Frequently Asked Tax Questions

Frequently Asked Tax Questions….

1. I registered my business. Is it mandatory to register for VAT? Registration for Value Added Tax obligation is not mandatory for all businesses. You should register for VAT obligation when your annual turnover is in excess of Kes 5,000,000 per annum. However, voluntary registration is allowed for businesses below Kes 5,000,000 per annum.
2. I have not been operating since I registered my business. Are tax returns still applicable? Yes, tax returns are applicable as soon as you register for the tax obligation, even if you are not operating. Failure to file nil returns will lead to huge penalties and fines.
3. How do I file a Tax return? You can now file tax returns online on KRA iTax portal. Click this link https://itax.kra.go.ke/KRA-Portal/ to log in and access your account.
4. How are payments made on iTax? You can make payments by first generating a payment registration number (PRN) on iTax, and then proceed to pay via cheque or RTGS. The PRN helps to link the payment to the tax obligation being settled.
5. What is a presumptive tax? Presumptive tax is a tax payable by a business person whose annual turnover does not exceed Kes 5,000,000. The presumptive tax replaced the turnover tax. Presumptive tax is a final tax and is levied at the rate of 15% of the amount payable for business permit or trade license issued by the county government.
6. How can I reverse VAT if I have already made the payment? If Tax Invoice was raised in error, you can raise a credit note within 6 months of the original invoice date. This allows you to offset the VAT with the following month’s output VAT. If the 6 months have elapsed, you can claim a VAT refund from KRA within 12 months. If the VAT relates to bad debts, you can apply for a refund within 3 – 5 years from the date of supply.
7. What is installment tax? This is an estimated income tax paid periodically through out the year. A projection of the tax payable is done at the beginning of the year based previous year’s tax payments or current year’s estimated profit and tax thereon. For individual taxpayers whose tax liability is not fully covered by PAYE, and exceeds Ksh 40,000 for any year, installment tax is payable. The due dates are: 20th of the 4th month, 6th month, 9th month and 12th month.
8. What are the tax obligations under rental income? Rental income is categorized into 2: Commercial rental income is subject to VAT and Income tax on the gain/profit. Residential rental income is subject to 10% rental income tax on gross rent. This is payable monthly by 20th of the following month. Landlords who would wish to remain in the previous regime can do so by applying to the commissioner.
9. How can Optima Accounting Services help? Our qualified and experienced consultants will work with you to achieve tax compliance in the dynamic Kenyan tax environment. Specifically, we can assist in various KRA related matters such as Tax Computation & Tax Returns (PAYE, VAT, Withholding Tax, Income Tax, and Rental Income Tax), Tax Compliance Audits, Tax Planning, Tax Refunds, Tax Compliance Certificates application & follow-up, among others.

Get in touch with us on info@optima-accounting.co.ke or call 0700 053980.