Point in Time
Act No: No. 29 of 2015
Act Title: TAX PROCEDURES
[ Date of commencement: 19th January, 2016. ]
[ Date of assent: 15th December, 2015. ]
Arrangement of Sections
PART I — PRELIMINARY
1.
Short title

This Act may be cited as the Tax Procedures Act, 2015.

2.
Object and purpose of the Act
(1)

The object and purpose of this Act is to provide uniform procedures for—

(a)

consistency and efficiency in the administration of tax laws;

(b)

facilitation of tax compliance by taxpayers; and

(c)

effective and efficient collection of tax.

(2)

Unless a tax law specifies a procedure that is unique to the administration of a tax thereunder, the procedures provided for under this Act shall apply.

(3)

This Act shall be interpreted to promote the object of the Act.

PART II — ADMINISTRATION OF TAX LAWS
4.
Functions and powers of the Commissioner
(1)

The Commissioner shall be responsible for—

(a)

the control and collection of taxes;

(b)

accounting for collected taxes; and

(c)

subject to the direction and control of the Cabinet Secretary, for the general administration of tax laws.

(2)

The Commissioner shall appoint such authorised officers as may be necessary for the administration of a tax law.

(3)

An authorised officer shall enforce, and ensure due compliance with, the provisions of the tax law, and shall make all due inquiries in relation thereto.

(4)

An authorised officer shall produce on demand such documents approved by the Commissioner establishing the officer’s identity.

5.
Delegation
(1)

The Commissioner may, in relation to a tax law, delegate in writing to an authorised officer the performance of any of the powers or functions of the Commissioner under that tax law, other than the power of the Commissioner under section 4.

(2)

The Commissioner may revoke, in writing, a delegated power or function at any time and nothing in this section prevents the Commissioner from exercising a delegated power or performing a delegated function.

(3)

A decision made, and a notice or communication issued or signed, by an authorised officer may be withdrawn or amended by the Commissioner or by that authorised officer, and shall, for the purposes of the tax law to which it relates and until it has been withdrawn, be deemed to have been made, issued or signed by the Commissioner.

PART III — TAXPAYERS
9.
Supply of information upon change in particulars

Every person carrying on a business shall, within thirty days of the occurrence of a change, notify the Commissioner of any changes—

(a)

in the place of business, trading name and registered address;

(b)

in the case of—

(i) an incorporated person, of the persons with share-holding of ten per cent or more of the issued share capital;
(ii) a nominee ownership, to disclose the beneficial owner of the shareholding;
(iii) a trust, the full identity and address details of trustees and beneficiaries of the trust;
(iv) a partnership, the identity and address of all partners; or
(v) cessation or sale of the business, all relevant information regarding liquidation or details of ownership.
10.
Deregistration
(1)

A person who ceases to be required to be registered for the purposes of a tax law shall apply to the Commissioner for deregistration under that specific tax law.

(2)

A registered person shall apply for deregistration under subsection (1)—

(a)

in the prescribed form; and

(b)

within thirty days of ceasing to be required to be registered under that tax law.

(3)

Where a tax law requires a registered person to apply for deregistration in addition to the requirement under this section, that person shall also apply for deregistration in accordance with the provision of that tax law.

(4)

The Commissioner shall notify in writing a registered person of the deregistration of that person if the Commissioner is satisfied that the person is no longer required to be registered for the purpose of a tax law.

(5)

The Commissioner may, on his or her own motion and by notice in writing to a person or a person’s tax representative, deregister the person when satisfied that the person is eligible for deregistration, including when the person is a natural person who has died, a company that has been liquidated, or any other person that has otherwise ceased to exist.

(6)

A person shall cease to be a registered person on the date of notification by the Commissioner in relation to the deregistration.

(7)

Where the Commissioner fails to respond to the application for deregistration within six months, the applicant shall be deemed to be deregistered.

(8)

Where the deregistration of a person requires the cancellation of that person’s registration or licence under a tax law, that registration or license shall be cancelled on the effective date of the deregistration.

11.
Personal identification number

The Commissioner shall issue a number, to be known as a personal identification number (“PIN”), to a person registered for the purposes of a tax law and that person shall use the PIN as may be required under this Act.

