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Offences Under VAT

There are many offences under the VAT Act. In the following sections, we are going to discuss some of those offences. It is important to note that these are not the only offences. The list keeps on changing.

Registration

Under tax registration provisions, it is an offence for a person to fail to apply for VAT registration when they are qualified to do so.

De-registration

It is an offence for a person to apply for VAT de-registration, which is the removal of VAT obligation from the PIN certificate when they do not qualify.

Personal Identification Number

Currently, the Personal Identification Number (PIN) is the only identification number used for VAT purposes. The VAT obligation is added to the PIN certificate. There are various offences under PIN. It is an offence to use:

a) A false PIN on VAT returns.

b) A false PIN on other documents relating to VAT.

c) PIN of another person (apart from the use of PIN by tax agents on behalf of their clients).

d) Obtain PIN using false or forged documents.

e) Obtain PIN through fraud, deceit, or misrepresentation.

Documents

Under the provision of documents, it is an offence for a person to:

  • Fail to keep, retain or maintain documents without excuses for a certain tax period as provided for in the tax law.

  • Deliberately prepare or maintain false documents.

  • Deliberately authorize another person to prepare false documents.

  • Deliberately authorize another person to maintain false documents.

  • Falsify tax-related documents.

  • Authorize another person to falsify tax-related documents.
    • Tax Returns

    Under the tax returns provisions, it is an offence for a person to:

  • Fail to submit a tax return by the due date.

  • Fail to submit other documents without reasonable cause.
    • If convicted, in addition to the sanction imposed, the person will furnish all the tax returns within the time specified by the Court.

    Pay Tax

    It is an offence for a person to:

  • Fail to pay tax by the due date.

  • Fail to pay the correct amount of tax.
    • Misleading Statements

    A tax statement can either be oral or written. However, it is an offence for a person to:

  • Make a statement with false or misleading materials or particulars to an authorized tax officer.

  • Omit any matter or thing which results in the statement being false or misleading in a material particular.
    • Fraud

    A person commits an offence about a tax period when they.

  • Omit any amount of tax from a tax return.

  • Claim VAT relief they are not entitled to.

  • Claim VAT refund they are not entitled to.

  • Make incorrect statements that affect their tax liability.

  • Prepare false books of accounts or other records relating to that of another person.

  • Falsify books of accounts or other records.

  • Default on any obligation imposed under the VAT law.
    • Enforcement

    It is an offence for a person to fail to:

  • Provide information for examination as required by the Commissioner.

  • Produce documents for examination as required by the Commissioner.

  • Appear before the Commissioner when required to do so.

  • Answer any question by the Commissioner or an authorized officer.

  • Provide reasonable facilities and assistance to tax officers to enable them to undertake their official duties when required to do so.
    • Obstruction of Authorized Officers

    It is an offence when a person

  • Hinders the Commissioner or authorized officers to perform their duties under the law.

  • Obstructs the Commissioner or authorized officers to perform their duties under the law.
    • Aiding or Abetting an Offence

    It is an offence when a person aids, abets, assists, incites or induces another person to commit an offence under any tax law. The person is liable for the same sanctions as the offence.

    Offences by Officers and Staff of Authority

    An authorized officer commits an offence if they contravene the provisions on confidentiality regarding tax matters. An authorized officer includes:

  • A person employed by the tax authority in any capacity.

  • A person engaged by the tax authority in any capacity.

  • A former officer of the tax authority.

  • A former employee of the tax authority.
    • Employees, Agents and Companies

    There are various provisions regarding VAT offences by employees, tax agents and companies. Some of the provisions are as follows:

  • If a person acting as an employee or agent commits an offence, the employer or principal are also guilty.

  • If the offences are by a company, the person liable is the one who was:
    • The Chief Executive Officer (CEO), Managing Director (MD), a director, company secretary, treasurer or other officer in the company.

    • Acting or purporting to act as CEO, MD, director, company secretary, treasurer or other officer in the company.
  • The person is not liable if the:
    • Offence was committed without the person’s consent or knowledge.

    • Person exercised reasonable care to prevent the commission of the offence.
    • Sanctions for Offences

    A sanction is a penalty for disobeying a law. There are various sanctions for various offences under the Act. The following are some of the sanctions under VAT:

  • For offences on recovery of VAT, and offences by authorized officers and staff of KRA, the sanctions are:

    • Imprisonment for a term not exceeding 10 years or A fine not exceeding kshs 10 million or double the tax evaded (whichever is higher) and imprisonment for a term not exceeding 10 years.
  • Offences by tax agents:
    • A fine equal to double the tax evaded or a fine not exceeding kshs 5 million (whichever is higher) or

    • Imprisonment for a term not exceeding 5 years orA fine equal to double the tax evaded or a fine not exceeding kshs 5 million (whichever is higher) and imprisonment for a term not exceeding 5 years. Any other offence:
      • A fine not exceeding kshs 1 million or

      • Imprisonment term not exceeding 3 years or

      • A fine not exceeding kshs 1 million and imprisonment term not exceeding 3 years.
      2. Payment of Tax on Conviction

      If a person is convicted for unpaid taxes, the court may order the person to pay full or part amount of the tax in addition to or in substitution of any other penalty.

      Jurisdiction to Try Cases

      Prosecution may be in any place in Kenya where the person is in custody as if the offence was committed in that place. Offences are prosecuted in courts designated to try offences of corruption and economic crimes.

      Prosecution for Offences

    Authorized officers representing the Commissioner prosecute case under the direction of the Director of Public Prosecution. The officer has all the powers of a Public Prosecutor.

    Tax Payment after Prosecution Any amount of principal tax, penalties and interest still due should be paid despite prosecution.

    taxpayers and Governments

    Taxpayer-Government Relationship Quiz

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    #11. What is the term used to describe the practice of deliberately avoiding paying taxes?

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    #13. What is the primary goal of a fair tax system?

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