Tax law requires taxpayers to keep, maintain, and retain certain records and documents to ascertain their tax liability, mostly through tax audits. The records and documents can be kept, maintained, and retained either as hard copies or in electronic formats.
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Tax law on records and documents
According to Section 23 of the Tax Procedures Act (2015), a taxpayer is expected to do the following as far tax records are concerned:
1. Maintain all the records and documents required under the various tax laws.
2. Maintain the tax records and documents in either official languages, either Kiswahili or English. If not, Commissioner will require the translation of documents into the official languages by an approved translator.
3. Retain the records and documents for five years from the end of the reporting period to which the records relate to a shorter period specified in tax law. However, the records and document can be retained for a longer period in case of :
- Amended assessments.
- Proceedings commenced before the end of five years year period.
- Others reasons.
4. The currency unit in Kenya shillings (books of accounts, records, paper register, tax returns, tax invoices.)
5. Provision for a simplified system of record-keeping for small businesses may be provided.
Tax Law on Production of Records and Documents
Section 59 of the Tax Procedures Act (2015) deals with the production of records to obtain full information of a taxpayer, taxpayers s tax liability, or other purposes relating to tax laws, e.g., evidence in a tax case.
For illustration only I Sources Pixabay
A taxpayer is required to:
- Produce for examination documents in their custody or their control relating to their tax liability or other persons.
- The time of provision is specified.
- The place to take the documents is specified.
- Manner of providing the documents is specified.
Penalty for failure to produce records and documents according to the Tax Law
Section 82 of the Tax Procedures Act (2015) provides for penalty for failure to failure to keep, maintain and retain tax records and documents without reasonable cause for a tax reporting period is liable to a penalty equal to the higher of:
- 10% of the taxable amount under a tax system the documents relate to in the reporting period the failure relates.
- When no tax is payable for in the period the document not produced related to, the penalty amount is kshs 100,000.
Conclusion
The law requires every taxpayer:
a. To keep, maintain and retain tax records and documents.
b. To produce the records and documents when required to do so.
Question
Are you keeping, maintaining and retaining tax records and documents ?
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