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.
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.
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.
β General Rule: The Corporation Tax return must be filed no later than the sixth month following the end of the companyβs financial year.
Failing to file Corporation Tax returns on time results in penalties as per the Tax Procedures Act, 2015:
π΄ Late Filing Penalty: The penalty for late filing is 5% of the tax due or Ksh 20,000, whichever is higher.
π΄ 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:
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
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
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.
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.
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.
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.
Yes, companies can choose a different accounting period, but they must notify the Kenya Revenue Authority (KRA) and ensure consistency in their financial reporting.
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.
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.
Yes, amendments can be made within five years from the date of submission. However, significant adjustments may require KRA approval.
Generally, no extensions are granted. However, in exceptional cases, businesses may request an extension in writing, but approval is at KRA's discretion.
π’ Don't Risk Penalties β 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.
β Stay compliant and avoid unnecessary penalties!
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