Tax Health Check procedures

TAX HEALTH CHECKS

The idea – similar to a regular medical check-up with your doctor now a health check of your organization’s tax affairs’ review of your business’s records and accounting systems with a view to: Identify any areas of risk in relation to tax Mitigate any tax risk Giving confidence in the level of risk the business has in relation to taxation Identify tax planning opportunities that have not been taken advantage of Prepare for a KRA audit

General provisions relating to administrative penalties and offences

(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 tax law.

Person liable to tax failing to register for taxes • KES 100,000 per month subject to a maximum of KES 1 million •

Failure to keep documents • KES 100,000 or 10% of the amount of tax payable to which the document relates to

• Late submission of tax return on account of employment income the higher of 25% of the tax due or KES 10,000 •

Late submission of tax return (individuals and corporates) the higher of 5% of the tax due or KES 20,000 •

Late submission of tax return on account of Turnover tax • KES 5,000 • Failure to comply with electronic tax systems • KES 100,000 • Tax evasion • Double the amount of tax • Tax refund fraud • Two times the amount of the claim

Tax shortfall penalty

This section applies to a person—who prepares a return with variances its 75% seventy-five per cent of the tax shortfall when the statement or omission was made deliberately;

Not payable when one can prove that could not reasonably be expected to know that the statement was false;

Commissioner must notify in writing of imposed penalty

Taxpayer may apply for waiver of penalties

Key deadlines and timelines

Vat 20^th penalties 10,000

Income tax year end

Payee 9^th following month 10,000

The purpose of the health check (is it for noting the tax risk or for self-declaration);

The period to be covered

The tax heads to be analyzed

Process

Select sample of ledgers to review

From the review check whether

1. Tax was paid
2. Rates used
3. Payment date

When the returns were made >

Tie the tax payments to the tax returns

Reconcile sales as per TB with sales as per the VAT 3 returns;

Payroll and the staff cost in the audited accounts

Quantify the exposure noted we will help u at Dennykins & Associates