The clock is ticking for millions of Kenyans as the June 30 deadline for income tax returns rapidly approaches. Filing your annual tax returns isn't just an option for salaried workers, business owners, or farmers; it is a mandatory legal requirement, and failing to comply carries repercussions.
For many, especially those who have not filed in multiple years, this deadline presents a unique challenge. This oversight is a risky move, as it exposes them to hefty accrued penalties, which can be a significant financial drain, especially considering that filing the returns themselves is a free service.
Despite robust mechanisms and additional support provided by the Kenya Revenue Authority (KRA) to assist with filing returns, many Kenyans remain confused, unsure of what to file, or unaware that they even need to file their returns. For starters, any Kenyan with an active KRA Personal Identification Number (PIN) is legally required to file an annual return even if you didn’t earn any income.
This means, if you are formally employed, you must file a return even if your employer already deducted PAYE (Pay As You Earn). If you are self-employed, run a business, earn rental income, or farm, you are required to declare your income. If you had no income, you still need to file a NIL return.
This process becomes a particularly hard nut to crack for individuals with several years of unfiled returns. Such delays are risky, exposing them to accumulating penalties, which can be a costly affair, particularly when filing returns is in itself free.
If one misses the deadline, KRA imposes a hefty five per cent of the tax due or Ksh2,000, whichever is higher, for those who miss the filing deadline. For late payment, KRA imposes a penalty of five per cent of the unpaid tax, plus one per cent interest every month until it is paid.
Accumulated penalties can easily affect your tax record, so it is better to file, even with incomplete information, rather than miss the deadline entirely.
In case one misses filing their returns multiple times, the system may show an error message like: “You must file previous returns before uploading” when they attempt to file returns. This means you need to clear all past pending returns before you submit your current one. Start with the oldest year and move forward.
The general process of filing multiple years of unfiled returns encompasses several steps. One first needs to understand their tax obligations for each year they missed. This entails determining your income status for each year missed, depending on whether you were employed, self-employed or had no income at all.
Next, you need to gather all the necessary documents. If you were employed, ensure you have your P9 forms for each relevant year. These forms summarize your employment income and PAYE (Pay As You Earn) deductions.
If you had business, rental, or other income, gather your books of accounts, income statements, balance sheets, and any withholding tax certificates for each year. In addition, one needs to have a record of their reliefs and deductions, and collect any documents supporting applicable tax reliefs, such as insurance policy certificates, mortgage certificates for each year.
Once all that is gathered, the next step is to access the iTax portal and log in. To log in, one needs to enter their KRA PIN and password. If you have forgotten your password, use the "Forgot Password" feature to reset it via your registered email address. If your email is no longer active, you will need to contact KRA for an email change
To file each year’s returns, one needs to click the “Returns” tab and select “File Return.” Next is to choose the relevant tax obligation (e.g., Income Tax - Resident Individual for most individuals).
When prompted, crucially, select the specific year of income you want to file for. You will need to do this for each missed year, starting from the earliest outstanding year. Thereafter, download the relevant Excel or ODS return template provided by the system for that specific year.
Afterwards, one needs to ensure macros are enabled in the downloaded Excel form. This is essential for the form to function correctly. The next step is to carefully fill in all required details for that specific year. Input your income (from P9s or other records), PAYE deductions, and any applicable tax reliefs.
After filling, click on the "Validate" button within the Excel sheet. This will check for errors and generate a zipped file of your return in your "Documents" folder. Afterwards, return to the iTax portal, select the tax period again, and upload the zipped file. Next, agree to the terms and conditions, click "Submit," and then download the acknowledgment receipt. This is your proof of submission.
It is important that if you make a mistake, you can still file an amended return later. More significantly, KRA had introduced the Tax Amnesty Program, where if you owed taxes before December 31, 2023, the programme allows you to pay the principal amount only, and have penalties and interest waived, provided you settle the amount by June 30, 2025.
If you had already paid all your principal tax for periods up to December 31, 2023, you automatically qualify for a waiver of the related penalties and interest. No formal application is required for this category.
However, if you had outstanding principal tax for periods up to December 31, 2023, you needed to apply to the KRA Commissioner for the amnesty. You would also need to propose a payment plan for the outstanding principal taxes, ensuring they are fully paid by June 30, 2025.
