EASTERN BRANCH ANNUAL TAX WORKSHOP SESSION :Tax compliance. Presentation by: CPA Faustin Mwinzi Thursday, 11 th NOV Uphold public interest

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1 EASTERN BRANCH ANNUAL TAX WORKSHOP SESSION :Tax compliance Presentation by: CPA Faustin Mwinzi Thursday, 11 th NOV 2018 Uphold public interest

2 Featured areas Tax procedures act, Tax appeals tribunal & alternative dispute resolution

3 Introduction The Tax Procedure Act, 2015 came into operation on 19 January enacted for purposes of harmonizing and consolidating procedural rules for the administration of tax laws in Kenya. Some minor amendments have since been made

4 focus Registration of tax payers Personal representatives Tax agents Assessments Tax appeals and ADR Tax penalties

5 Registration and deregistration Who is required to register? A person who has accrued or expects to accrue a tax liability Expects to manufacture or supply excisable goods Expects to supply excisable services

6 Registration cont Registration within 30 days Deregistration to be done within 30days Commissioner to respond within 14 days denying de-registration If Commissioner fails to respond deregistration effective after 6 months

7 Changes affecting registration Should be done within 30 days Place of business, change of trading name, registered address Shareholders with more than 10% or more of the issued share capital Nominee ownerships to disclose the beneficial owner Trustees beneficiaries Cessation or sale of business

8 Tax representatives A legal representative of an Individual under legal disability; Chief Executive Officers, Managing directors, Company secretary, treasurer, trustee or a resident director or similar officer acting in such a capacity; Accounting officers for govt entities; A partner or a manager of a partnership

9 Duties of personal representative performing any duty or obligations of the tax payer as required under the Act including filing of returns

10 Liability of tax rep Each representative shall be liable only for tax appointed for Previously all representatives of a person were jointly liable for all taxes

11 Tax agents THE TAX PROCEDURES (TAX AGENTS) REGULATIONS, 2018 Qualifying persons Members of ICPAK Advocates of the high court A former tax administrator with +10yrs expr A qualifying person must register with the commissioner and pay 20K Reg of partnership permissible

12 Tax agents roles prepare and submit tax returns on behalf of a taxpayer; liaise with KRA on behalf of a taxpayer on matters relating to tax; advise and represent a taxpayer before the Commissioner or the Tribunal -TAT deal with any other matters on behalf of a taxpayer.

13 Conduct of a tax agent 1. Professionalism 2. Maintain register with; the names of all the clients the date of engagement by each client; the physical, postal addresses and any other contact details of each client; information on nature of the business that each client is engaged in; Record of all tax payable and due dates for all clients

14 Cancellation of license Ceasation of business as an agent? Notify the commissioner 7 days prior The commissioner will cancel the license if; Willful falsification of returns or Ceases to satisfy registration requirements

15 Tax quacks Its an offence to; Register an agent fraudulently Procure registration fraudulently Operate as an agent without being registered Fine 200K or 10 years imprisonment or both w.e.f 14 Jun 2018

16 Information Technology Use of information technology to lodge a tax return, application, notice, statement or other document is now anchored by the law

17 Info Tech offences Hackers!- unauthorized access or disclosing infor obtained from a tax system- 400k fine or 2 yrs for companies Shs 1m, Falsifying or damaging tax infor- 800k or 3yrs or both

18 Record Keeping A person is required to; Maintain any document required under tax law in either of the official languages (English and Kiswahili); The documents maintained should enable the person s tax liability to be readily ascertained; Retain documents for a period of five years The prescribed units of currency in the books of accounts, records, paper registers, tax returns or tax invoices is Kenya shillings

19 Returns Extension of time submit the tax return before the date of submission of the tax return introduced; The extension granted shall not alter the tax due date; Request should be made 15 days prior due date for monthly taxes and 30 days for annual taxes The commissioner to notify tax payer 5 days prior to the due date- only single extension

20 Assessments Self Assessment - A return completed and submitted electronically shall be treated as a self assessment return despite the pre-entered information and the tax payable being computed electronically; Default assessment an assessment issued by the Commissioner in cases where a tax payer has failed to submit a tax return; Advance assessment an assessment issued by the Commissioner in instances where the taxpayer is yet to submit a return prior to the filing due date. Open tax assessments by the KRA - 5 years Relief for mistake or error in self-assessment,available within 5 years and Commissioner is required to respond within 30 days.

21 Amended Assessments The commissioner can revise an assessment A tax payer can apply for revision of self assessment within 5 years For request s made by taxpayer for amendment the commissioner need not respond within 30 days, but if he rejects he must give reason

22 Tax Refunds Application for a refund may be made within five years of the date on which the tax was paid. The Commissioner may subject the claim to an audit. The commissioner responds to refund claim within 90 days Refund monies are applied in the following order (a) in payment of any other tax owing by the taxpayer under the tax law; (b) in payment of a tax owing by the taxpayer under any other tax law; and any remainder shall be refunded to the taxpayer. The Commissioner refunds in two years with 1% interest p.a for any further delay

23 Erroneous Refund Where any tax has been refunded tax in error, the person to whom the refund has been erroneously made shall, on demand by the Commissioner, pay the amount erroneously refunded. Refund attracts interest at 1% p.m for the period outstanding but the interest chargeable shall not exceed one hundred percent of the tax originally due.

24 Tax Decisions A tax decision is conclusive on the production of a notice of an assessment or a document under the hand of the commissioner in the case of a self-assessment, the production of the original return of the selfassessment or a document under the hand of the taxpayer The return submitted electronically will suffice

25 Objections (1) A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law. (2) A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision

26 Tax in dispute Before TPA 2015, a tax payer was to pay at least 30% of tax in dispute TPA 2015, tax payer only to pay tax not in dispute After 2018, tax payer can apply for extension to pay tax not in dispute if objection is valid

27 Tax Appeals

28 Alternative dispute resolution

29 Alternative dispute resolution W.e.f 17 July 2015 is an additional and/or alternative means of resolving tax disputes outside the judicial and quasi-judicial process Its Voluntary, participatory and mediation process as no party imposes a decision

30 ADR The time spent in attempting to settle tax disputes out of the TAT such as through the Alternative Dispute Resolution mechanism will now not be taken into account in determining the 90 day timeline within which matters ought to be heard and determined by TAT

31 Administrative penalties Offence Failure to register or de-register Penalty Penalty of KES 100,000 per month or part capped at 1million Failure to keep, retain or maintain proper documents Penalty equal to 10% of the amount of tax payable subject to a minimum of KES 100,000 Late submission of PAYE returns Penalty equal to 25% of the tax due or KES 10,000; whichever is higher Late filing of any other tax return Penalty of 5% of the amount of tax payable under the return subject to a minimum of KES 2000

32 Penalties cont Failure to file any other document, other than a tax return Penalty of KES 1,000 per day subject to a maximum penalty of KES 50,000 Tax avoidance Penalty equal to 200% of the amount avoided by a taxpayer Fraudulent claim for a refund of tax Penalty of 200% the amount of the claim under all tax laws Offenses committed by KRA officers or persons required to act on Commissioner instructions Fine not exceeding KES 2 million or to imprisonment for a term not exceeding 5years or to both

33 Interactive Session