Who is required to file tax returns in Kenya, and what happens if I don’t file?

Tax compliance in Kenya is a legal requirement for individuals and businesses registered with the Kenya Revenue Authority (KRA), ensuring they file tax returns and pay applicable taxes on time to avoid penalties, legal consequences, and disruptions in accessing government services. Maintaining a good tax record enhances credibility, facilitates business operations, and grants access to opportunities such as tenders, licenses, and financial services

1. Who Is Required to File Tax Returns?

a) Individuals

Every Kenyan citizen or resident with a KRA PIN must file annual tax returns, even if they have no income. The key categories include:

✔ Employed Individuals

• Employees must file an Individual Income Tax Return (IT1 Form) on the KRA iTax portal.
• If your employer deducts Pay As You Earn (PAYE) tax, you should cross-check your tax record with your P9 form provided by your employer.
• The filing deadline is June 30th each year.

✔ Self-Employed Individuals & Business Owners

• If you run a business, you must declare your income and pay the applicable tax:
  • Turnover Tax (TOT) (1% on monthly revenue for businesses earning between Ksh 1M and Ksh 50M per year).
  • Income Tax for Sole Proprietors (applies to those earning above Ksh 50M).
• Self-employed individuals without a fixed salary must also file annual returns based on their declared income.

✔ Students, Unemployed Individuals, and PIN Holders Without Income

• If you have a KRA PIN but are unemployed or a student with no source of income, you must file a Nil Return every year to avoid penalties.
• A Nil Return confirms that you had no taxable income during the year.

b) Businesses & Companies

All registered companies and partnerships must file tax returns as per their tax obligations.

✔ Limited Companies & Partnerships

• Companies must file annual Corporate Tax Returns (IT2 Form) before June 30th each year.
• The corporate tax rate in Kenya is 30% for resident companies and 37.5% for non-resident companies.

✔ VAT-Registered Businesses

• Businesses registered for Value Added Tax (VAT) must file monthly VAT Returns (Form VAT3) by the 20th of every month.
• Failure to submit VAT returns attracts penalties and interest.

✔ PAYE-Registered Employers

• Employers must deduct and remit Pay As You Earn (PAYE) tax from employees’ salaries and file monthly PAYE returns by the 9th of the following month.
• Non-compliance attracts severe penalties.

2. What Happens If You Don’t File Tax Returns?

Failure to file tax returns in Kenya results in the following penalties:

✔ Individual Tax Return Penalties

• Late filing: Ksh 2,000 or 5% of tax due, whichever is higher.
• If you don’t file, KRA will issue an estimated assessment, and you could face additional enforcement measures.

✔ Corporate Tax Return Penalties

• Late filing: Ksh 20,000 or 5% of tax due, whichever is higher.
• If a company fails to submit returns, KRA can take legal action and even deregister the company.

✔ VAT and PAYE Penalties

• VAT Returns: Late filing attracts a penalty of Ksh 10,000 or 5% of the VAT payable, whichever is higher, plus 2% interest per month.
• PAYE Returns: Late filing attracts a penalty of 25% of the tax due or Ksh 10,000, whichever is higher.

3. How Dennykins & Associates Can Help

Dennykins & Associates is a tax consultancy and registered tax agent in Kenya that helps individuals and businesses comply with tax obligations efficiently.

Our Tax Services Include:

1. Filing Individual Tax Returns (Employment, Business, and Rental Income)
2. Filing Corporate Tax Returns (For Small and Large Businesses)
3. VAT & PAYE Compliance (Monthly filing and submissions)
4. KRA PIN Registration and Updates
5. Tax Advisory & Planning (To help you save money legally)
6. Handling Tax Disputes & Appeals (If you have issues with KRA)

Why Choose Dennykins & Associates?

1. Licensed & Experienced Tax Agents – We are certified professionals who understand Kenya’s tax laws.
2. Fast & Hassle-Free Filing – We ensure your returns are filed on time to avoid penalties.
3. Confidential & Reliable Services – Your tax data is safe with us.