11 February 2016
Global Tax Alert
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Kenya enacts
Tax Procedures
Act, 2015
Executive summary
The President of Kenya assented to the new Tax Procedures Act, 2015 (the
Act) on 18 December 2015. A legal notice issued by the Cabinet Secretary for
Finance on 14 January 2016 appointed 19 January 2016 as the date the Act
came into operation.
The Act was enacted for purposes of harmonizing and consolidating procedural
rules for the administration of tax laws in Kenya.
Key provisions in the Act include:
• Tax registration and deregistration
• Appointment of tax representatives and tax agents
• Statute of limitations
• Introduction of public and private rulings for the Income Tax Act
• Collection and recovery of taxes, and priority of tax in liquidation and bankruptcy
• Use of tax overpayments in settlement of other tax obligations
• A reduction of the interest rate for late payment of tax
• Use of information technology to make payments, file taxes, serve notices and
records
• Higher penalties for offenses committed
• Extension of time to pay taxes and file returns
2 Global Tax Alert

Detailed discussion Statute of limitations

The Act has introduced a timeframe for the execution of
This Act essentially, by deletion, amends the provisions of
various duties and responsibilities by the Commissioner and
the Income Tax Act and the Value Added Tax (VAT) Act.
the taxpayer. Some of the notable periods are:
Tax registration and deregistration Duty Under the Act Previous
Under the Act, a person is required to apply for registration Amendment of a tax return 5 years 7 years
as a taxpayer to the Commissioner within 30 days after the in the case of a mistake
person has accrued a tax liability or expects to accrue a tax
Maintenance of records 5 years 7 years
liability under the Income Tax Act or the VAT Act, 2013. The
person is also required to apply for deregistration within a Objection decision to be 60 days Open
similar period (30 days) once the person ceases to meet the made by the Commissioner
registration requirements for the purpose of a tax law. This Issuance of a private ruling 45 days None
provision creates certainty of when a person is supposed to Application for 14 days None
register or deregister for tax purposes. deregistration as a taxpayer

Taxpayer’s tax representative Public and private rulings

The Act has provided different categories of persons who
may act as tax representatives for another person. Further,
the Act provides that the tax representative of a taxpayer
will be responsible for performing any duty or obligation
imposed by a tax law on the taxpayer, including the
submission of returns and the payment of tax. This is a good
measure to facilitate compliance with tax laws especially for
nonresident taxpayers who do not have a physical presence
in Kenya. However, the tax representative faces significant
tax exposure for non-compliance by his/her principal.
Lifting of corporate veil
The Act also provides for personal liability of officers and
staff of a company.
A public ruling issued by the Commissioner will be binding on
him until it is withdrawn. The public ruling shall be published
in at least two newspapers with nationwide circulation. The
public ruling is not binding on the taxpayer.
A taxpayer may apply for a private ruling to the
Commissioner in writing. The Commissioner should revert
back to the applicant within 45 days. A private ruling
shall not be binding on a taxpayer. Where there is any
inconsistency between a public ruling which is in existence
and private ruling, the private ruling shall supersede. This
provision allows taxpayers to obtain an interpretation
of ambiguous provisions from the Commissioner; it was
previously only available under the VAT Act of 2013.

Tax agent Information technology

The Act has introduced the use of information technology
The Act provides for the licensing of tax agents and the
to lodge a tax return, application, notice, statement or other
persons who would qualify to be licensed. The provision will
document. Taxpayers can now use computer systems, mobile
promote accountability on the part of the tax agent.
electronic devices, electronic and mobile communication
systems to submit tax returns and pay taxes.
 Global Tax Alert 3

Powers of authorized Kenya Revenue Authority (KRA) officials

Under the Act, KRA officials have various powers among them; rights, privileges and protection of a police officer, power to
prosecute a person accused of committing an offense under a tax law subject to the direction of the Director of Public Prosecutions
and power to compound offenses.
In addition, authorized officers have powers to write directly to the Land Registry in relation to a land or building owned by a
taxpayer for the land or the building to be the subject of a security if the tax payer has failed to pay tax under any tax law.

Offenses and penalties

Below are some of the offenses and penalties stipulated in the Act:

Offense Penalty
Person liable to tax for failing to register for taxes KES100,000 (approx. US$978) per month subject to a
maximum of KES1 million (approx. US$9,785)
Failure to keep documents KES100,000 or 10% of the amount of tax payable to which
the document relates to
Late submission of tax return on account of employment The higher of 25% of the tax due or 10,000
income (approx. US$97.85)
Late submission of tax return on account of Turnover tax KES5,000 (approx. US$49)
Late submission of tax return (individuals and corporates) The higher of 5% of the tax due or KES20,000
(approx. US$196)
Failure to comply with electronic tax systems KES100,000
Tax Avoidance Double the amount of tax
Tax Avoidance Two times the amount of the claim

Late payment interest

The late payment interest rate for taxes due has been reduced from 2% to 1% per month. Further, the computation of interest
has been changed from compounded interest to simple interest. This will greatly reduce the burden on the taxpayer especially
under the VAT Act 2013.

Remission of penalties
The Act provides for remission of penalties by the Commissioner, upon approval by the Treasury Cabinet Secretary, with the
exception of penalties imposed due to tax avoidance. Such a remission can be through the Commissioners own motion, or
through application by a taxpayer. The Act is however silent on whether the remission extends to any interest levied following
any aspect for non-compliance.

Extension of time to pay tax or submit a tax return

The Act provides that a person may apply in writing to the Commissioner for an extension of time to pay taxes or submit a tax
return. The application may be granted where the Commissioner is satisfied that there is a reasonable cause and shall notify the
taxpayer in writing. This provision aligns the Income Tax Act to the VAT Act provisions in regards to submission of tax returns.
4 Global Tax Alert

For additional information with respect to this Alert, please contact the following:

Ernst & Young Kenya, Nairobi

• Geoffrey Karuu +254 20 271 5300 geoffrey.g.karuu@ke.ey.com
• Catherine Mbogo +254 20 271 5300 catherine.mbogo@ke.ey.com
• Francis Kamau +254 20 271 5300 francis.kamau@ke.ey.com
• Jemimah Mugo +254 20 271 5300 jemimah.mugo@ke.ey.com

Ernst & Young Advisory Services (Pty) Ltd., Johannesburg

• Justin Liebenberg +27 11 772 3907 justin.liebenberg@za.ey.com

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
• Leon Steenkamp +44 20 7951 1976 lsteenkamp@uk.ey.com
• Gonçalo Dorotea Cevada +44 20 7951 2162 gcevada@uk.ey.com

Ernst & Young LLP, Pan African Tax Desk, New York
• Dele A. Olaogun +1 212 773 2546 dele.olaogun@ey.com
• Jacob Shipalane +1 212 773 2587 jacob.shipalane1@ey.com
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