13.
Use of a PIN
(1)

A person shall state his or her PIN—

(a)

on any return, notice or other document submitted, lodged, or used for the purposes of a tax law, or as otherwise required under a tax law; or

(b)

on any documentation required for a transaction specified in the First Schedule.

(2)

Subject to subsection (3), one PIN shall be issued to each person and it shall not be used by a person other than the person to whom it was issued.

(3)

The PIN of a person may be used by a tax agent when—

(a)

the person has given written permission to the tax agent to use the PIN; and

(b)

the tax agent uses the PIN only in respect of the tax affairs of the person.

14.
Cancellation of a PIN
(1)

A person issued with a PIN under section 12(3) but who is not registered under section 8 shall notify the Commissioner in writing when that person no longer requires a PIN for the purposes of a transaction specified in the First Schedule.

(2)

The Commissioner shall, by notice in writing, cancel the PIN of a person when satisfied that—

(a)

the person has been deregistered under section 10;

(b)

the person is required to notify the Commissioner under subsection (1) but has failed to do so;

(c)

the person has notified the Commissioner under subsection (1);

(d)

a PIN has been issued to the person under an identity that is not the person's true identity; or

(e)

the person had been previously issued with a PIN that is still in force.

(3)

The Commissioner may, at any time and in writing, cancel a PIN issued to a person and issue the person with a new PIN.

15.
Taxpayer's tax representative
(1)

A person is the tax representative of another person for the purposes of this Act or a tax law, in the case of—

(a)

an individual under a legal disability, if that person is the guardian or other legal representative who receives or is entitled to receive income on behalf, or for the benefit, of the individual;

(b)

a company within paragraph (a) of the definition in section 3, if that person is the chief executive officer, managing director, company secretary, treasurer, trustee or a resident director or similar officer of the company acting or purporting to act in such a position;

(c)

an association of persons, if that person is responsible for accounting for the receipt or payment of moneys or funds on behalf of the association;

(d)

a partnership or limited partnership, if that person is a partner in the partnership or a manager of the partnership responsible for accounting for the receipt or payment of moneys or funds on behalf of the partnership;

(e)

a trust (other than the estate of a deceased taxpayer), if that person is a trustee of the trust;

(f)

the National Government, or a county government, the judiciary and the Parliamentary Service Commission if that person is the accounting officer;

(g)

a company within paragraph (b) of the definition in section 3, a foreign government, political subdivision of a foreign government, or international organisation, if that person is responsible for accounting for the receipt or payment of moneys or funds in Kenya on behalf of the company, foreign government, political subdivision of the foreign government, or international organisation;

(h)

a taxpayer to whom section 17 applies, if that person is the person appointed in respect of the taxpayer under that section;

(i)

in the case of a non-resident person, if that person is controlling the non-resident person's affairs in Kenya, including a manager of a business of that non-resident person; or

(j)

any person (including a person referred to in paragraphs (a) to (j)), if that person is the agent or representative of the person as provided for under a tax law or specified by the Commissioner, by notice in writing to the agent or representative.

(2)

In this section—

“individual under a legal disability” includes a minor or an individual who is unable to comply with the requirements of a tax law because he or she is impaired by a physical or mental disability;

"non-resident person” means a person who is not a resident for the purpose of a tax law and includes a partnership or trust settled or formed outside Kenya;

"resident” has the meaning assigned to it under the Income Tax Act; and

"resident director” means a director who is resident.

20.
Licensing of tax agents
(1)

The Commissioner shall issue a licence to an applicant under section 19 if the applicant is a fit and proper person to prepare tax returns, notices of objection, or otherwise transact business with the Commissioner under a tax law on behalf of a taxpayer.

(2)

The Commissioner shall issue a licence to a partnership under section 19 if—

(a)

a partner in the partnership or an employee of the partnership is a fit and proper person to prepare tax returns, notices of objection and transact business with the Commissioner on behalf of a taxpayer; and

(b)

every partner in the partnership is of good character and integrity.

(3)

The Regulations under this Act may provide for guidelines for determining whether or not a person is a fit and proper person to prepare tax returns, notices of objection, or transact business with the Commissioner on behalf of taxpayers.

(4)

The licence issued to a tax agent shall be valid until it is cancelled under section 22.

