Offences and penalties under tax procedures act

Tax procedure act

The Act sets out to harmonize and consolidate the procedural rules for the administration of tax on all tax laws in Kenya. The tax laws under the act

• The Tax Procedures Act;
• the Income Tax Act,
• the Value Added Tax Act,
• the Excise Duty Act;
• Any regulations or other subsidiary legislation made under Tax Procedures Act or the Income Tax Act, the Value Added Tax Act, and Excise Duty Act.

Offences and penalties

An offence is a crime, felony, misdemeanor or contravention or other breach of, or failure to comply with, any written law, for which a penalty is provided.

A penalty is defined as punishment imposed on the offender usually in form of imprisonment or a fine.

The general provisions relating to administrative penalties and offences in this Act are:

1.      A person shall not be subject to both the imposition of a penalty and the prosecution of an offence in respect of the same act or omission in relation to a tax law.

2.      If a person has committed an act or omission that may be liable under tax law to both imposition of penalty and prosecution of an offence, the Commissioner shall decide whether to demand for the penalty or to prosecute the offence.

3.      Where a person has paid penalty under tax law and the Commissioner commences prosecution, penalty shall be repaid to the said person as refund of tax under Section 48 of the Act and that person shall not pay penalty unless the prosecution is withdrawn.

The penalties and offences under the Act are summarized as follows

81	Penalties relating to registration and licensing	Failure to apply for registration	Kshs. 100, 000.00 for every month/or part of a month of default. The penalty imposed shall not exceed Kshs.1,000,000.00
		Failure to apply for deregistration or cancellation of registration	Kshs. 100, 000.00 for every month/or part of the month of default. The penalty imposed shall not exceed Kshs.1,000,000.00
82	Penalty for failure to keep documents		10%   of the amount of tax payable by person to which the document relate for the period to which the failure relates. Where no tax is payable for the reporting period for the period to which the failure relates, the penalty shall be Kshs.100,000.00
83	Late submission penalty	Submission of a tax return after due date	25% of the tax due or Kshs.10,000.00, whichever is higher in respect to an employment income return;·       Ksh.5,000.00 if it is in relation to Turnover Tax return; or In any other case 5% of the tax payable under the return or Kshs.20,000.00 whichever is higher.
		Submission of a document other than tax return after due date	Kshs.1000.00 for each day or part day of default. The total penalty shall not exceed Kshs.50,000.00
84	Tax shortfall penalty	Under Section 84(2)- this provision is subject to section 84(3) and (4) of the Act	Tax shortfall shall be:·       85% of the tax shortfall when the statement was or omission to an Authorised Officer was made deliberately; or ·       20% of the short fall in any other case
		Under Section 84(3)	Tax short fall penalty shall be increased by:·       10% points when this is the 2nd application of this section to that person; or ·       25% points when this is a 3rd or subsequent application of this section to that person
		Under Section 84 (4)	Tax shortfall penalty imposed under Section 84(2) shall be reduced by 10% when a person voluntarily discloses to the Commissioner the statement or omission to which the section applies prior to:(i)              discovery by the Commissioner of the tax shortfall; or (ii)            The commencement of an audit of the tax affairs of the person to whom the statement relates.
5	Tax Avoidance Penalty		Tax avoidance penalty is equal to double the amount of the tax that would have been avoided.
86	Penalty for failing to comply with electronic tax system		Kshs.100,000.00
87	Penalty for failure to appear before the Commissioner .		Kshs.10,000.00 in case of an individual; and·       Ksh.100,000.00 in any other case
88	Penalty in relation to fraudulent claim for refund		Penalty of an amount equal to two times the amount of the claim.