t is that time of the year when every Kenyan who has a Kenya Revenue Authority PIN or personal identification number, is required to file tax returns. This applies to all citizens, even those who have ‘nil returns,’ meaning they fall below the taxable amount bracket.
If you have a side gig, you are, under the law, supposed to file returns on the side business, even if you have filed your employment returns. Even those employed by agencies which do not deduct tax, still have an obligation to declare their income.
Penalties for not filing returns
The deadline for filing returns is usually 30th June. If you do not meet the deadline, you may end up paying a Ksh10,000 penalty at the minimum. Employers who do not submit returns will either pay 5% of the due tax amount or Ksh20,000, whichever is higher.
Where an employer or business is guilty of deliberately trying to evade the system, or submitting late payment of the taxes, they could face much larger fines and penalties.
For a business, whether those in entrepreneurship or start-ups, in order for you to get a government tender, you must have a valid tax clearance certificate showing that you do not owe the taxman any money. Without a PIN certificate, you could lose out on an opportunity for wealth creation and success because most organizations will not work with companies that do not have it.
The process of filing the returns
Gone are the days of lining up at the Kenya Revenue Authority offices to file returns. Many people will tell you that they would literally line up the whole day before they were able to complete the process.
Nowadays, thanks to technology, filing returns is very easy. By simply logging on to the iTax system, you can complete the process in less than 15 minutes. All you need to do is make sure you have all the relevant documents, as you will need this to input your information into the system.
If you are in employment, you will get a P9 form from your employer. For those who are self-employed, you need your profit and loss statement. If you are an individual or a student who already has a PIN, but is not earning any money, you will need to file nil returns.
Now log onto your account in iTax and click on the Returns Menu. On the drop-down click the file return and if you are filing a nil return choose that alternative.
If you have returns to file, click on the file returns option, it will redirect you to another page where you should click the tax-resident individual option. Download the excel sheet and fill in the relevant data. The excel sheet will do all the necessary computations, including what you owe the Kenya Revenue Authority.
You also have complete control of your account and have your records easily accessible anytime you need them.
Be very vigilant when you are filling in the details in your tax returns because an error on the form will make your submission useless. You, however, have the option of using The File Amended Return option to correct any errors on your return.
When you confirm that all the information is correct, click on validate and then zip the file before uploading on the system. State whether the return is modified or original as well as the return interval.
Once you submit your returns, KRA sends an acknowledgment email.
Filing VAT returns
You need your Z report from your ETR machine as well as any items you may have purchased that have VAT including branding or equipment.
Log onto the system, click on Returns Menu, choose the File Returns option, click on VAT and download the excel sheet. Input the necessary information using the Z report and your expense sheet, validate and generate the zip file and save it on your computer.
On the system, log in your company credentials, click on Returns, File Returns, and then click the VAT option, fill in the necessary blanks, and then upload the zipped file. Accept the terms and conditions by ticking the box and submit your form.
KRA will send you an acknowledgment email.
You will get a payment slip that you need to fill in highlighting your payment methods, and your receiving bank. Once you submit the necessary information, you’ll get a registration number and sleep for your payments. Use this at the bank when making your payment and make sure that you get a receipt as proof of payment.
Advantages of using the iTax system
The system has simplified the whole process of tax collection. For the end user, you can use the system from anywhere as long as you have access to the internet, thereby saving you a lot of time. You also have complete control of your account and have your records easily accessible anytime you need them.
Best of all, you do not have to deal with tonnes of paperwork as was the case previously. The process is simple to use, without needing to hire the services of an accountant or a broker to do it for you.
Do not wait until the last minute to make your returns, because the system does tend to go down where there is high traffic and many people complain that they’re not able to access the site. If the returns are less than Ksh70,000, you can always use the M-Pesa bill number 572572 to make the payments.