(5)

The Commissioner shall notify in writing an applicant under section 19 of the decision on the application.

(6)

The Commissioner may, from time to time, publish, a list of persons issued with licenses to act or operate as tax agents.

21.
Limitation on the performance of tax services for taxpayers
(1)

A person, other than a tax agent, shall not—

(a)

represent another person as that other person's tax agent; or

(b)

offer assistance to another person for a reward in respect of that other person's rights or obligations under a tax law.

(2)

Subsection (1) (b) shall not apply to a legal practitioner acting in the ordinary course of the person's profession.

PART IV — RECORD-KEEPING
23.
Record-keeping
(1)

A person shall—

(a)

maintain any document required under a tax law, in either of the official languages;

(b)

maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained; and

(c)

subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.

(2)

The unit of currency in books of account, records, paper registers, tax returns or tax invoices shall be in Kenya shillings.

(3)

When, at the end of the period specified in subsection (1)(c), a document—

(a)

relates to an amended assessment, the person shall retain the document until the period specified in section 31(7) has expired; or

(b)

is necessary for a proceeding commenced before the end of the five year period, the person shall retain the document until all proceedings have been completed.

(4)

When a document referred to subsection (1) is not in an official language, the Commissioner may, by notice in writing, require the person required to keep the document to provide, at the person's expense, a translation into an official language by a translator approved by the Commissioner by the date specified in the notice.

(5)

Despite anything in any tax law, the Regulations may provide for a simplified system of record-keeping for small businesses.

PART V — TAX RETURNS
24.
Submission of tax returns
(1)

A person required to submit a tax return under a tax law shall submit the return in the approved form and in the manner prescribed by the Commissioner.

(2)

The Commissioner shall not be bound by a tax return or information provided by, or on behalf of, a taxpayer and the Commissioner may assess a taxpayer's tax liability using any information available to the Commissioner.

26.
Commissioner may require taxpayer to submit a tax return
(1)

This section shall apply where, during a reporting period—

(a)

bankruptcy, winding up or liquidation proceedings have been instituted against a taxpayer;

(b)

the Commissioner has reason to believe that a taxpayer is about to leave Kenya permanently; or

(c)

a taxpayer has ceased, or the Commissioner has reason to believe that a taxpayer will cease, carrying on any business in Kenya; or

(d)

a taxpayer has died.

(2)

The Commissioner may at any time during a reporting period, by notice in writing, require—

(a)

the taxpayer or the taxpayer's tax representative to submit a tax return for the reporting period by the date specified in the notice being a date that may be before the date that the return for the reporting period would otherwise be due; and

(b)

pay any tax due in relation to the return.

(3)

Where a taxpayer is subject to more than one tax, this section shall apply separately for each tax.

27.
Tax return duly submitted

A tax return purported to have been submitted by or on behalf of a taxpayer by another person shall be treated as having been submitted by the taxpayer or with the taxpayer's authority unless the contrary is proved.

PART VI — TAX ASSESSMENTS
28.
Self-assessment
(1)

A taxpayer who has submitted a self-assessment return in the prescribed form for a reporting period shall be treated as having made an assessment of the amount of tax payable (including a nil amount) for the reporting period to which the return relates being the amount set out in the return.

(2)

If a taxpayer liable for income tax has submitted a self-assessment return in the prescribed form for a year of income and the taxpayer has a deficit for the year, the taxpayer shall be treated as having made an assessment of the amount of the deficit for the year being the amount set out in the return.

(3)

If a registered person has submitted a self-assessment return in the approved form for a tax period and the taxpayer's total input tax for the period exceeds the taxpayer's output tax for the period, the registered person shall be treated as having made an assessment of the amount of the excess input tax for the period being that amount set out in the return.

(4)

A tax return in the approved form completed and submitted electronically by a taxpayer shall be a self-assessment return despite—

(a)

the form containing pre-entered information provided by the Commissioner; or

(b)

the tax payable being computed electronically as information is being entered into the form.

