Are you living and working in Kenya? Do you own a business, are self-employed or earn an income for giving services or the sale of products? Do you earn rental income every month? If your answer to any of these questions is yes, then you are obliged to pay tax.
Individuals (residents or non-residents) and companies are entitled to Pay-as-you-earn (PAYE) income tax. Once you have complied in paying your taxes, you should file your tax returns. This exercise is done for a particular year of income and should be completed between January 1 - and June 30 of the following year. For instance, for the tax period 01/01/2022 - 31/12/2022, returns should be filed on or before June 30, 2023.
For companies, this period varies depending on their financial year. If a company’s accounting period starts January 1 - December 31, it should file its returns on or before June 30 of the following year.
For years now, the Kenya Revenue Authority (KRA) has an online tax return platform (iTax) which has simplified the process.
If an individual or company fails to file returns in the required time they attract a penalty for late filing:
Whether you are employed, self-employed, doing business or you recently worked and earned a salary, this is the time to file your tax returns and evade unnecessary penalties from the taxman.
This article explores income tax returns and how you can file them. But first, let's understand what tax returns mean, and the steps in filing individual or company returns.
Tax returns refer to a declaration of income earned by an individual, business or company within a particular financial period. This statement is used by tax authorities to assess liability for tax.
Whether you are employed, self-employed or unemployed you should file your tax returns, as long as you have a KRA PIN number which every individual above the age of 18 should have.
Individual income taxes are filed depending on whether you have an employment income, or other sources of income.
For employment income only, the following steps are useful;
You will be required to enter the password, solve the arithmetic to log in. Request a new password under the forgot password statement below the login tab if you have forgotten your password and follow the prompts.
Enter the return period, select tax obligation (Resident or Non-Resident Individual), check the ‘yes’ box to show you are employed and click next.
Fill in your defined pension for the year and personal relief according to the P9 form. Validate to get the tax due, submit and download the return acknowledgement certificate.
Nil returns are filed by individuals with KRA PIN but are not employed or do not have tax data for the return period under review.
For instance, if you do not have tax information for the tax period starting January 1 to December 31, 2021, you will be required to file Nil returns. Note that failure to do so will also attract a penalty.
Note, if you have any tax deducted even for one, two or three months, the iTax system will not generate the nil returns computations.
Company returns are filed after a company or business pays Corporation Tax, PAYE, Value Added Tax (VAT), Withholding Tax, or Digital Tax.
Company returns should be filed on or before the sixth month after the end of an accounting period.
These returns are filed under the Income Tax Company Returns (IT2C) form available on iTax.
A tax refund is the reimbursement of excess tax paid within a given tax period. Taxpayers eligible for a tax refund include life or education insurance policyholders, mortgage facility homeowners, persons living with disability holding exemption certificates, taxpayers who pay withholding tax in excess of final liability and those who pay tax in error.
You will need a P9 form for claims related to excess PAYE tax or a insurance policy certificate, mortgage certificate, and withholding tax certificate.
To apply for a refund, follow the following steps;
Sometimes when filing tax returns, you could make errors by entering wrong values in the sheet. This results in the wrong tax computation that you submit without noticing. To correct this, you should make corrections and file amended returns.
Paying tax is an individual obligation to grow and develop the country’s economy. Filing returns help the tax department in determining accountability and improving national revenue allocation. When you file your tax returns it means you are a responsible person.
If you file within early, you could avoid unnecessary penalties for late filing. Note that the deadline is June 30, 2023. Avoid last minute filing, sometimes the system may be overloaded and delay your filing earning you a very avoidable penalty.