The Kenyan Treasury has proposed a new deadline of June 30, 2024 for tax defaulters to pay their principal taxes as a precondition for amnesty on fines, penalties, and interest on their accumulated debt. According to the Finance Bill 2023, which was recently published, tax debtors who paid all the principal tax owed before December 31, 2022 will be granted amnesty from penalties, interests, or fines. However, those who have not paid their principal tax by December 31, 2022 must apply to the Commissioner (Kenya Revenue Authority) for amnesty of interest, penalties or fines on their unpaid taxes and propose a payment plan for the outstanding amount.
The amnesty will only be granted if the outstanding principal tax dues are cleared by June 30, 2024. The Treasury proposes interest and penalty charges for dues not cleared by June 30, 2024.
Under the previous tax amnesty program that ended on December 31, 2022, the taxman collected at least Sh9.07 billion from the second phase of the program after 752 additional defaulters voluntarily declared unpaid taxes. The program allowed defaulters who declare their pending liability and pay within the first year to enjoy a 100 percent interest and penalty waiver. Businesses and individuals that disclosed and paid the pending tax liability within the second year of the program were to receive a remission of 50 percent while payments that come in the third year will have 25 percent relief.
The proposed deadline is expected to incentivize tax defaulters to pay their outstanding taxes and enjoy amnesty on interest, penalties, and fines. It remains to be seen whether this new proposal will help to significantly increase tax compliance and revenue collection in Kenya.