29.
Default assessment
(1)

Where a taxpayer has failed to submit a tax return for a reporting period in accordance with the provisions of a tax law, the Commissioner may, based on such information as may be available and to the best of his or her judgement, make an assessment (referred to as a "default assessment") of—

(a)

the amount of the deficit in the case of a deficit carried forward under the Income Tax Act (Cap. 470) for the period;

(b)

the amount of the excess in the case of an excess of input tax carried forward under the Value Added Tax Act, 2013 (No. 35 of 2013), for the period; or

(c)

the tax (including a nil amount) payable by the taxpayer for the period in any other case.

(2)

The Commissioner shall notify in writing a taxpayer assessed under subsection (1) of the assessment and the Commissioner shall specify—

(a)

the amount assessed as tax or the amount of a deficit or excess of input tax carried forward, as the case may be;

(b)

the amount assessed as late submission penalty and any late payment penalty payable in respect of the tax, deficit or excess input tax assessed;

(c)

the amount of any late payment interest payable in respect of the tax assessed;

(d)

the reporting period to which the assessment relates;

(e)

the due date for payment of the tax, penalty, and interest being a date that is not less than 30 days from the date of service of the notice; and

(f)

the manner of objecting to the assessment.

(3)

A written notification by the Commissioner of an assessment under this section shall not alter the due date (referred to as the "original due date") for payment of the tax payable under the assessment as determined under the tax law imposing the tax, and any late payment penalty or late payment interest shall remain payable based on the original due date.

(4)

This section shall not apply for the purposes of a tax that is not collected by assessment.

(5)

Subject to subsection (6), an assessment under subsection (1) shall not be made after five years immediately following the last date of the reporting period to which the assessment relates.

(6)

Subsection (5) shall not apply in the case of gross or wilful neglect, evasion or fraud by a taxpayer.

30.
Advance assessment
(1)

Subject to subsection (2), the Commissioner may, based on the available information and to the best of his or her judgement, make an assessment (referred to as an "advance assessment") of the tax payable by a taxpayer specified in section 26 for a reporting period.

(2)

The Commissioner shall make an advance assessment of a taxpayer if the taxpayer has not submitted a return for the reporting period.

(3)

An advance assessment—

(a)

may be made before the date on which the taxpayer's return for the period is due; and

(b)

shall be made in accordance with the tax law in force at the date the assessment is made.

(4)

The Commissioner shall notify in writing a taxpayer assessed under subsection (1) of the advance assessment and specify—

(a)

the amount of tax assessed;

(b)

the amount of any penalty payable in respect of the tax assessed;

(c)

the reporting period to which the assessment relates;

(d)

the due date for payment of the tax and penalty; and

(e)

the manner of objecting to the assessment.

(5)

An advance assessment may be amended under section 31 so that the taxpayer is assessed in respect of the whole of the reporting period to which the advance assessment relates.

(6)

Despite the provisions of this section, a taxpayer shall submit a tax return as required by this Act or the relevant tax law in relation to an advance assessment of tax by the Commissioner.

PART VII— COLLECTION AND RECOVERY OF TAX AND REFUND OF TAX
32.
Tax as a debt due to the State
(1)

A tax payable by a person under a tax law shall be a debt due to the Government and shall be payable to the Commissioner.

(2)

A taxpayer who is required to pay a tax electronically under a tax law or section 75 of this Act shall pay the tax electronically unless he or she is authorised in writing by the Commissioner to use another method of payment.

34.
Priority of tax
(1)

The following amounts shall be held in trust for the Government by the person receiving or withholding the amount—

(a)

the value added tax payable on taxable supplies made by the person (net of any deduction for input tax allowed) when the person is a registered person under the Value Added Tax Act, 2013 (No. 35 of 2013);

(b)

the excise duty payable on the removal of excisable goods from the person's factory or the supply of excisable services by the person

when the person is a licensed person under the Excise Duty Act (No. 23 of 2015);

(c)

withholding tax; and

(d)

an amount that a payer is required to pay under a notice issued under section 41(2).

(2)

If the person referred to in subsection (1) is liquidated or is declared bankrupt, the amount referred to in subsection (1) shall not form part of the estate of the person in liquidation or bankruptcy and shall be paid to the Commissioner before any distribution of property is made.

(3)

Despite the provision of any other written law, the withholding tax deducted by a person—

(a)

shall not be subject to attachment in respect of any debt or liability of that person;

(b)

shall be a first charge on the payment or amount from which the tax is withheld or deducted; and

(c)

shall be deducted prior to any other deduction that the person may be required to make from the payment or amount under an order of any court.

