The Tax Procedures (Amendment) (No. 2) Bill, 2024

Background

The Tax Procedures (Amendment) (No. 2) Bill, 2024 seeks to amend the Tax Procedures Act (Cap. 469B). The principal object of the Bill is to refine tax administration procedures, leverage digital technology to facilitate cost-effective revenue collection, provide relief frameworks for unrecoverable taxes, and extend the previously enacted tax amnesty programme.

Key Amendments

• Electronic Tax Invoices (Section 23A): Prescribes the exact details required in an electronic tax invoice, including the supplier and purchaser's name, address, PIN, invoice serial number, date/time, and transaction details.
• Tax Amnesty Extension (Section 37E): Restructures the amnesty program, pushing the deadline for full payment of outstanding principal taxes to 30th June 2025 to qualify for waiver of interest, penalties, or fines accrued up to 31st December 2022.
• Tax Abandonment (Section 37F): Establishes a formal process for the relief of tax debts due to recovery difficulties or hardship, requiring Cabinet Secretary approval and regular Gazette publication of names and amounts.
• Offset and Refund Timelines (Section 47): Allows taxpayers to apply to offset overpaid taxes against outstanding debts or future liabilities, with refunds of overpaid taxes limited to five years for income tax and six months for other taxes.
• System Integration (Section 59A): Empowers the Commissioner to require taxpayers with turnovers exceeding KSh 5 million to integrate their electronic systems with the KRA system.
• Exclusion of Weekends and Holidays (Section 77): Excludes Saturdays, Sundays, and public holidays from the computation of time limits for lodging tax objections and appeals.

New Obligations

• Purchasers of Small Business Goods: If buying from a small business or small-scale farmer whose turnover does not exceed KSh 1 million, the purchaser is responsible for issuing the tax invoice to ascertain tax liability.
• Remote Workers' PINs: Individuals working remotely outside Kenya for an employer in Kenya (excluding those working for the national carrier) must now obtain a KRA Personal Identification Number (PIN).
• Withholding Tax Agents: Agents must remit withheld taxes by the fifth working day after making the deduction.

Penalties

• Failure to Integrate Systems: A person with a turnover exceeding KSh 5 million who fails to comply with a notice to integrate their electronic tax system commits an offence and is liable to a penalty not exceeding KSh 500,000 for every month or part thereof that the failure continues.
• EPZ Late Returns: Export processing zone (EPZ) enterprises that fail to submit required returns are subject to a penalty of KSh 20,000 per month.
• Withholding Tax Defaults: Failure to withhold or remit withholding tax by the fifth working day results in a penalty of 10% of the amount not withheld or remitted.

Transitional Provisions

• Taxpayers who had been granted amnesty on unpaid principal taxes as of 31st December 2022, but who have unpaid amounts remaining on 30th June 2025, will lose their amnesty and the outstanding sums will attract standard interest and penalties.