It’s that time of the year again when those with income are required to file last year’s tax returns with the Kenya Revenue Authority (KRA).

As the clock ticks towards the June 30, those who fail to meet the deadline are liable to penalties.

“All individuals with an income and businesses are required to file returns,” says Mr Ashif Kassam, a partner at RSM Ashvir, an audit, tax and consulting firm.

A tax return declares one’s income or that of a business and the taxable amount. Under the Income Tax Act, one is liable to a penalty at the rate of five per cent of the net tax due for every 12 months for failure to submit the return forms.

“The reason for filing income tax returns to declare to Kenya Revenue Authority your income and expenses for last year,” says Kassam.

KRA has mailed return forms to companies employers with more than 150 employees. The forms can also be collected from KRA offices or downloaded from the revenue collector’s website.

Efforts have also been made towards facilitating returns filing electronically. Currently, Value Added Tax (VAT) returns can be filed online. Details required in the individual return form include income from employment, business, farming, rent and interest. Income from one’s wife is also treated separately in the form.

Declare all income

An individual is required to file income tax return if his/her income exceeds the basic exemption limit.

Taxpayers are required to declare all income earned last year. If a man is married and living with his wife, her income is deemed to be his income for income tax purposes.

It should therefore be included in the return. A married woman should complete her own return form if she is separated from her husband either by a court order or by agreement or is a resident of Kenya and her husband is not.

Those failing to furnish accounts and for making an incorrect income return or statement or for claiming false personal relief are liable to additional tax.

Failure to furnish a full and true return and accounts or making a false return/statement may also be the subject of a criminal charge.

place of work

An individual taxpayer should also include the value of any benefit or facility enjoyed as a result of employment. These include residence or meals provided at your employer’s place of business; domestic servants or transport from your residence to your place of work.

Benefits in kind or in the form of service, however need not be included if the total value during the year was less than Sh24,000.

If an employer provides free medical cover, it need not be included except if the employer pays doctor’s bills or reimburses the employee in cash.

One is advised to consult with the employer as to the value of benefits received. If any amount is paid by your employer on your behalf for personal liabilities such as household bills, these are regarded as income from employment and must be taxed.

Use of employer’s car for private purposes is a benefit. One should therefore state the model, make and rating of the car in the returns forms.

Contributions made to any registered retirement fund or to a provident fund are deducted before tax is calculated.

The amount of insurance relief is 15 per cent of premium paid provided that it is in respect of the taxpayer’s life or life of his wife or child. The insurance relief shall not exceed Sh45,000 per annum.

minimum year

A copy of the policy has to be attached and if this is an education policy it has to be for a minimum of 10 years.

The individual rates of tax are 10 per cent on the first Sh121,968, some 15 per cent on the next Sh114,912, some 20 per cent on the next Sh114,912, some 25 per cent on the next Sh114,912.00, and 30 per cent on all income over Sh466,704 per annum.

Source:  Jackson Okoth, The Standard Newspaper, 15/6/09