Key Changes in the Tax Procedures (Amendment) Act, 2024: Kenya's New Tax Regime
- Muhoro & Gitonga Associates
- Aug 29, 2024
- 6 min read
Updated: 5 days ago
Table of Contents
Extended Tax Amnesty Programme: A Second Chance
New Mechanism for Tax Recovery Relief
Reforming Tax Invoice Requirements: The E-Invoicing Mandate
Revisiting the Computation of Time in Tax Disputes
The E-Tax System: Mandatory Integration for High Turnover Businesses
Compliance Obligations, Requirements, and Timelines
Frequently Asked Questions (FAQ)
1. Introduction
The enactment of the Tax Procedures (Amendment) Act, 2024 (the "Act") marks a pivotal moment in Kenya's tax administration landscape. This legislation, which came into effect on December 27, 2024, introduces significant changes to the Tax Procedures Act, 2015, impacting compliance, dispute resolution, and overall tax management for both individuals and corporate entities operating in Kenya.
Kenyan businesses and taxpayers must urgently review their internal processes to ensure full compliance with the new statutory obligations and timelines.
2. Extended Tax Amnesty Programme: A Second Chance
One of the most immediate and impactful changes is the extension of the Tax Amnesty Programme. This provision, amending Section 37E of the Tax Procedures Act, offers a critical window of opportunity for taxpayers to regularise their affairs.
2.1. Key Amendments and Timelines
Extension Deadline: The deadline for paying all outstanding principal taxes to qualify for the amnesty has been extended to June 30, 2025 (from the previous June 30, 2024).
Qualifying Period: The amnesty applies to interest, penalties, and fines that accrued on principal tax debt up to December 31, 2022.
Compliance Requirement: To receive the amnesty, a person must:
Formally apply for the tax amnesty.
Pay all outstanding principal taxes by the new deadline of June 30, 2025.
Not incur a further tax debt thereafter.
Note: Taxpayers who had outstanding principal tax debts as of December 31, 2022, but did not meet the previous deadline now have an extended period to settle the principal amount and have the corresponding accrued interest and penalties for that period waived.
3. New Mechanism for Tax Recovery Relief
The Act introduces a new section, Section 37F, which re-establishes a framework for abandonment or relief of tax where recovery is deemed doubtful or unduly difficult.
3.1. When is Relief Applicable?
The Commissioner of Taxes may refer a case to the Cabinet Secretary for relief where it is determined that:
It may be impossible to recover the unpaid tax.
There would be undue difficulty or expense in recovering the unpaid tax.
There is hardship or inequity in relation to the recovery of an unpaid tax.
There is any other reason occasioning inability to recover the unpaid tax.
Upon review, the Cabinet Secretary for Finance may approve full or partial relief of the tax due. The Commissioner is now required to publish a notice in the Gazette every four months detailing the names of the taxpayers, the reasons for abandonment, and the amount of taxes abandoned, ensuring transparency and public accountability.
4. Reforming Tax Invoice Requirements: The E-Invoicing Mandate
The amendments aim to enhance the integrity of the tax system by tightening rules around electronic tax invoices, particularly addressing the integration of the Electronic Tax Invoice Management System (eTIMS).
4.1. Specifications for Electronic Tax Invoices
The Act now specifies mandatory content for an electronic tax invoice, including:
The words "TAX INVOICE".
Name, address, and PIN of the supplier.
Name, address, and PIN (if applicable) of the purchaser.
Serial number, date, and time of issue.
Description, quantity, and value of the supply
4.2. Introduction of Reverse E-Invoicing
A significant shift is the introduction of a reverse invoicing mechanism. For purchases made from small businesses or small-scale farmers whose annual turnover does not exceed KES 5 Million, the purchaser is obligated to issue the tax invoice.
This provision shifts the administrative burden away from small-scale traders and onto the larger purchasing entities, which are better equipped for electronic compliance.
4.3. Mandatory E-Tax System Integration
The Act reinforces the Commissioner's authority to mandate integration with KRA's electronic tax system. For businesses whose turnover exceeds KES 5 Million, the Commissioner may issue a notice requiring the business to integrate their data management system with the KRA system to submit electronic documents.
Non-compliance with this notice attracts a hefty penalty of KES 500,000 per month or part thereof that the failure continues.
5. Revisiting the Computation of Time in Tax Disputes
The Act has brought much needed clarity and fairness to the computation of statutory timelines for lodging tax objections and appeals.
