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Corporation Tax Filing Deadline in Kenya: Key Dates and Penalties

January 29, 2025

Introduction

Timely filing of Corporation Tax returns is essential for businesses operating in Kenya to avoid penalties and ensure compliance with tax regulations. The Kenya Revenue Authority (KRA) oversees tax administration in the country, and understanding their guidelines is crucial for effective tax planning and maintaining a good standing with the authority.

Determining the Accounting Period

The accounting period, also known as the financial year, is a 12-month period for which a company prepares its financial statements. Companies can choose their accounting period, but it typically aligns with the calendar year, running from January 1st to December 31st. Selecting an appropriate accounting period is vital as it influences the tax filing deadlines.

Corporation Tax Filing Deadline in Kenya

According to the Kenya Revenue Authority (KRA), all companies operating in Kenya are required to file their Corporation Tax returns within six months after the end of their financial year.

βœ… General Rule: The Corporation Tax return must be filed no later than the sixth month following the end of the company’s financial year.

For example:

  • If your financial year ends on December 31, 2024, the tax return should be filed by June 30, 2025.
  • If your financial year ends on June 30, 2024, the filing deadline is December 31, 2024.

How to File Corporation Tax Returns on iTax

The KRA has implemented the iTax system, an online platform designed to facilitate tax-related processes. To file Corporation Tax returns:

  • Access iTax: Visit the iTax portal and log in with your credentials.
  • Navigate to Returns: Select the 'File Return' option under the 'Returns' menu.
  • Choose the Appropriate Form: For Corporation Tax, select the Income Tax Company Return (IT2C Form).
  • Complete the Form: Enter the required financial details accurately.
  • Submit: Review the information and submit the return.
  • Payment: Generate a payment slip via iTax and make the payment at any KRA-appointed bank

Penalties for Late Filing and Payment of Corporation Tax Returns

Failing to file Corporation Tax returns on time results in penalties as per the Tax Procedures Act, 2015:

πŸ”΄ Late Filing Penalty: The penalty for late filing is 5% of the tax due or Ksh 20,000, whichever is higher.

πŸ”΄ Late Payment Interest: Any unpaid tax accrues interest at 1% per month until fully settled.

For example:

If your company owes Ksh 500,000 in Corporation Tax and fails to file on time:

  • The penalty would be 5% of Ksh 500,000 = Ksh 25,000 (higher than Ksh 20,000).
  • Interest at 1% per month on unpaid tax applies until the amount is cleared.
    πŸ’‘ Tip: Set up reminders and plan your tax filings early to avoid penalties and ensure compliance.

Installment Tax Payments

Installment Tax is paid in advance at four equal installments and is due and payable by the 20th of the 4th, 6th, 9th, and 12th month of a company's accounting period. This system ensures that companies contribute to their tax liability throughout the year, aiding in cash flow management

Balance of Tax Payment

After the accounting period concludes and the actual tax payable is determined, any balance of tax should be paid on or before the last day of the fourth month following the end of the accounting period. For instance, if the accounting period ends on December 31st, the balance of tax is due by April 30th of the following year

Tax Rates Applicable

As previously mentioned, resident companies are taxed at 30%, while non-resident companies are taxed at 37.5%. It's important to note that certain companies, such as those operating in Export Processing Zones (EPZ), may be exempt from Corporation Tax.

Role of Auditors in Tax Filing

Companies are required to have their books of accounts audited before filing their annual return. Audited financial statements provide assurance of accuracy and compliance with accounting standards, which is crucial for the integrity of the tax filing process.

Consequences of Non-Compliance

Non-compliance with tax filing obligations can lead to legal repercussions, including fines and interest charges. Additionally, it can tarnish a company's reputation, potentially affecting its operations and relationships with stakeholders.

Tips for Timely Compliance

  • Maintain Accurate Records: Keep detailed financial records throughout the year.
  • Set Reminders: Use digital calendars to remind you of upcoming deadlines.
  • Seek Professional Assistance: Engage tax professionals to ensure compliance and accuracy.

Frequently Asked Questions (FAQs)

  • What is the penalty for late filing of Corporation Tax returns?

The penalty is 5% of the tax due or Kshs. 20,000, whichever is higher, plus interest of 1% per month on any unpaid tax.

  • Can the accounting period be different from the calendar year?

Yes, companies can choose a different accounting period, but they must notify the Kenya Revenue Authority (KRA) and ensure consistency in their financial reporting.

  • What happens if my company makes no profit? Do I still need to file returns?

Yes, all registered companies must file tax returns even if they made no profit or did not operate during the year. In such cases, a Nil return should be submitted through iTax.

  • How do I make tax payments after filing my Corporation Tax returns?

After filing your returns on iTax, generate a payment slip and make the payment through KRA-designated banks or via mobile money and online banking platforms linked to the KRA system.

  • Can I amend my Corporation Tax return after submission?

Yes, amendments can be made within five years from the date of submission. However, significant adjustments may require KRA approval.

  • Is there an extension for Corporation Tax filing deadlines?

Generally, no extensions are granted. However, in exceptional cases, businesses may request an extension in writing, but approval is at KRA's discretion.

Let Spondoo Kenya Handle Your Corporation Tax Filing!

πŸ“’ Don't Risk Penalties – Let the Experts Handle It!

Understanding and adhering to Corporation Tax filing deadlines is crucial for businesses in Kenya to avoid penalties and interest charges. Companies must file their returns within six months after the financial year ends to comply with KRA regulations.

βœ… Stay compliant and avoid unnecessary penalties!

Need expert help with tax filing? Spondoo Kenya simplifies the process for you!

πŸ‘‰ Get started today: Visit Spondoo Kenya and let our tax professionals handle your returns hassle-free! πŸš€

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Information provided on the site is merely guidance that may change in line with Kenya law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo & Spondoo.ke is a trading name of Accounting SQL Limited, authorised & license accounting firm in the United Kingdom. This trading name is licensed to Spondoo Advisers Limited, an authorised & licensed accounting firm in the Republic of Kenya.
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