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Penalties

PENALTIES, INTEREST & FINES

TOT Rules as set out in ITA

  • Failure to submit a tax return under regulation (9). Default penalty is KES 2,000.
  • Return submission within the required period, but Failure to pay tax due. Penalty of KES 2,000.
  • Failure to pay tax due, or part thereof, under rule 9: Interest is 2% per month, on the unpaid tax. 
(1) Late submission penalty or Returns Section 83 TPA

The amount of tax payable or due under the return shall be reduced by the amounts already paid and withholding tax credits. 

  • PAYE: Higher of,
    • 25% of the tax due or 
    • 10,000 shillings.
  • TOT return: 
  • VAT or excise duty: (Wef 01/07/2018) Higher of, 
    • 5% of tax payable under the return or 
    • 10,000 shillings,  
  • Other cases—(Wef 01/07/2018)
    • i)  Non-individual: Higher of 
      • 5% of tax payable under the return or 
      • 20,000 shillings,; or 
    • ii) Individual: Higher of 
      • 5% of tax payable under the return or 
      • 2,000 shillings.

(2) Failure to submit a document, other than a tax return. Section 83 TPA

  • Penalty of 1,000 shillings per day or part day of default .(maximum KES 50,000.)
  • A person ceases to be in default at the time the document is received by the Commissioner.

(3) Late Payment penalty: Section 83A TPA
  • Penalty of 5% of the tax due. (wef 01/07/2018)
(4) Short-Falls(s.84 TPA)
  • Penalty = 75% of the shortfall, 
  • Above will increase by 10% & 25% points on 2nd and 3rd/subsequent applications respectively.
(5) Tax avoidance:
  • Penalty = Double the amount of the tax that would have been avoided 
(6) Failing to comply with electronic tax system(Submission of return/pay a tax - electronically)
  • Penalty = Ksh100,000
(7) Failure to appear before the Commissioner: Penalty--
  • 10,000 shillings (For individual)
  • 100,000 shillings (For any other case)
(8) Fraudulent claim for refund:
  • Penalty = two times the amount of the claim.
(9) Unauthorized access or improper use of computerized tax system - FINE.
  • 2 or less Years imprisonment and/or fine not exceeding 400,000 Ksh (For natural person)
  • Fine not exceeding 1,000,000 Ksh(For body corporate)
(10) Interference with computerized tax systems.
  • 3 or less Years imprisonment and/or fine not exceeding 800,000 Ksh (For natural person only)
(11)Sanctions for offences (FINES):
  • Under this Act ** =  
    • Ksh<1M and/or <3years imprisonment.
  • Under sections 98(1) or 102(1) =  
    • Ksh<2M and/or <5years imprisonment.
  • Under section 97 =  
    • Ksh<10M or double the tax evaded(the higher) and/or  <10years imprisonment.
  • Under section 92 =  
    • Ksh<5M or double the tax evaded(the higher) and/or  <5years imprisonment.
(12)Failure to apply for:
  • Registration(or deregistration or cancellation of registration) as required under a tax law:
    • Penalty KES 100,000 per month or part of it, to a maximum of Kes1M (S.81 TPA)
(13)Failure to keep, retain, or maintain a document as required under a tax law:
    • Higher of, 10% of relevant tax on document or Kes100,000. (S.82TPA)
(14)Failure to refund tax paid by commissioner then recovered from payer: (s.31(3)VATA)
    • Interest of 2% per month or part thereof of the tax refunded (Not more than refund*).
(15)Failure to register/cancellation, doing unwanted cancellation, etc: (s.37VATA)
    • Fine <200,000 shillings or to imprisonment for a term <2 years, or to both.
(16)VAT offenses with no other penalty: (s.63VATA)
    • Fine <1M shillings, or to imprisonment for a term <3years, or to both.
(17)Corporate body: Penalty on every director (officer) failure to make deductions- WHT(S.35), Annuities/will (s.36) and PAYE(s.37). Refer(s.37A-ITA).  Each shall be liable to: 
  • fine of  ranging from Kes 10,000 to 200,000 or 
  • imprisonment for a term not exceeding 2 years or 
  • both.
 (18)Failure for Employer to account for PAYE:( s.37(2)ITA )
  • Penalty- higher of 25% of the amount of tax involved or Kes10,000.
(19) General penalty for other offences under ITA for which no other penalty applies:(s107 ITA)
  • Fine <Kes 100,000 or imprisonment for a term <6 Months or both.
(20) Late payment interest (s38TPA)
  • 1% pm or part of a month on the amount unpaid for the period commencing on the date the tax was due and ending on the date the tax is paid.
  • The accrued late payment interest shall not, in aggregate, exceed the principal tax liability.
(21) Penalty on underpayment of instalment tax. (s72C ITA)
  • 20% of the difference between the amount of instalment tax payable and the instalment tax actually paid multiplied by 110% shall be payable.

(22) PAYE: Penalty on Employer in failure to deduct/ account for / supply the Commissioner with a certificate : s.37(2)

  • Penalty = 25% of principal tax or Kes 10,000 whichever is greater.
(22) For EPZ- failure to submit a return or late submission of a return (11Nth Schedule)
  • Penalty: 2,000 shillings per day for as long as the failure continues.
(23) A person guilty of an offence under these PAYE Rules:
  • fine not exceeding 10,000 shillings or 
  • to imprisonment for a term not exceeding six months or to both.
(24)-Penalty for failure to deduct or remit withholding tax under WHT Rules
  • 10% of the amount of the tax involved, subject to a maximum penalty of 1M shillings.

NITA - Industrial Training Act
Penalties: 
  • Failure to Pay: 5% of the levy shall be added to the amount for each month or part of a month thereafter that the amount due remains unpaid. .(s.5B(3))
  • Failure to comply : fine not exceeding one hundred thousand shillings and  
  • Failure to comply after a conviction: Penalty not exceeding fifty thousand shillings for every month or part thereof during which such failure is continued. (s.5B(4))

NSSF ACT-
Registration of employer and employee. Section 19
  • (6) Any employer who fails, neglects or refuses to register under this section commits an offence and shall be liable to a fine not exceeding Kenya shillings fifty thousand; 
  • (7)(c)retain, such register or record for such period as the Board may prescribe, but such period shall not exceed ten years;
Penalty for default in payment and incorrect contributions. Section 27
  • 5% of the amount of that contribution shall be added to the contribution for each month or part of a month that the amount due remains unpaid,

Catering Training and Tourism Development Levy:
Rate:
  • Levy: 2% of the gross receipts derived from the sale of food, drinks and the provision of accommodation and other services supplied during each month.(SUBSIDIARY LEGISLATION-Orders under section 16- Catering training and tourism development levy order, 2000)
  • Hotel manager’s licence:  10% of the annual licence fee .
Penalty 
  • 3% of the amount shall be added to the amount payable for each month or part of it. Section 16(5) The hotels and restaurants act
  • Failure to comply with provisions: Kes20,000
NHIF


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A person liable to a penalty may apply in writing to the Commissioner for the remission of the penalty or interest payable and such application shall include the reasons for the application. S.89(6)TPA

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