Taxpayers that dispute tax demands will have seven days to file a notice of objection even as the Finance Bill 2024 gives the Kenya Revenue Authority (KRA) more time to respond.
Should lawmakers approve the Finance Bill, 2024, the KRA will have 90 days to respond to an objection lodged by the taxpayer against a tax decision, up from the current 60 days.
The Finance Bill, 2024, which sets forward the revenue-raising plan for the next fiscal year starting July, was tabled in the National Assembly by the Cabinet Secretary for National Treasury Njuguna Ndung’u.
In the proposed changes, KRA will reject a taxpayer’s notice of objection against a tax decision, either for lacking relevant information or not being lodged within the legally stipulated time frame of seven days.
“Section 51 of the Tax Procedures Act is amended—in subsection (4A), by deleting the words ‘the Commissioner may make an objection decision within sixty days after the date on which the notice of objection was lodged’ and substituting therefor the new words “the objection shall be deemed disallowed,” reads the Finance Bill.
Should the National Assembly approve the amendment it will pile pressure on taxpayers with a dispute with the taxman to quickly put together a water-tight notice of objection against a tax decision.
Section (4A) of the Tax Procedures Act gives the KRA Commissioner 60 days to reject, through writing, a notice of objection by a taxpayer that either lacks some information or was lodged outside of the stipulated time frame.
Seven Seas Technologies, headed by businessman Micheal Macharia, is one of the companies that lost a case against the KRA after it failed to provide additional documents to ward off the taxman’s demand relating to pay-as-you-earn (PAYE) and withholding taxes.
After the taxpayer lodges a notice of objection against a tax decision, the KRA Commissioner is expected to get back within 14 days of receiving the notice, informing the taxpayer in writing that the objection has not been validly lodged.
The taxpayer is then expected to submit the information specified in the notice within seven days after the date of the notice. After these seven days, the KRA Commissioner has another 60 days to either reject or accept the objection by the taxpayer.
The fresh changes propose to get rid of the 60 days, which means should the taxpayer not properly lodge his notice of objection within a week, the objection will be deemed to have been disallowed.
Meanwhile, the Bill proposes to amend the same law to give the KRA Commissioner more time to issue craft and issue its own notice of objection against the taxpayers.
“Section 51 of the Tax Procedures Act is amended… in subsection (11), by deleting the words “sixty days” and substituting therefore the words “ninety days,” reads the Bill.
As part of its functions of collecting revenue, the KRA undertakes an audit of tax compliance on a taxpayer over a given period after which they can raise an assessment demanding a certain amount of tax payments.
Before proceeding to the Tax Appeals Tribunal, the taxpayer can dispute the tax decision by first lodging against the decision within 30 days of being notified by the KRA.
A notice of objection is validly lodged when it states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments.
In relation to an objection to a tax assessment, the objection is valid if the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section.
Moreover, the taxpayer has to submit all the relevant documents relating to the objection.
In a bid to help it collect more taxes, the government has been proposing changes aimed at making the KRA more powerful.
Last year, lawmakers rejected a proposal to have the taxpayers deposit 20 percent of disputed tax amounts for cases filed at the Tax Appeals Tribunal even as analysts argued the provision was going to limit access to justice and reduce the working capital of business entities.
In the latest proposed changes, the National Treasury wants the KRA to have unfettered access to taxpayer’s data, including bank accounts and M-Pesa transactions.
Using this information, the KRA can then issue an assessment to a taxpayer for non-payment of taxes.
