Demystifying the Voluntary Tax Disclosure Programme | Ronalds LLP

Voluntary Tax Disclosure Program

Taxpayers volunteering for this program will be waived/granted relief of penalties and interest from non-compliance on the tax disclosed and granted immunity from prosecution and remission shall be granted as follows;

  • Full remission on penalties and interests 100 for applications made and tax liability paid in the first year of the program, 2021.
  • 50 remission on penalties and interests for applications made in the second year of the program, 2022
  • 25 remission on penalties and interest for applications made in the final year of the program, 2023 third year

Taxpayers volunteering for this program will be waived/granted relief of penalties and interest from non-compliance on the tax disclosed and granted immunity from prosecution and remission shall be granted as follows;

  1. Full remission on penalties and interests (100%) for applications made and tax liability paid in the first year of the program, 2021.
  2. 50% remission on penalties and interests for applications made in the second year of the program, 2022.
  3. 25% remission on penalties and interest for applications made in the final year of the program, 2023 ( third year).
  • The taxpayers and the Commissioner shall enter into an agreement on the timelines that the tax liability shall be payable.
  • The timeline shall not exceed 1 year from the date of the agreement.
  • Violation of the provisions of the agreement will result in the annulment of the remissions. The taxpayer will be liable to pay all the penalties and interests.
  • However, this program shall not be applicable to the following persons;
      • If the taxpayer is under a tax audit;
      • If the taxpayer has been notified of a pending audit or investigation from the Commissioner.
  • Voluntary Tax Disclosure Program has the following limitations;
  • If the taxpayer is under a tax audit;
  • If the taxpayer has been notified of a pending audit or investigation from the Commissioner.
  • Voluntary Tax Disclosure Program relief shall be withdrawn by the Commissioner;
  • If the relief results into a refund payment to the taxpayer.
  • If the taxpayer fails to disclose material facts of the tax liability

Advantages of the Voluntary Tax Disclosure Program.

The VTDP targets the non-compliant taxpayers in all tax obligations (Corporate Tax, PAYE, VAT, WTH, Excise and Customs). The taxpayers will enjoy the following benefits;

  • The penalties and interest resulting from the undisclosed tax liability for the last five years will be waived depending on their payment plan selected. See illustration below;

The VTDP targets the non-compliant taxpayers in all tax obligations (Corporate Tax, PAYE, VAT, WTH, Excise and Customs). The taxpayers will enjoy the following benefits;

The penalties and interest resulting from the undisclosed tax liability for the last five years will be waived depending on their payment plan selected. See illustration below;

Normal Tax Liability Computation

TPA Penalty Provisions

Principal Tax

Penalties

Outstanding Months

(5 years)

Interest

Total Liability

5% on shortfall

 1,000,000

 50,000

 60

  600,000

 1,650,000

75% on shortfall

 1,000,000

  750,000

 60

  600,000

 2,350,000

 

With the 5% penalty and 1% monthly interest on an estimated Kshs 1 million tax liability that is undeclared, the remissions for the three years repayment period are as tabulated above,

With a 75% penalty and 1% monthly interest on the estimated tax liability of KSHS. 1 Million undeclared, the remissions for the three years repayment period are as tabulated above.

Companies that opt for the VTDP will be issued with a tax clearance certificate indicating their compliance vide the VTDP.

The taxpayers will not face any litigations as a result of non-disclosure of the tax liabilities.

The VTDP gives flexible repayment plans up to a period of three years, with the final year being in 2023.

The companies will also have clean bill of health tax ledger which may warranty a seamless Tax Compliance Certificate application process.

Road map for taking advantage of VTDP

As Ronalds LLP, we encourage taxpayers who have undisclosed tax liabilities and have not been audited by KRA to seize this opportunity to avoid paying hefty penalties and suffer tax audits by KRA for non-disclosure of taxes in the future.

In order to take advantage of the Voluntary Tax Disclosure Program, we recommend the following steps:

 

  1. Engage a tax consultant to review the companies tax exposure through the tax health check process. As Ronalds LLP, we are already partnering with clients in the journey of applying for the Voluntary Tax Disclosure Program.
  2. There is a need to discuss within the management the various tax implication resulting from the tax exposure.
  3. While at the management level, we advise on the existing tax planning opportunities available to the taxpayer aside from the timely VTDP.
  4. Upon making decision to voluntarily disclose the tax liability, of the company or individuals, we initiate the application process for VTDP through the availed channels by the Commissioner.
  5. There is need to discuss within the management on the various tax implication resulting from the tax exposure.
  6. While at the management level, we advise on the existing tax planning opportunities available to the taxpayer aside from the timely VTDP.
  7. Upon making the decision to voluntarily disclose the tax liability, of the company or individuals, we initiate the application process for VTDP through the availed channels by the Commissioner.
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