- Kenya has extended its tax amnesty period by six months, starting from 27 December 2024.
- The tax amnesty program was initially offered up to 30 June 2024 and covered historical tax periods up to 31 December 2022. The law has increased the covered tax period up to 31 December 2023.
- The tax amnesty provides for waiver of penalties and interest for taxpayers who have already paid the principal tax and those who will have settled the principal tax by 30 June 2025.
Executive summary
Kenya assented into law the Tax Procedures (Amendment) Bill, 2024 on 11 December 2024 and the bill became effective on 27 December 2024. The resulting Tax Procedures (Amendment) Act, 2024 (the Act) extended the tax amnesty that was introduced by the Finance Act, 2023 for a period of six months until 30 June 2025.
Additionally, the Act extended the coverage from 31 December 2022 to 31 December 2023. The tax amnesty provides a waiver of penalties and interest if a taxpayer has settled the principal tax or subsequently settle the principal tax by 30 June 2025.
Detailed discussion
Background
In September 2023, the Finance Act 2023 introduced a tax amnesty initiative to encourage taxpayers to clear their historical tax gaps and enjoy an amnesty on related penalties and interest.
The tax amnesty was applicable to taxpayers who had paid the principal tax before 31 December 2022. All taxpayers who had not paid the principal tax before 31 December 2022 were required to apply to the Kenya Revenue Authority (KRA) for an amnesty of interest and penalties on the unpaid tax and propose a payment plan for the outstanding amount.
The tax amnesty was:
- Only applicable on interest and penalties on the unpaid tax that had accrued up to 31 December 2022
- Only granted if the person paid the outstanding principal tax by 30 June 2024
The initiative enabled taxpayers to make voluntary disclosure of unpaid taxes, apply for a payment plan and enjoy waiver of the related penalties and interest. There were concerns, however, that the period provided was not sufficient to enable taxpayers make all declarations and pay the principal tax by the due date.
Highlights of tax amnesty extension
The tax amnesty automatically applies on penalties and interest if a person had paid all the principal tax by 31 December 2023.
If by 31 December 2023 the principal tax was not paid, a person may apply to the KRA for the tax amnesty and propose a payment plan. The tax amnesty shall only be granted once the person has met the following conditions:
- Applies for tax amnesty
- Pays all outstanding principal taxes by 30 June 2025
- Does not incur a further tax debt
- Gives a written undertaking for settlement of the outstanding taxes owed
Principal tax that remains unpaid on 30 June 2025 will attract applicable penalties and interest.
Implications
The extension of the amnesty initiative until 30 June 2025 provides another opportunity for businesses and taxpayers to rectify discrepancies or errors in their tax records and mitigate liability for late payment penalties and interest.