KRA's Voluntary Tax Disclosure Program; All You Need to Know

A Kenya Revenue Authority (KRA) signage on a building

Kenya Revenue Authority (KRA) introduced the Voluntary Tax Disclosure Program (VTDP) on January 1, 2021, through the Finance Act 2020. 

The authority said that the initiative would run for three years to December 31, 2023, and it is aimed at improving revenue collection through enhanced compliance by bringing more taxpayers from the usually untaxed sections of the economy into the tax net.

The scheme is part of KRA's new measures to raise Ksh 1.57 trillion for the financial year 2020/21, alongside Minimum Tax and Digital Service Tax (DST) spoke to Wanja Wangondu,  KRA's Assistant Manager of Taxpayer Services, who shared an insight into the program, especially after several individuals misinterpreted it, thinking that it was all about reporting tax frauds and cheats to the agency. 

Times Towers in Nairobi which houses Kenya Revenue Authority’s head office. Thursday, February 20, 2020.
Times Towers in Nairobi which houses Kenya Revenue Authority’s head office. Thursday, February 20, 2020

What is the Voluntary Tax Disclosure Program (VTDP)?

This is a program used by KRA to urge taxpayers to declare the income they had not proclaimed. It’s about the individual taxpayer coming out themselves and reaching out to us. If there is any income you had not declared between July 2015 to June 2020 then you have three years to make the declaration. 

Are there categories targetted for the Voluntary Tax Disclosure Program?

No. This program is for all taxpayers, businesses and individuals. 

Which tax periods will VTDP Cover?

The disclosures eligible under this programme will be for tax periods of up to 5 years prior to 1st July 2020. This is from 1st July 2015 to 30th June 20

How does the program work?

The program runs from January 2021 to December 2023. If you make the declaration in 2021, you get 100 percent waiver on all interests and penalties you could have faced. 

In 2022, 50 percent waiver and 25 percent waiver in 2023. KRA will apply all penalties and interests to any taxpayer whether they disclose the taxes or not, after December 31, 2023.  

How does a taxpayer apply for the program?

Persons who are interested in obtaining relief under the Voluntary Tax Disclosure Programme shall apply through a prescribed online application form on the i-Tax system under disclosure. 

When the submission is complete, the person shall receive an acknowledgement slip.

A person may submit a manual application to their respective Tax Service Office before the rollout of the module in iTax or in the event of temporary system downtime.

Traders at a market in Kenya.
Traders at a market in Kenya.

A person submitting a manual application shall provide tax return(s) for the period(s) and the application must contain the following critical information: - Application date, PIN Number, Name of the taxpayer, Tax Head, Tax Period, Tax Liability previously disclosed for the tax period, Tax Liability disclosed/tax assessed. Application form attached.

All applications received will be processed within a period of 30 days from the application receipt date.

A person making an online application should visit the KRA website for the step by step process.

Will the taxpayer pay all the tax declared at once?

You don't need to have all the money at once. You can enter into a payment plan and pay in instalments or after a certain period of time, up to six months since the declaration. 

Will a person be issued with a certificate?

A person shall be issued with a VTDP certificate, which shall serve as evidence that the person took advantage of the VTDP for the taxes of the periods specified in that certificate.

The Certificate issued shall only cover the taxes disclosed and the corresponding tax periods.

Can a taxpayer be prosecuted after disclosure?

No. A person granted relief under VTDP shall not be prosecuted for their previous tax liabilities. However, where the applicant fails to disclose the facts of the tax liability, the Commissioner may withdraw the relief, assess additional tax or commence prosecution.

Are there exemptions?

The only exemption is if KRA had already initiated an audit on the taxpayer for the tax they never declared. That means that the taxman is the one who found out that you did not declare a certain tax. Another case is where the taxpayer is a party to ongoing litigation with respect to the tax liability or any matter relating to the tax liability

Then you do not qualify for the disclosure program. 

What other conditions are attached to VTDP?

VTDP only applies to a disclosure resulting in payment of taxes. A taxpayer shall not be granted relief which may result in a refund of taxes paid on or before the VTDP window or which may lead to an increase in their tax credit or loss carried forward.

A person granted relief under the programme shall not be prosecuted on the same set of facts with respect to the fully disclosed and paid taxes.

A person granted relief in accordance with the provisions of the VTDP shall not appeal or seek any other remedy with respect to the taxes, penalties and interest remitted by the taxman. 

Times Tower
Times Tower, KRA headquarters in Nairobi