Introduction
Early last month August 2017, KRA informed Kenyan taxpayers that personal identification numbers (PINs) would by de-activated by 31st August 2017.
The affected taxpayers were:
The affected taxpayers were:
- Those who have not migrated to i-Tax platform.
- Those already in i-Tax platform but do not file tax returns or file nil tax returns will be.
Why Deactivate the PINs?
KRA may have had several reasons for taking the initiative to deactivate the PINs. Some of the most probable reasons are:
- Compel the affected taxpayers to start filing tax returns.
- Oblige the taxpayers to remit unpaid taxes.
- Clean the i-Tax register.
- Collect the tax liabilities in the taxpayer’s ledgers.
- Establish the number of active taxpayers to enable KRA to plan its tax collections.
- Realization that since the tax liabilities are not based on transacted business, it may be impossible to collect the taxes.
Deactivated PINs
However, though this did not happen for all affected taxpayers, KRA did deactivate the PINs for a record 95,000 persons as earlier warned.
The persons whose PINs were deactivated are individual taxpayers who had value-added tax (VAT) obligation, had transacted vatable business but had not declared the VAT or submitted tax returns.
Deactivation of Director’s PINs
In the meantime, KRA has promised to include in the list of PINs to be deactivated the PINs for persons who are directors in companies that a) have not migrated to i-Tax platform and b) those already in i-Tax platform but do not file tax returns or file nil tax returns.
Looking at the Kenya business environment, many Kenyans register many companies for various reasons. The persons use the companies to transact business for a short time and then they abandon them.
Other persons are invited to be directors in companies that they are aware of what they transact in or in companies that they do not know what they transact in.
In essence, there are many Kenyans who are directors in numerous companies registered with KRA. Those companies are expected to comply with tax laws in Kenya but they are not taxed compliant.
The directors may have abandoned the companies and moved on to others either intentionally or circumstances force them to do so. In the meantime, fines, penalties and interests have accumulated the company’s tax ledgers held by KRA.
This is because of not filing the tax returns and failure to pay tax. The directors and shareholders may not even be aware of the tax liabilities.
Way forward
So what is the way forward for the affected taxpayers? There are various options for the affected taxpayers
a) Already Deactivated
Get in touch with KRA and sort out the reasons that made the PIN to be deactivated. But before then, some transactions were captured in KRA where you collected VAT and did not remit. Look for money to pay the tax.
b) Migrate to i-Tax
For those who have not migrated to i-Tax, they should do so if they are still operating the businesses. To access i-Tax, a person needs to log in directly or can seek assistance from internet bureau/cafe, from your accountant, auditors etc. Remember to carry forward any tax credits that you have to i-Tax.
c) Not Tax Compliant
For those already in i-Tax, and have not been filing tax returns, start filing tax returns. In case there is tax to pay, start making the payments whatever the amount. You can then make plans on how to settle the balances.
Whatever money paid goes to your tax ledger and will reduce your tax liabilities at the end of the day.
d) Inactive PINs
For any PIN that is not active for example companies that are dormant and are not in operation, the persons should apply for de-registration or placement into dormancy status.
e) Directors in Non-compliant Companies
KRA has also indicated that PINs for directors in none compliant companies will be deactivated. If there is any company where you are a director and do not want to continue being a director, cease being a director.
This can be done by getting out and informing the registrar of companies. Get the new CR 12 forms and take to KRA. That will be evidence that you are not a director anymore.
However, every person must remember that every registered individual taxpayers, partner or director remain personally liable for any tax liabilities incurred when you were associated with the business.
This is irrespective of whether the business was active or not. Company directors and the top management are some of the people who are personally liable for tax liabilities.
Feel free to send us questions or topics on tax and investments in Kenya that you would wish to be covered in this Website.
Disclaimer
This post is for general overview and guidance and does not in any way amount to professional advice. Hence, www.taxkenya.com, its owner or associates do not take any responsibility for results of any action taken on the basis of the information in this post or for any errors or omissions. Kenyan taxpayers must always rely on the most current information from KRA. Tax industry in Kenya is very dynamic.
©Wakaguyu Wa Kiburi
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