Al Capone was a ruthless gangster during America’s prohibition era, 1920 to 1933. He exploited prohibition laws to build an empire and along the way left a series of murders, racketeering, extortion rackets, and all manner of crimes under the penal code.
As powerful a gangster as he was, his fall would soon come. But he was not brought down by murder convictions or bootlegging (the illegal sale of alcohol). No, he was brought down by tax evasion. This became one of the falls of empires brought down by something that could have been avoided.
In 1931 he was arrested, charged for tax evasion, and sentenced to 11 years. Yes, America’s most powerful and violent gangster fell because he did not pay taxes. Evading to pay taxes can kill your business within seconds. One might think is smart, but in the end, the law catches up.
Companies too, large and small, have also fallen because of tax evasion. Paying taxes is not optional. If you have a list of 10 essential tasks for your business, paying taxes should be in the top three if not the very first. It gives you peace of mind and legitimacy.
And paying your taxes should be a priority as we enter the second quarter of the year where most companies and individuals file annual returns to the Kenya Revenue Authority (KRA). As an SME, this is the best time to set your records straight. A mere lack of a Tax Compliance Certificate (TCC) can deny you deals worth millions.
To this end, SMEs should be aware that, whereas paying taxes is compulsory, the KRA is not a mob enforcer. KRA agents will not break kneecaps or knock out a few teeth for not paying taxes, far from it; they work with taxpayers to ensure while you fulfill your obligations, your SME is still able to operate.
This leads us to the KRA’s tax amnesty and why you should use it while the window of opportunity is still open.
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What is the tax amnesty program?
The Tax Procedures (Amendment) Act, 2024 reintroduced tax amnesty on interest, penalties, or fines on tax debt for periods up to 31st December 2023. The tax amnesty program opened on 27th December 2024 and will run up to 30th June 2025. The KRA’s tax amnesty program offers SMEs a chance for a fresh start on their taxes.
The amnesty applies to a person or businesses with penalties, interest, or fines and has no principal taxes owing for periods up to 31st December 2023; and a person or business that has principal tax accrued up to 31st December 2023 but pays the outstanding principal tax debts by 30th June 2025.
Essentially, the KRA is offering to waive penalties and interest if you agree to pay your outstanding principal taxes through a mutually acceptable payment plan. The fines and other penalties will be scrapped. Tax amnesty will be applicable on all interest, penalties or fines on tax debts relating to tax periods up to 31st December 2023.
So, the best approach is to work with an experienced accountant who can calculate your tax obligations, and then you can contact KRA to seek the best mutually agreeable approach on how and when you will pay your obligations.
Taking advantage of the amnesty is important because as a SME you never know when you will be asked for a tax clearance certificate for a tender you are pursuing or to renew some business.
Businesses (and of course the government) are increasingly requiring a clean bill of tax health as a prerequisite for any business. To avoid unnecessary penalties and ensure compliance, SMEs should act now and take advantage of this amnesty before the June 30, 2025, deadline.
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