Penalty for Not Filing Nil Returns in Kenya

Filing tax returns is a civic duty for all Kenyan residents who have a KRA PIN, even if you didn’t earn any income during the financial year. In such cases, you’re required to file what’s known as a “nil return.” So, what happens if you fail to file your nil returns? Let’s dive into the implications, the penalties involved, and how you can avoid such penalties in the future.

Penalty for Not Filing Nil Returns in Kenya

Failure to file tax returns, including nil returns, is a serious offence in the eyes of the Kenya Revenue Authority (KRA). If you neglect to file your nil returns, you won’t escape unnoticed. The penalty for not filing a nil return, as of my last update in September 2021, was KES 20,000.

You might think, “I didn’t earn any income, so why should I bother?” Well, once you register for a KRA PIN, you’re obligated to file annual returns, even if it’s a nil return. Not doing so, you’re in violation of tax laws, and KRA will impose penalties for non-compliance.

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How to Check KRA Penalties

Wondering if you have any penalties looming over your head? KRA has made it easy to check if you have any outstanding penalties or debts.

Here’s how to check your KRA penalties:

  1. Visit the KRA iTax portal and log in using your KRA PIN and password.
  2. From the main menu, hover over the “Debt and Enforcement” tab, and click on “Apply for Waiver for Penalties and Interests.”
  3. A new page will open, displaying your tax obligations, any penalties or interest accrued, and the reason for the penalty.
  4. If you see any penalties listed, it means you have an outstanding penalty.

Remember, checking your penalties isn’t something you should do out of fear or curiosity. It’s a matter of responsibility. Knowing where you stand with KRA can help you avoid surprises and make informed financial decisions.

KRA Penalty Waiver

If you’ve accrued penalties and interest due to late or non-filing of your tax returns, don’t panic. KRA offers an opportunity for taxpayers to apply for a waiver of these penalties and interest.

The process for applying for a waiver is straightforward:

  1. Log in to your iTax profile.
  2. From the main menu, hover over the “Debt and Enforcement” tab, and click on “Apply for Waiver for Penalties and Interests.”
  3. Fill in the application form provided, clearly stating the reasons for your failure to file returns or pay taxes on time.
  4. Submit the application.

Approval of your waiver request isn’t guaranteed. It depends on the reasons you provide and the discretion of the tax officer handling your case. If your waiver is approved, you’ll receive a waiver approval letter through your iTax registered email.

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Penalty for Late Filing of VAT Returns in Kenya

Value Added Tax (VAT) is another tax obligation that carries penalties if not filed on time. As of my last update in September 2021, the penalty for late filing of VAT returns was KES 10,000 or 5% of the tax due, whichever is higher.

Just like with income tax returns, it’s crucial to file your VAT returns promptly to avoid such penalties. If you’re a VAT registered taxpayer, you should file your VAT returns by the 20th of the following month.

Conclusion

Navigating the world of tax can be a bit daunting, especially if you’re new to it. However, understanding your obligations, such as the importance of filing nil returns and the penalties associated with non-compliance, can help make the process less intimidating.

Bear in mind that the penalties imposed by KRA for not filing nil returns, VAT returns, or any other tax returns are not just financial inconveniences. They are indicators of non-compliance, which could affect your standing with the KRA and possibly other institutions, like banks or government bodies, that require proof of tax compliance.

If you find yourself in a position where you’ve accrued penalties, don’t despair. The KRA offers a waiver process that, while not guaranteed, does provide a potential solution for reducing or eliminating these penalties. Make sure to provide a valid reason for your initial non-compliance when applying for a waiver.



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