Therefore, let us all honour this patriotic exercise and submit our tax returns in good time for the betterment of our nation.
During one of our taxpayer education and sensitisation forums, one (whom for the purpose of this column I will call Jack) asked to talk to me over a critical matter which he said had been nagging him and his colleagues at their workplace for a long time.
Jack wondered why, as an employee, he was required to declare his employment income for a given year and file the individual annual income tax return on the same. He believed the monthly Pay As You Earn (PAYE) deduction by his employer was final as the employer declares, files and pays the tax on his behalf. In fact, in his own words, the filing of individual annual income tax returns is a replication of tasks.
ACCOUNTABILITY
Jack’s concern epitomises the sentiments of many taxpayers with employment income and who are required to file their individual annual income tax returns on or before June 30.
The requirement by law for every individual taxpayers to file their annual income returns is founded on two major crucial reasons. First, in the case of a taxpayer with employment income, submission of individual annual income tax returns gives the Kenya Revenue Authority (KRA) an opportunity to verify if what the employer declared in their PAYE monthly submissions matches what the taxpayer has declared for a given year of income.
In case of a disparity between the two declarations, the necessary steps are taken to address the anomaly. This also serves to enhance accountability and transparency, so that we don’t have instances where an employer deducts PAYE from their employee’s income but fails to remit it to KRA.
INSTALMENTS
Secondly, filing of an individual return provides an opportunity for employees with additional income to declare the extra sources.
These may include rental income, consultancy, farming or any other businesses. Such taxpayers are required to declare the additional income and pay the tax due by April 30 and subsequently file the return by June 30. For individual taxpayers whose tax payable in a year is Sh40,000 and above, the tax should be paid in four equal instalments and the balance cleared by April 30.
Monthly rental income (MRI), however, is payable at 10 per cent of the gross residential rent received on a monthly basis for each taxpayer (including employees) receiving a residential rent of Sh10 million and below in each year. Payment is due on or before 20th of the month following the month rent was received.
CLARIFICATION
According to the Income Tax Act, the filing season for individual annual income tax returns opens on January 1 and runs for six months up to June 30. Is there, then, a reason to file your return late? The unanimous answer here is No. The long span over which the exercise takes place ensures that taxpayers get ample time to submit their returns.
Early filing of tax returns presents a load of benefits to individual taxpayers. For instance, when you start working on your return early, you will have enough room to seek clarification or any form of assistance from any of KRA service centres countrywide. In addition, filing early gives you the peace of mind you need to go about your daily business.
When taxpayers file their tax returns early, they are also saved from the agony of hefty penalties. The Tax Procedures Act 2015 prescribes a Sh2,000 penalty for any individual income tax return filed after the June 30 deadline and an interest of one per cent of the tax due.
P9 FORM
The question, therefore, is, why risk the penalty and interest yet the filing period is long enough for the exercise?
Employers, on the other hand, are key stakeholders in this crucial exercise. This is because, apart from deducting, remitting and filing PAYE every month, they are required by law to issue tax deduction forms, known as P9, to their employees after every end of the year.
A P9 form guides the employee in filing their annual income tax returns. In the past, taxpayers who have on varying instances submitted their tax returns late have directed a pointing finger at their employers for late issuance of this requisite document.
LONG QUEUES
It is, therefore, essential for employers to issue their employees with P9 forms early to enable them to submit their returns in good time.
Over the years, before KRA rolled out the phenomenal iTax platform, the filing season would be characterised by long queues, especially as the deadline approached. In most cases, taxpayers would cheat the deadline by an eyelash-wide margin.
However, since its rollout, iTax has not only revolutionised the tax return filing experience, but also empowered the taxpayer to file their returns from any part of the world at any time.
PATRIOTIC
In the spirit of facilitating all the taxpayers at all times and especially during filing seasons, KRA has so far enhanced its presence countrywide through establishment of service centres and desks at Huduma Centres. Working hours have also been extended at the centres for optimum service delivery.
Therefore, let us all honour this patriotic exercise and submit our tax returns in good time for the betterment of our nation.
Daily Nations 2018,By Ms Njagi is the Kenya Revenue Authority’s Chief Manager for taxpayer services in Domestic Taxes Department. [email protected].
