By Rispah Simiyu
Taxpayers can now lodge their applications for relief of penalties and interest under the voluntary tax disclosure programme (VTDP) on the iTax platform. This follows a recent enhancement of the iTax platform to allow online submission of VTDP applications. A step-by-step guide on the application process is available on the Kenya Revenue Authority (KRA) website.
The VTDP is an olive branch extended to all taxpayers who for one reason or the other failed to disclose taxable income between 1st July 2015 and 30th June 2020. It was introduced through the Finance Act of 2020 and runs from 1st January 2021 to 31st December 2023.
Taxpayers who apply for relief under the programme will have penalties and interest on the principal taxes disclosed, waived.
The extent to which the penalties and interest are waived under the programme depends on the point of application within the three-year period during which the programme will be running. Taxpayers who apply for relief in the year 2021 and pay the principal taxes fully will enjoy 100 per cent waiver of penalties and interest.
However, those who apply for relief and fully settle their principal taxes in the years 2022 and 2023, will only be entitled to a waiver of 50 per cent and 25 per cent, respectively. This means that the earlier one does the application and pays the principal taxes in full, the higher the percentage of the relief granted. Taxpayers who are yet to come forward are therefore encouraged to take advantage of the remaining months of the year to get a full remission of penalties and interest.
For the period between January to July 2021, more than 300 applicants had applied for relief under the VTDP. The total revenue implication from the applications received amounted to more than Kshs. 2.7 billion, with collection of around Kshs. 999 million. Taxes that can be disclosed under the VTDP include Individual Income Tax, Pay As You Earn (PAYE), Withholding Taxes, Capital Gains Tax, Value Added Tax (VAT), Turnover Tax, Advance Tax, Excise Duty, Rental Income Tax and Corporation Tax.
KRA will treat all the information provided under the VTDP with utmost confidentiality. The information shall not be used against the taxpayers in future enforcement actions if the declaration is done fully and in good faith. It is instructive to note that where a taxpayer who applies for the programme presents false information or fails to disclose material facts in respect of the relief, KRA may revoke the waiver granted and assess additional taxes or commence prosecution against that taxpayer.
While the VTDP comes as a relief to many taxpayers, there are several cases where a taxpayer shall not qualify for relief under the programme. Instances of non-qualification include where a taxpayer is under audit or investigation for the tax liability in question or has been notified, by KRA, of its intent to carry out an investigation or an audit with respect to the undisclosed tax liability. Taxpayers with ongoing litigation cases in respect to the tax liability or any matter relating to the tax liability will also not qualify for relief under VTDP.
It is important to note that there must be a tax liability involved for one to be granted waiver of penalties and interest under VTDP. The programme only applies to disclosures resulting in payment of taxes. This means that a taxpayer who, for example, has incurred penalties for late filing of nil returns shall not be considered under this amnesty. In such a case, the regular waiver application process shall apply. In addition, a person shall not be granted relief under the VTDP which may result in a refund of taxes paid.
Apart from expanding the tax base, the VTDP offers taxpayers with undisclosed tax liabilities a second opportunity to start off on a clean slate. The programme is a hallmark of KRA’s transformation journey from enforcement to a facilitative revenue agency whose engagements with the taxpayers are founded on trust.
Taxpayers with previously undisclosed taxes are encouraged to take advantage of the relief granted under the VTDP to avoid imposition of punitive penalties and interest.
The writer is the Commissioner of Domestic Taxes Department at KRA.
Views expressed in this article do not necessarily represent those of KBC.