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Kenya: Tax Amnesty under the Finance Act 2023

10 August 2023
– 2 Minute Read
| Tax

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Overview

  • Following the ruling by the Kenyan Court of Appeal lifting the conservatory orders against the implementation of the Finance Act, all the provisions of the Finance Act have now become legally effective.
  • The Finance Act provides for a tax amnesty on penalties or interest on tax debt where a person had paid all the principal tax due before 31 December 2022. Further, where a taxpayer has not settled their outstanding principal tax due by 31 December 2022, the law provides for the taxpayer to make an application to the Kenya Revenue Authority for an amnesty of interest or penalties on the unpaid tax and propose a payment plan for the outstanding amount.
  • This tax amnesty does not apply to tax avoidance penalties under the Tax Procedures Act.

Following the ruling by the Court of Appeal lifting the conservatory orders against the implementation of the Finance Act 2023 (Finance Act), all the provisions of the Finance Act have now become legally effective.

Although the Finance Act has faced significant criticism, it has also introduced measures aimed at providing relief to taxpayers. Notably, the Finance Act provides for a tax amnesty on penalties or interest on tax debt where a person had paid all the principal tax due before 31 December 2022.

Further, where a taxpayer has not settled their outstanding principal tax due by 31 December 2022, the law provides for the taxpayer to make an application to the Kenya Revenue Authority (KRA) for an amnesty of interest or penalties on the unpaid tax and propose a payment plan for the outstanding amount. The scope of the tax amnesty would be as follows:

  • the tax amnesty covers interest or penalties on the unpaid tax that accrued up until December 2022;
  • the tax amnesty shall be granted once if the person:
    • applies for amnesty and pays all the outstanding principal taxes by not later than 30 June 2024;
    • does not incur a further tax debt; and
    • signs a commitment letter for settlement of all outstanding taxes that the person may owe.

It is important to note that any amount of principal tax as of 31 December 2022 that remains unpaid on 30 June 2024 shall attract interest and penalties and no amnesty shall be granted for such interest and penalties under this provision.

This tax amnesty, however, does not apply to tax avoidance penalties under section 85 of the Tax Procedures Act.  Tax avoidance is a transaction, or a scheme designed to avoid liability to pay tax under any law. Tax avoidance penalty is equal to double the amount of the tax that would have been avoided.