5.1. Exclusion of Non-Working Days
The amendment to Section 77 of the Act provides that in computing the time limit for lodging a notice of objection to the Commissioner or an appeal to the Tax Appeals Tribunal, High Court, or Court of Appeal, Saturdays, Sundays, and public holidays shall be excluded.
This alignment with general principles of legal computation ensures that taxpayers are not unduly prejudiced by time limitations expiring on non-working days.
6. The E-Tax System: Mandatory Integration for High Turnover Businesses
The provisions under Section 4.3 are reiterated here to highlight the critical nature of the mandatory integration requirement.
The Act grants the Commissioner powers to issue a notice to high-turnover businesses, requiring them to integrate their data management systems for electronic document submission. Compliance is mandatory to avoid severe penalties.
7. Compliance Obligations, Requirements, and Timelines
The Tax Procedures (Amendment) Act, 2024, creates immediate action items for Kenyan businesses.
Obligation | Affected Parties | Timeline/Requirement | Compliance Notes |
Tax Amnesty Application & Payment | Taxpayers with principal debt up to Dec 31, 2022 | Pay all principal tax by June 30, 2025 | Must apply to the Commissioner and give a written undertaking. |
Electronic Tax Invoicing | All suppliers and purchasers | Immediate effect (Dec 27, 2024) | Ensure electronic invoices contain all statutory details (Sec. 23A). |
Reverse E-Invoicing | Purchasers from small businesses (turnover $\le$ KES 5M) | Immediate effect (Dec 27, 2024) | The purchaser must issue the e-invoice to ascertain the seller's tax liability. |
E-Tax System Integration | Businesses with turnover $>$ KES 5M | Upon receipt of notice from the Commissioner | Integrate systems to submit detailed transactional data as required. Penalty for non-compliance is KES 500,000 per month. |
Tax Dispute Timelines | All taxpayers involved in objections/appeals | Immediate effect (Dec 27, 2024) | Calculate objection/appeal deadlines by excluding Saturdays, Sundays, and Public Holidays. |
8. Frequently Asked Questions (FAQ)
Q: What is the main objective of the Tax Procedures (Amendment) Act, 2024?
A: The main objective is to enhance Kenya's overall tax administration efficiency, promote compliance by offering an extended tax amnesty, streamline the e-invoicing framework, and clarify procedural matters in tax disputes.
Q: Who qualifies for the extended Tax Amnesty Programme?
A: Any taxpayer with accrued interest, penalties, or fines on a principal tax debt that was outstanding on or before December 31, 2022, qualifies, provided they apply and pay the full outstanding principal tax amount by the new deadline of June 30, 2025.
Q: How does the new law affect the computation of time for my tax appeal?
A: The Act amends Section 77 of the principal Act to explicitly exclude Saturdays, Sundays, and public holidays when calculating the time within which a taxpayer must lodge an objection or appeal. This effectively grants taxpayers more working days to prepare and file their dispute documents.
Q: What is "Reverse E-Invoicing" and who is responsible for it?
A: Reverse E-Invoicing is a mechanism where a purchaser (not the seller) is legally required to issue an electronic tax invoice for a supply of goods or services they receive from a small business or small-scale farmer whose annual turnover is KES 5 Million or less. This is aimed at easing the compliance burden for small-scale traders.
Q: What is the penalty for failing to integrate my business system with the KRA E-Tax system?
A: If a business with a turnover exceeding KES 5 Million fails to comply with the Commissioner's notice to integrate its data management system with the KRA electronic tax system, it is liable to a penalty of KES 500,000 for every month or part thereof that the failure continues.
Q: Does the new Act affect the KRA's power to waive taxes?
A: Yes, the Act re-introduces a formal framework (Section 37F) that empowers the Cabinet Secretary for Finance to approve the abandonment or relief of part or the whole of an unpaid tax, upon recommendation by the Commissioner, where recovery is impossible, unduly difficult, or inequitable.
9. Conclusion and Legal Advisory
The Tax Procedures (Amendment) Act, 2024, introduces significant shifts in Kenya's tax compliance and administration framework. The changes, particularly the extended amnesty and the enhanced e-invoicing requirements, demand immediate and proactive responses from all taxpayers and businesses.
We recommend that all entities immediately undertake a Tax Compliance Review to assess their eligibility for the extended amnesty and to ensure their internal systems, especially in accounting and procurement, are fully compliant with the new electronic tax invoicing and integration mandates.
Disclaimer: This article provides general information and does not constitute legal advice. For specific advice on your tax obligations, please consult with a qualified legal professional.
To learn more, see the Tax Procedures (Amendment) Act, 2024.
