Avoid last-minute rush to gain from tax amnesty window

Taxpayers must arrange their finances quickly so that they can pay all their principal taxes for up to December 31, 2022. PHOTO | SHUTTERSTOCK

Kenyans are accused of being last-minute. I hope that this will not be the case with the tax amnesty programme.

The programme which was introduced through Finance Act, 2023 has a short window considering that the end date is 30 June 2024. You may think that there is enough time for taxpayers to examine their tax affairs, apply for a waiver of penalties and interest, negotiate for payment plans with the Kenya Revenue Authority (KRA) and pay outstanding principal tax but this is not the case.

Taxpayers have a noticeably fleeting time to enjoy the benefits of the programme. The Christmas mood is slowly getting in and soon November and December will be gone leaving taxpayers with a lazy January and a short five months to seriously consider whether they will take advantage of the waiver.

Even then, Kenyans in their usual fashion might be tempted to wait until the last month, June 2024 to start looking for their tax consultants and KRA contacts.

So, what do you need to do? There are three things that taxpayers must do now. First, it is important to understand who qualifies for the programme.

The programme is meant to allow taxpayers with principal tax liabilities for periods up to December 31, 2022 to pay the principal tax and apply for a 100 percent waiver of the corresponding penalties and interest.

Secondly, taxpayers must quickly review their tax compliance for the period covered by the tax amnesty program. This means going back to all those historic tax issues that you may have ignored, coming clean to self-declare, paying the principal tax and applying for waiver of penalties and interest.

The tax health check, if done well, will either confirm that the business is tax-compliant or expose potential tax liabilities that can be mitigated through the tax amnesty programme. Unfortunately, a tax health check takes a lot of time.

It is therefore important to start the process now.

Thirdly, taxpayers must arrange their finances quickly so that they can pay all their principal taxes for up to 31 December 2022 and not disrupt their cash flow needs for their businesses. This could mean anything from taking a loan, asking for grants, making painful decisions to preserve cash, among others.

All these require time, so leaving it to the last minute to identify the principal tax and pay by 30 June 2024 may not work.

Going forward, taxpayers must commit to a higher standard of tax compliance. The tax climate in Kenya keeps on changing and the penalties for non-compliance could be the final straw that breaks the camel’s back.

In the current tough business environment with dwindling revenues, you want to have other problems to deal with, not tax. This is more important because KRA’s power to abandon tax has been taken away by the same Finance Act, 2023 that gives taxpayers up to 30 June 2024 to enjoy the tax amnesty.

This means that after June 30, 2024, the taxpayer will be forced to pay all the principal taxes and 100% of the penalties and interest.

Mr Kanyi is a Partner at Cliffe Dekker Hofmeyr (incorporating Kieti Law LLP)