Tax Amnesty in Kenya: Implications for Digital Service Providers

Kenya has introduced a tax amnesty program aimed at providing relief to taxpayers by waiving penalties and interest on outstanding tax liabilities. This initiative is part of the recently passed Tax Amendments Act 2024 and is relevant to digital service providers, who have faced evolving tax obligations in Kenya over recent years. The program offers an opportunity to achieve tax compliance while addressing past non-compliance issues, fostering trust, and encouraging a more favourable business environment.

Key Details of the Tax Amnesty Program

1. Eligibility Period: The amnesty applies to tax periods up to December 31, 2023, making it applicable to a wide range of tax obligations, including VAT, Income tax, and digital service tax.

2. Application Window: Taxpayers can benefit from this program between December 27, 2024, and June 30, 2025.

3. Scope: The amnesty focuses on waiving penalties and interest accrued on unpaid principal taxes.

4. Conditions:

·         Full Payment Option: Taxpayers who have already settled all principal taxes by December 31, 2023, will automatically receive waivers on related penalties and interest without needing to apply.

·         Payment Plan: Taxpayers unable to make a one-time payment must apply to the Kenya Revenue Authority (KRA) and propose a payment plan. Full settlement of outstanding principal taxes must be completed by June 30 2025, to qualify for the waiver.

Why It Matters for Digital Service Providers

Digital service providers, particularly non-resident ones, have been navigating a complex tax landscape in Kenya. The introduction and subsequent repeal of the Digital Services Tax (DST) and the implementation of the VAT on supplies made over the Internet have created compliance challenges. Non-compliance or delays in meeting these obligations have led to the accumulation of penalties and interest.

This tax amnesty offers a crucial opportunity to reset since businesses can settle outstanding principal taxes, clear penalties, and interest, and start with a clean slate. This is especially important for already registered taxpayers, as it ensures their standing with the KRA is regularized, reducing the risk of audits or future enforcement actions.

Steps to Take Advantage of the Amnesty

1. Assess Outstanding Liabilities:

·         Conduct a thorough review of tax liabilities for tax periods up to December 31, 2023.

·         Focus on principal taxes related to VAT and digital service tax obligations.

2. Application and Payment:

·         If all principal taxes are settled, no application is needed; the waiver is automatic however for some cases you might have to write to your account manager to initiate the process.

·         For unpaid taxes, submit an application to the Commissioner, outlining a feasible payment plan.

·         Ensure compliance with the agreed payment schedule to meet the June 30, 2025, deadline.

Conclusion

Kenya’s tax amnesty program is a win-win for taxpayers and the government. Businesses can leverage this opportunity to regularize their tax status, improve compliance, and enhance their relationship with the KRA.

Digital Service providers are encouraged to engage promptly act and make the most of this window of opportunity. For already registered taxpayers, this is a chance to solidify their good standing and mitigate risks of future penalties.

Source: Kenya Revenue Authority