How to File Nil Returns for a Company in Kenya

When it comes to taxes, many are familiar with individual tax obligations, but what about companies? Whether it's a startup that hasn't started operations or a company that didn't make any revenue during a particular year, it's crucial to understand how to file nil returns. Let's dive into this topic and address the question: "Is it mandatory to file nil return for a company?" Spoiler alert: Yes, it is!

Understanding Nil Returns

Before we go into the specifics, let's break down what nil returns are. A nil return is a tax return filed when a company has no taxable income in a given financial year. No taxable income could mean the company made no sales, incurred a loss, or did not operate during the year. Despite the lack of income, the company is still required to file a return declaring that it had no taxable income.

Also Read: Penalty for Not Filing Nil Returns in Kenya

Is It Mandatory to File Nil Return for a Company?

The simple answer is yes. In Kenya, it's a legal requirement for all registered entities, including companies, to file annual tax returns. This obligation holds, whether or not the company made any income during the year.

It might seem odd to file a return when there's no income, but this action keeps the company in compliance with Kenya Revenue Authority (KRA) regulations. It also ensures the company maintains an active and compliant status with KRA, which can be crucial when seeking tenders, contracts or when the company resumes operation.

How to File Nil Returns for a Company in Kenya

The process of filing nil returns for a company is done online through the KRA's iTax system. Here's a step-by-step guide:


Step 1: Prepare Your Documents


Even though you're filing nil returns, you still need some basic information about the company. Make sure you have the company's KRA PIN and iTax password ready. If the company has a tax agent, their details will also be required.


Step 2: Access the KRA iTax Portal


Using a computer or a smartphone, go to the KRA iTax portal. Enter the company's KRA PIN and password, and the arithmetic sum provided, then log in.

Also Read: How to File Nil Returns for Students


Step 3: Navigate to the Returns Section


Once you're logged in, navigate to the 'Returns' menu and select 'File Nil Return.'


Step 4: Fill in the Details


You will be asked to fill in the tax obligation (which is 'Income Tax – Company'), return period (from 1st January to 31st December of the relevant year), and other relevant details.


Step 5: Submit the Return


After filling in the details, click 'Submit.' You'll get a pop-up message indicating that the return has been submitted successfully. An acknowledgment receipt will also be generated, which you should download and save for future reference.

Also Read: How to File Returns

Consequences of Not Filing Nil Returns

Failure to file nil returns can have consequences for the company. The KRA imposes penalties on companies that do not file their returns, regardless of whether they had any taxable income. The penalty for late submission of a company tax return was KES 20,000.

Conclusion

Filing nil returns for a company in Kenya is not just a legal requirement; it's also a crucial part of maintaining the company's compliance status. It might seem like a small administrative task, especially when the company has not made any income, but the consequences of non-compliance can be significant.

Remember, staying on top of your tax obligations, even when it comes to filing nil returns, is good business practice. It ensures you're always ready to seize opportunities without worrying about.


FAQs


How do I file a return for a company in Kenya?


Filing a return for a company in Kenya involves reporting the company's income, expenses, and other relevant details for a financial year. Here's how:

- Log into the iTax system with the company's KRA PIN and password.


- Navigate to the 'Returns' menu and select 'File Returns.'


- Choose 'Income Tax - Company' and download the tax return form.


- Open the downloaded Excel spreadsheet and fill out the sections as required. The 'Basic Info' sheet is mandatory. You may also need to fill out 'Profit and Loss,' 'Balance Sheet,' and other sheets depending on the company's financial activities during the year.


- After filling out the form, click 'Validate.' If there are no errors, a zip file will be created.


- Go back to the iTax portal, upload the zip file, agree to the terms and conditions, and click 'Submit.'


- An acknowledgment receipt will be generated, which you should download and save for future reference.

Remember, the company is required to file a return every year, even if it did not have any taxable income. In such cases, a nil return should be filed.
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