35.
Order of payment
(1)

When a taxpayer is liable to pay a penalty or a late payment interest in relation to a tax liability and the taxpayer makes a payment that is less than the total amount of tax, penalty and interest due, the amount paid shall be applied in the following order—

(a)

firstly in payment of the tax liability;

(b)

secondly in payment of penalty; and

(c)

finally the balance remaining shall be applied against any late payment interest.

(2)

When a taxpayer faces more than one tax liability at the time a payment is made, the payment shall be applied against the tax liabilities in the order in which the tax liabilities arose.

(3)

Where the interest payable under this section accrues, the aggregate interest payable shall not exceed the principal tax liability.

36.
Security for payment of tax

The Commissioner may, for the purposes of securing the payment of any tax due or which shall become due, require a person to furnish a security in such manner and in such amount as the Commissioner may prescribe.

37.
Relief because of doubt or difficulty in recovery of tax
(1)

This section applies where the Commissioner determines that—

(a)

it may be impossible to recover an unpaid tax;

(b)

there is undue difficulty or expense in the recovery of an unpaid tax; or

(c)

there is hardship or inequity in relation to the recovery of an unpaid tax.

(2)

Despite the provision of any tax law, the Commissioner may, with the prior written approval of the Cabinet Secretary, refrain from assessing or recovering an unpaid tax and the liability in relation to the tax shall be deemed to be extinguished or the tax shall be deemed to be abandoned or remitted, as the case may be.

(3)

In any case referred to the Cabinet Secretary under subsection (1) and where appropriate, the Cabinet Secretary may direct the Commissioner in writing—

(a)

to take such action as the Cabinet Secretary may deem fit; or

(b)

to obtain the directions of the court in relation to the case.

38.
Late payment interest
(1)

Subject to subsection (2), a person who fails to pay a tax on or before the due date for the payment of the tax shall be liable for late payment interest at a rate equal to one per cent per month 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.

(2)

If it is found that the principal amount or part of the principal amount was not payable, the late payment interest paid by a person under subsection (1) shall be refunded to that person to the extent that the principal amount to which the interest relates is found not to have been payable.

(3)

The late payment interest payable under this section shall be computed as simple interest.

(4)

The late payment interest payable under this section shall be in addition to any late payment penalty or sanction imposed under Part XII in respect of the same act or omission.

(5)

The late payment interest shall be payable to the Commissioner and shall be treated as a tax payable by the person liable for the interest.

(6)

Where the Commissioner notifies a person of the person's outstanding tax liability under a tax law or this Act and that person pays the outstanding tax in full (including late payment interest payable up to the date of the notification) within the time specified in the notification, a late payment interest shall not accrue for the period between the date of notification and the date of payment.

(7)

A late payment interest payable by a person—

(a)

in respect of withholding tax payable by the person; or

(b)

in respect of an amount referred to in section 16(5) or (6), 17(3)(c), 18(1) or (2), 42(3), 43(9) or 46, payable by the person, shall be borne personally by the person and shall not be recoverable from any other person.

(8)

The accrued late payment interest shall not, in aggregate, exceed the principal tax liability.

39.
Recovery of unpaid tax by suit
(1)

Despite any other written law for the time being in force, the Commissioner may recover an unpaid tax as a civil debt due to the Government and, where the amount of unpaid tax does not exceed one hundred thousand shillings, the debt shall be recoverable summarily.

(2)

In any suit for the recovery of an unpaid tax, the production of a certificate signed by the Commissioner stating—

(a)

the name and address of the person who is the defendant in the suit; and

(b)

the amount of tax and late payment interest (if any) due by the person,

shall be conclusive evidence that the amount stated on the certificate is due from that person.

40.
Security on property for unpaid tax
(1)

Where a taxpayer, being the owner of land or a building in Kenya, fails to pay a tax by the due date, the Commissioner may direct the Land Registrar in writing that the land or building, to the extent of the taxpayer's interest in the land or building, be the subject of a security for the unpaid tax specified in the notification to the Land Registrar:

Provided that the Commissioner shall notify the taxpayer in writing of the direction within seven days from the date of the notification to the Land Registrar.