A voluntary, proactive review of your books before KRA finds the gaps. Learn what a tax health check entails, how it differs from a KRA audit, and how Gichuri & Partners helps you mitigate risks early. Do you know why candidates do mock exams before the final national exam? Or why our mothers asked us to clean the house and everything in it before the community arrived for thorough cleaning?
Better yet, why are you advised to brush and floss your teeth thoroughly before a dental checkup? All three of these have one thing in common: they straighten up your internal affairs and preparedness before an external force or authority comes into action.
That’s what a tax health check or compliance review does. Don’t wait for a KRA tax audit to catch you off guard. Once that audit notice lands in your inbox or on your desk, whatever happens next is out of your hands. It becomes a KRA review: their timeline, their questions, and their conclusions.
A tax health check streamlines your books, tax affairs, and other relevant records when the power is still in your hands. It’s voluntary, confidential, and in your best interest. It identifies gaps, errors, and tax exposure before KRA arrives. That way, you have enough time to fix them and avoid tax non-compliance.
What is a Tax Health Check?
A tax health check is a structured review of your business’s books, financial records, tax filings, and accounting systems. Its goal is to identify risks before they become a tax liability. Tax health checks are voluntary and are usually initiated by the business owner, a company, a chief executive officer (CEO), a chief financial officer (CFO), or another relevant financial leader.
It’s similar to a regular health check you do to ensure your vitals are working smoothly and to detect disease risks early, rather than waiting until you have an emergency and need to go to hospital. During a tax health check, we examine how your business handles the major tax obligations. These include:
- Value Added Tax (VAT)
- Withholding Tax (WHT)
- Pay As You Earn (PAYE)
- Corporation Tax
- Customs and Excise Duty, if applicable.
The goal of a tax health check is not to tick all the above boxes but to identify and mitigate risks while there is still time. Most businesses conduct a tax health check ahead of a funding round, ownership changes, or leadership changes. Additionally, it is also done as part of the annual financial maintenance.
What is a Compliance Review?
What’s the major difference between a tax health check and a compliance review? A compliance review is narrower, while a tax health check is broader. A compliance review checks whether your business is meeting specific tax obligations. Some of the questions a compliance review answers include:
- Are your tax filings accurate?
- Are they filed on time/your deadlines met?
- Are your tax systems like eTIMS correctly integrated into your business model?
- Are your declared taxes correct?
As the name suggests, it’s all about statutory compliance. Have you complied with VAT, PAYE, and income tax regulations? Is your eTIMS invoicing compliant with KRA expectations? Do you deduct statutory deductions like SHIF, NSSF, and Affordable Housing Levy as required? Therefore, a compliance review determines whether you are meeting your day-to-day tax obligations, while a tax health check digs deeper to uncover historical tax exposure that could jeopardize your tax position over time.
Tax Health Check vs. KRA Tax Audit: The Key Differences
Both tax health checks and KRA audits review your tax records and books. So what’s the difference? The table below highlights the key differences between a tax health check and a KRA audit.
| Key Factors | Tax Health Check | KRA Audit |
| Who initiates it | The business owner, CEO, CFO, and relevant financial head. | KRA |
| Requirement | Voluntary | Mandatory |
| Purpose | To identify and fix risks before KRA does | To assess the accuracy of filed returns and financial records to verify compliance |
| Confidentiality | Internal and confidential | While they are formal and confidential, KRA is an active party |
| Timing | Can be conducted any time on your schedule | Reactive and random- KRA audits are often triggered after returns are filed and flagged |
| Outcome | Remediation plans to mitigate risks
There is room for self-correction |
Additional tax assessments, penalties, interest, or a tax dispute. |
This distinction matters because KRA favors voluntary disclosure more than discovering gaps on its own. If you can identify and fix errors in your tax and financial records, you’ll have an easy time explaining it to KRA. Therefore, a tax health check can prevent a routine KRA audit from becoming a tax dispute.
Why a Tax Health Check Matters
A tax health check offers many benefits to your business. These include:
- It catches errors before KRA does: You are able to identify gaps and errors in your financial and tax records, fix them, or use them to negotiate with KRA from a point of good faith.
- Reduces your risk in the event KRA conducts an audit: You’re well prepared when KRA conducts a tax audit because you already know the weak areas and have probably fixed them already.
- Helps build stronger internal controls: Tax health checks don’t only help with your tax affairs. When you identify gaps in your books and financial records, you instruct your team to do better moving forward.
