a zip file.

Step 4: Upload the Completed Income Tax Company Return Form

The next step is to upload the completed IT2C form you filled out in the above step. Locate the zip file in your documents and upload it as directed on the portal.

Check the I Agree to the Terms and Conditions box.

Step 5: Submit the Return Form

Click Submit to turn in the form to KRA.

Step 5: Receive Return Acknowledgement Receipt

KRA will receive your annual tax return. The system will autogenerate an acknowledgment receipt. Download the receipt using the provided link.

Step 6: Tax Payment

Click Payment to proceed to the tax payment step. Generate the payslip and make the required payment. Payments can be done through:

  • KRA-endorsed banks
  • MPESA

Note: If the annual tax liability is projected to exceed Ksh. 40,000, you are required to pay the tax in installments, a mode of payment known as Installment Tax on iTax.

What is Installment Tax in Corporation Tax?

As the name suggests, installment tax is corporate tax paid in installments. Instead of paying a lump sum at the end of the tax period, the company/business is required to make partial payments in four equal installments.

These installments are paid in advance, before the business accounts are prepared. Therefore, the installments are based on the estimated profits. But how are the installment taxes calculated? Installment tax is computed in two ways. These are:

  1. Based on the previous year (Prior year basis). Tax payments from the previous year are multiplied by 110%.
  2. Based on estimated profits of the current year (current year basis).

Note: Not all SMEs are eligible to pay installment tax. Sole proprietorships, those whose estimated annual profit is below Ksh. 40,000, and persons subject to the turnover tax (TOT) aren’t eligible for installment tax.

Installment Tax Rates

The installment tax rate is 25% of the profits leading up to the provided payment schedule. The payment schedules are:

  • 20th day of the 4th month
  • 20th day of the 6th month
  • 20th day of the 9th month
  • 20th day of the 12th month

Note: For companies in the Agricultural sector, the installments are paid in two payment schedules, 20th day of the 9th month and 20th day of the 12th month. The first three installments are combined and paid in the 9th month.

Company Income/Corporation Tax Tips for SMEs

Follow these tips to ensure tax compliance and avoid penalties, interests, and other repercussions from KRA as an SME:

  • Understand your tax obligations: SMEs in Kenya have several tax obligations, including annual and monthly taxes. Knowing which taxes you’re expected to pay helps you stay compliant.
  • Maintain accurate records: Lack of accurate records is a recipe for disaster when it comes to taxes. Discrepancies can cast doubts on your taxable income. Ensure your sales and purchase invoices, financial records, bank statements, and payroll records are accurate and transparent.
  • Take advantage of tax incentives and reliefs: Leverage every tax-saving opportunity that is presented to you, either through KRA incentives or reliefs.
  • Respond to KRA queries and audits: KRA may ask queries or request tax audits if your taxes show some discrepancies. Accord them the support they need and provide all required documents and records.
  • Stay up to date with Kenyan tax laws, especially those about SMEs: Keep up with tax changes and new laws pertaining to SMEs.
  • Work with Tax experts: Navigating tax returns and payments for SMEs is not an easy feat. Simple errors can cost you, leading to KRA penalties. Seeking the help of a professional tax consultant saves you time and the headache that comes with annual tax return filing in Kenya.

Simplify Your Annual Income Tax Return Filing

Are you a business owner looking to stay compliant with Kenyan tax laws? At Gichuri & Partners, we simplify your annual income tax return filing to give you peace of mind and help you stay compliant. Our expert team will handle your tax returns so that you can focus on important matters like building your business. We also provide accounting, bookkeeping, payroll management, and audit services to maintain accurate records, which in turn simplifies filing taxes. We are your trusted partner in tax and accounting services!

READ MORE
Privacy Policy

KRA PIN Registration for Foreigners

Hundreds of non-Kenyans are increasingly coming to Kenya for various purposes, including professional and personal. Professionally, foreigners see Kenya as a great destination for employment, business, and investment. Our growing economy attracts a diverse range of talents, including engineers, doctors, architects, tech experts, remote workers, and innovators. Those coming here for business reasons target our rich consumer potential in healthcare, manufacturing, technology, and agriculture.

Kenya also attracts foreign students and young people who come here for educational exchange programs, further studies, and employment opportunities. The other group that comes to Kenya comes for personal reasons, like lifestyle change, tourism, affordable living, and temporary stay. Whatever the reasons for visiting Kenya, non-Kenyans require a KRA PIN for various legal and business activities. These include opening a bank account, tax compliance, property acquisition, and utility services.

 Are you wondering where to start as a foreigner looking to obtain a KRA PIN? This guide explains KRA PIN registration for foreigners, including the requirements and the step-by-step process.

Which Foreigner Needs a KRA PIN?

Not all foreigners coming to or transacting with Kenya require a KRA PIN. Below are examples of non-Kenyans who need a KRA PIN:

  1. Residents
  • Foreign employees residing and working in Kenya
  • Foreign investors
  • Diplomats
  • Refugees
  • Dependants, e.g., Foreigners married to a Kenyan
  • Foreign students
  • Missionaries
  1. Non-Residents: These are mostly foreign investors who reside outside Kenya. They could be investing in a Kenyan business, buying property, or acquiring inheritance, etc.

