You have likely been required to present a tax compliance certificate at one point or another, whether for personal or business needs. But does having this certificate mean that you have a clean bill of health tax-wise? We break this down in this guide.
What is a Tax Compliance Certificate in Kenya?
A Tax Compliance Certificate in Kenya is normally issued by the KRA to prove that a taxpayer has no tax obligations or arrears in tax matters pending, and that any person dealing with such a taxpayer may consider them as such. That is, they are clean in their tax matters.
This certificate is required in many business transactions to prove that the holder of the same pays his or her taxes and, to some extent, is a reliable businessperson to transact with. When it comes to transactions of procurement involving the Government, this is a must-have document before you can apply for Government tenders.
To many people, and on the face of it, this gives the taxpayer the impression that their tax matters concerning a particular tax period are fully in order. However, this is not necessarily the case in all tax matters covered in the particular tax period in the certificate.
Is It A Clean Bill of Tax Health?
A good perusal of the tax compliance certificate at the bottom will reveal that the issuer of the same, the KRA, has laid therein a caveat and a disclaimer to the document to the effect that the documents are not fully conclusive. If the Revenue Authority discovers new evidence other than what it had at the time of issuing the certificate that materially alters the tax compliance status, it can withdraw the same. It can also be withdrawn should it be found that there are outstanding tax debts covering the period, even prior to the period covered in the certificate.
The certificate is normally issued upon the taxpayer filing their returns for a particular period. It is basically conferred on the basis of the taxpayer’s and his accountant’s and or auditor’s assessment of the taxpayer’s tax matters status. On the basis of this, they conclude that the taxpayer’s tax matters are in order and apply for the compliance certificate.
The Revenue Authority, on the other hand, is legally mandated and, as part of its work, can audit the taxpayers’ tax returns and determine whether, in its opinion, the same are in order. Once the Authority goes through the said returns, they determine whether the same reflect the true set of affairs on your tax returns matters or not.
If the KRA is not convinced that the tax returns are in order, they will do their own audits on the returns and, in the process, may also take into consideration other documents that they can legally access, like bank deposits or any other relevant and related matters to the taxpayers’ tax matters.
On the basis of this, if they consider the taxpayer’s tax affairs not to be in order, or they have queries over the same, they will seek further information from the taxpayer, or assess him and communicate their findings to him and therein lies the paradox. You had the Tax Compliance Certificate, and yet you were not clean tax-wise.
Go Beyond the Tax Compliance Certificate.
Tax matters are not only complex, but they can also have significant legal and financial repercussions if you are not compliant. Our legal experts, who have handled a multitude of tax matters, understand the gravity of tax matters and are here to guide you on how to stay compliant. To get personalized advice, use the form below to book a one-on-one session with one of our lawyers.