- Helps boost your confidence: As a business owner, CEO, or CFO, you speak in board meetings with more confidence knowing your tax and financial affairs are in order. Whether it’s fundraising, leadership changes, or licence renewal, you move differently when your tax position is verified.
What We Do| Our Tax Health Check & Compliance Review Process
Our tax health check & compliance review process entails the following:
Strategic Session/Scoping Call
We schedule a strategy meeting where we define the goals, tax periods to be reviewed, and the tax heads that matter the most for your business.
Document and Systems Review
We examine all the relevant tax and financial documents to have a clear picture of your tax position. These include ledgers, eTIMS records, filed returns, and payroll data.
Data Reconciliation
We reconcile the following data:
- Payroll data against your PAYE returns
- Sales against your VAT returns
- Withholding tax certificates against actual remittances
- Other relevant checks.
This compares internal data with provided regulatory filings and digital data to ensure accuracy, consistency, and compliance.
Risk Assessment
Where issues are found, we estimate the potential risk. What kind of tax exposure are you dealing with? What is at stake? With this knowledge, you’ll know what to do to remedy the situation.
Preparing a Report
We write a clear report of our comprehensive tax health check, including:
- An overview of your business’s overall tax compliance, status, major risk areas, and tax exposure points.
- The specific tax heads reviewed.
- Findings and related risk analysis.
- Potential liabilities, including back taxes, penalties, and interest charges your business might face if KRA conducts an audit.
- Unutilized tax-saving opportunities.
Actionable Recommendations
Based on our findings and expertise, we suggest practical steps to rectify errors, improve internal controls, and optimize tax planning moving forward. We also support you through voluntary disclosure to KRA if you decide to do so.
Why Choose Gichuri & Partners For Your Tax Health Check
Gichuri & Partners is your reliable consultant on everything tax, including tax planning, tax filing, tax assessments, dispute resolution, and tax health checks. Here’s why clients across Kenya choose us for their tax compliance needs:
CPA-ICPAK Certified
We are a team of certified public accountants registered with the Institute of Certified Public Accountants in Kenya (ICPAK). Our work meets the ethical and professional standards required of statutory auditors. Moreover, all our experts are certified and registered KRA tax agents with the qualifications to undertake professional tax services.
Experience
It doesn’t get any better than having hands-on experience. We’ve been in the tax industry for over a decade, during which we’ve handled client work in tax health checks, compliance reviews, KRA audits, and tax dispute resolution. Our health checks are designed to examine what KRA looks for, not a generic checklist.
Confidentiality Guaranteed
A tax health check is an internal affair and remains so until you decide otherwise. What we find out during the review remains between you and our team. If you are looking for a tax firm that preserves the dignity and confidentiality of your financial data, choose us.
Practical Output
Our work doesn’t end when we hand in the report. We help you develop an actionable remediation plan that improves your tax position and prevents potential tax disputes with KRA.
Who Needs Our Tax Health Check Services?
Still on the fence about whether you need a tax health check or not? See who benefits from our tax health check services in Kenya below:
- SMEs Preparing for Growth: If you are a small or medium-sized business getting ready for a funding round, a new investor, ownership, or leadership changes, you need an in-depth tax review and due diligence.
- NGOs and Non-Profits: Most donors require detailed tax reports and independent compliance assurance as a condition for funding.
- Companies with an incoming new finance lead: A tax health check gives the incoming CEO or CFO a clean slate. Moving forward with unresolved issues and assumptions may make their work harder along the way.
- Businesses that have never been audited by KRA: This is the group with the highest risk because if there are issues, they remain undiscovered and accumulate over time.
- Businesses that have received informal signals from KRA: It’s not hard to suspect when you’re on KRA’s radar as a business or individual taxpayer. Before an audit or assessment notice, KRA sends soft signals like email reminders, unexpected SMS, auto-generated system queries, and unexplained iTax portal limitations. If you’ve noticed such on your profile, it may be time for an internal tax health check before KRA comes to you guns blazing.
Find Tax Risks Before They Become Costly
A tax health check or compliance review catches errors, tax risks, and exposure points when you still have the power to remedy your affairs. Don’t wait until KRA issues an audit notice because by then, things will go according to their rules.
Act when the ball is still in your court. Let us help you have an independent and confidential look at your books, tax records, and relevant documents to secure your tax position. And if we identify risks, we will help you remedy the situation before it escalates into a tax dispute. Ready to get started? Talk to one of our tax health check experts today!
