KRA orders young firms to begin filing returns on iTax

Kenya Revenue Authority (KRA) says it will stop accepting manual tax returns from non-operating companies at the end of this month, urging them to begin filing online returns.

The filing will only be for returns showing no value added tax and pay as you earn (PAYE) payable for year 2014 and, therefore, “nil” returns, an indication that they are not yet in trading despite being registered.

Filers of returns can begin to use the iTax system — the online tax payment and filing system — if they have “nil” returns payable from April.

“ITax enables all taxpayers to access various tax services online. In this regard, all VAT and PAYE NIL filers are advised to file their tax returns due in April 2015 on the iTax system. Therefore, no manual NIL returns will be accepted (from May 1, 2015),” said the notice issued by the office of the Commissioner for Domestic Taxes Alice Owuor.

Tax experts said the notice, published in local dailies, was intended to increase compliance for firms which are not yet in operation and, therefore, had no taxable sales or employees yet.

“This is intended for new companies or those that are yet to start operations even though they are registered. The KRA wants them to ultimately file online because it cuts costs but also improves compliance,” said Stanley Ngundi, a tax manager with audit and advisory firm PKF Kenya.

The KRA has been taking measures to improve compliance. Before the latest step, the authority had shifted to levying withholding VAT of six per cent on businesspeople who supply goods and services to the government.

The figure was partly deliberately kept below the standard 16 per cent VAT so as to reduce the amount of refunds that resulted from such payments.

READ: Suppliers on the spot as KRA re-introduces withholding tax

The withholding tax had been stopped in 2010 due to backlog in refunds. A lot of the supplies to the state qualified for refunds of the VAT paid and the Treasury decided the solution was to remove the tax altogether and leave it for payment only by the individual suppliers who qualified to pay.

However, KRA later noted that without the money being withheld at the point of payment from the government many did not pay the tax as required.

The assumption had been that the supplier would actually pay the VAT of 16 per cent without having it withheld by the government and remitted directly to the KRA.

In the notice last Friday, the KRA said taxpayers needed to update their details in the iTax systems so as to easily gain access in order to file returns after this month.

The authority said it was training taxpayers, noting that it had set up iTax support centres in Nairobi, Mombasa, Kisumu, Nyeri and Eldoret.

The KRA has also partnered with 33 commercial banks to facilitate faster payment of taxes as well as devolved its services to Huduma Centres that were set up last year.