Tax Bulletin:The Finance Act, 2023 Introduces a Fresh Amnesty for Penalties and Interest Relief

Introduction

The Finance Act 2023, in eliminating the Commissioner’s authority to waive penalties and interest, introduces a tax amnesty for interest and penalties accrued until December 31, 2022, effective from September 1, 2023, to June 30, 2024. Below, we address key questions about the amnesty program.

Eligibility

All taxpayers with penalties and interest resulting from unpaid principal taxes until December 31, 2022, are eligible for the amnesty, provided the principal taxes are paid by June 30, 2024.

Covered Tax Liabilities

The amnesty applies to all taxes under the Tax Procedures Act, 2015, including the Income Tax Act, Value Added Tax Act, Excise Duty Act, and Miscellaneous Fees and Levies Act.

Conditions

To apply for the amnesty, a taxpayer must meet these conditions:

Unpaid penalties and interest must pertain to periods before December 31, 2022.
Full settlement of principal taxes, if applicable, by June 30, 2024.

Automatic Amnesty

Taxpayers who settled principal taxes by December 31, 2022, qualify for an automatic amnesty. They need to check their iTax ledgers for waived penalties and interest, as the KRA is configuring this module.

Partial Payment

If the principal tax is not fully settled by June 30, 2024, penalties and interest on the unpaid amounts will be charged.

Assessment from KRA

Taxpayers settling the principal tax by June 30, 2024, and facing assessments predating December 31, 2022, can utilize the amnesty, regardless of their dispute stage with the KRA.

Denial of Amnesty

A taxpayer may be denied the amnesty if:

• Principal tax remains unpaid by June 30, 2024.
• Penalties and interest relate to periods after December 31, 2022.
• Penalties and interest arise from assessments due to fraud, tax avoidance, or tax evasion.

Application Process

Taxpayers with outstanding principal taxes until December 31, 2022, can apply to the Commissioner for amnesty, along with a proposed payment plan that should not extend beyond June 30, 2024. Amnesty is granted upon final installment payment as committed in the plan. Applications must be made on iTax, specifying the tax obligation and related period.

For pending principal tax liabilities due to return amendments or system issues until December 31, 2022, taxpayers should engage with their Tax Service Office to resolve these matters.

Conclusion

Once the amnesty period concludes, no legal framework allows taxpayers to obtain a waiver of penalties and interest. Eligible taxpayers are strongly advised to seize the current amnesty opportunity.

Our tax team is available to assist taxpayers wishing to utilize the amnesty program. Contact us via email at hello@sealconnectedventures.com or mobile at 0713 281299 or 0791 292246.