Importance of KRA PIN to Foreigners

A KRA PIN is a unique identifier code consisting of 11 characters. This code identifies the individual or business as they transact with the Kenya Revenue Authority, government bodies, and service providers. Below are the various benefits of a KRA PIN to a non-Kenyan:

Fulfil Tax Obligations

Whether you are a foreign investor, employee, or entrepreneur, obtaining a KRA PIN is the first step towards tax compliance. The PIN is a legal requirement and helps you fulfill your tax obligations, like PAYE,  income, and turnover tax.

Access Business Services

Non-Kenyans looking to set up a business in Kenya require a KRA PIN for business/company registration, applying for a business permit, applying for government tenders, among other services.

Access Financial Services

Foreigners, from investors to students, require banking services and other financial services. A KRA PIN is needed to open a bank account, apply for loans, among other financial activities.

Import Goods

If you’re a foreign investor looking to import goods to Kenya for business, you need a KRA PIN for importation. This PIN comes in handy when paying excise duty, taxes, etc.

Acquire Property in Kenya

KRA PIN is a requirement for property acquisition, whether it’s land, property, or an apartment.

Access Utility Services

You need a KRA PIN to access utility services like electricity, internet, and water. These services require this PIN to verify your identity and ensure proper billing.

How to Register for a KRA PIN as a Non-Kenyan

Here is the step-by-step KRA PIN registration process for foreigners:

Step 1: Prepare Required Documents

Foreigner KRA PIN registration requires specific documents, and this varies from one type of foreigner to another. For instance, a refugee requires their alien ID and employer’s PIN details, while a foreign investor requires a passport and a letter of introduction from a tax agent. Some of the required documents for the foreigner KRA PIN registration include:

  • National or Alien ID
  • Work permit
  • Employer’s KRA PIN
  • Letter of introduction from employer
  • Business registration documents
  • Letter of introduction from a tax agent
  • KRA PIN of the tax agent
  • Letter of appointment of a tax agent by the applicant
  • Proof of investment
  • Endorsement letter from KenInvest
  • Valid passport
  • Student pass
  • Etc

Do your due diligence to find out the required documents for your specific case and prepare them beforehand.

Step 2: Log in to the iTax Portal

Go to the iTax portal. Click on New PIN Registration.

Step 3: Choose Taxpayer Type and Mode of Registration

Click on Taxpayer Type and select either Individual or Non-Individual. Non-Individual applies to businesses, companies, partnerships, and other foreign legal entities. Go to Mode of Registration and select Online form. Finally, select Yes or No when asked whether you want to register for a PIN with no obligation. Click Next to move to the next page.

Step 4:  Fill in your Basic Information

Select the Non-Kenyan Resident or Non-Kenyan Non-Resident checkboxes under residential details.

Fill out the rest of the form, including the employee’s profession, bank details, and tributary bond details.

Upload the required documents.

Verify every detail is provided on this window, then click Next to go to the following page.

Step 5: Fill in the Obligation Details

Select your tax obligations and fill in the registration dates.

Verify the details and then click Next.

Step 6: Fill in Income Details

Select your sources of income, whether employment, rental income, or business.

Enter the required details like the employer’s PIN and name, business income details, and rental income details.

Verify the details and click Next.

Step 7: Fill in Agent Details (Where Applicable)

Enter the tax and intermediary agent details if they apply to your registration.

Verify the details.

Solve the arithmetic problem and then click Submit.

If you made some errors, you’ll see them under the Error Tab.

Rectify the errors and resubmit.

Step 8: Issuance of KRA PIN Certificate

KRA will review your application. Upon approval, the tax authority will send you a KRA PIN certificate that you can download from your iTax portal. You’ll find your unique KRA PIN on this certificate.

Tips to Ensure a Smooth KRA PIN Registration for Foreigners

Want your non-Kenyan KRA PIN registration process to be quick? Follow these tips:

  • Understand the different foreign categories: Identify the category you fall under before starting the registration process. These categories include non-Kenyan employees residing in Kenya, non-Kenyan investors residing in Kenya, non-Kenyan investors residing outside Kenya, and diplomats. See more details on the KRA website.
  • Do due diligence on all required documents beforehand: You will be required to upload copies of relevant documents like passports, alien ID, and work permits. Find out which documents apply to your foreign category beforehand and prepare them.
  • Hire a tax consultant: Tax consultants have experience and the needed resources to assist foreigners in applying for a KRA PIN. Consider working with one to ease the application process and save time.

Navigating the complexities of KRA PIN registration as a non-Kenyan can be challenging. At Gichuri & Partners, we simplify the process for you. Let our expert team guide you through the process to ensure efficiency and compliance. Contact us to get started!

READ MORE

Enter your details to receive a full quote and consultation

Book Your Appointment

Need immediate assistance? Call us at +254 711 827 149