Thanks to decades of investments in education, Kenya has amassed millions of professionals in various disciplines, such as law, architecture, engineering, you name it. But while that may be so, you find that most citizens do not like engaging professionals such as tax experts in Kenya in their business and personal exploits, and they often choose to do things themselves, aka DIY.
And when probed about this, people offer different reasons to support opting out of professional help. Some of them state that the services offered by such professionals are expensive. Others feel that the personnel in these professional fields are not trustworthy; some suggest that they do not require the professionals, while others say that the professionals are not readily available. The reasons are quite lengthy, and it is not uncommon for people to bank on the same stances when it comes to hiring tax experts in Kenya.
But are businesses and individuals taking a risk by failing to rely on tax experts in Kenya? Let us consider this from a practical perspective.
Who Are Tax Experts in Kenya?
The term tax experts in Kenya is rather broad as it encompasses various professionals who are well-versed on tax matters in Kenya. But seeing as these professionals offer a wide array of services suited for different needs, it is important to understand each category of tax experts, as follows:
Certified public accountants.
These professionals, often referred to as CPAs, are governed by the Institute of Certified Public Accountants of Kenya (ICPAK), and often work in local CPA firms as well as auditing organizations. Businesses often turn to them for help with activities such as:
- Filing their returns,
- Remaining compliant with VAT,
- Handling payroll taxes,
- Ensuring that they are adhering to the KRA eTIMs invoicing guidelines, and
- Running general checks on their tax compliance.
As such, you can think of them as the professionals who offer preventative services as far as tax disputes in Kenya go.
Authorized KRA Tax Agents.
These are licensed tax agents who have been licensed by the Kenya Revenue Authority and who are tasked with various responsibilities on behalf of the taxpayers in Kenya. So, inasmuch as they carry licenses from KRA, their role is to help businesses navigate the tax system in Kenya and, therefore, protect them from penalties and help them establish and manage a positive relationship with KRA.
Many businesses hire and pay these independent professionals to serve as their official representatives when dealing with KRA audits, resolving tax disputes, fixing financial backlogs, and overall ensuring that they are compliant with their tax requirements. Information regarding these agents is available on the official KRA Tax Agents portal.
Tax Lawyers and Legal Consultants.
Advocates of the High Court of Kenya who have specialized in Tax Law come in handy when businesses are facing issues such as aggressive tax litigations, challenging KRA tribunal cases, complex mergers and acquisitions, and a wide range of other issues that encompass both legal and tax matters.
As such, while CPAs and authorized tax agents may excel at managing the figures and general compliance, tax lawyers and legal consultants offer the following perks:
They can offer representation in court. Tax disputes in Kenya can escalate beyond the standard internal reviews, paving the way for cases in the local Tax Appeals Tribunal (TAT) and beyond. And while CPAs and tax agents can represent you at the tribunal level, only advocates of the High Court of Kenya can represent you in the High Court of Kenya or the Court of Appeal if you decide to go past the tribunal.
They have a deep understanding of the law. CPAs and tax agents look at taxes from a mathematical perspective to ensure that your records comply with the set guidelines. Tax lawyers and legal consultants, on the other hand, look beyond the numbers and also focus on the statutes. In this way, in cases where the tax statutes are ambiguous or conflicting, these professionals are able to find loopholes or even use past case law precedents to argue against the KRA assessment.
They offer confidentiality. Per the Kenya Evidence Act, communications between clients and their legal advocates are protected under professional privilege, which is unlike the case with tax agents and CPAs, who are barred by ethical rather than legal guidelines. This privilege means that while the KRA can legally compel CPAs and tax agents to hand over documentation about your business, they cannot do so to a tax lawyer or legal consultant.
In addition to the above, tax lawyers and legal consultants are especially important in cases where KRA accuses a business owner of criminal tax evasion or fraudulent practices that are criminal offense matters. Thus, they can step in to offer their services, thereby protecting you against self-incrimination while also handling aspects such as plea bargains, bail or bond terms, and other legal matters.
Why Do You Need Tax Experts in Kenya?
Now that we have covered the main categories of tax experts in Kenya, let us get into whether you need to consider such a hire. To cut to the chase, the answer is yes. Businesses do need these experts, and we can chalk it up to the following reasons.
To Understand Tax Obligations.
Every businessperson in Kenya is legally bound to pay taxes, and this is normally referred to as tax obligation(s). But while that may be so, as a businessperson, you might not be well conversant with your tax obligations. After all, there are a myriad of taxes in different fields, including Income tax, VAT (Value Added Tax), Excise duty, customs taxes, Capital gains Tax, etc., and various levies applicable to different businesses.
And with so many moving parts, understanding what applies to you can prove challenging, which is why many businesses choose to bring in tax professionals who can break down what applies to them.
To Handle Tax Disputes.
Tax disputes are quite common in Kenya, and many businesspeople often find themselves facing severe financial penalties in such cases. Unfortunately, few businesspeople understand what to do at every stage. How so?
Responding to KRA effectively and within time.
Tax disputes often start with the KRA conducting an assessment or sending a demand notice to the businessperson in question.
Per the tax laws, the businessperson must respond to KRA, be it in accepting the terms that KRA has set or challenging them. However, responses are not as simple as they may seem on paper, as different taxes require different responses, so much so that even some tax professionals may not be well-versed in all the responses.
What’s more, the response given by the businessperson carries the weight of either resolving the tax dispute or worsening it and compounding the likely penalties. Unfortunately, not many businesspeople are aware of this, and many of the responses fall into the latter category.
By hiring tax experts in Kenya, who are well educated in tax matters, you can get the professional help you need to make the right response at the right time.
Complying with tax laws.
Tax laws in Kenya set out the procedures that businesspeople must follow in order to resolve tax disputes. These guidelines not only dictate how to respond to KRA (as discussed in the previous point) but also stipulate what to include in the response, as well as the timelines within which the responses should be made. Therefore, without considering all these aspects, it is possible to make an ineffective response that barely moves the needle when it comes to resolving your tax dispute.
Dealing with disputes.
In cases where a businessperson does not agree with the demands or assessments by KRA, they have to respond to the authority. However, the act of doing so does not necessarily do away with the assessment or demand, and KRA can escalate the matter. Tax experts in Kenya come in handy in such cases by informing businesses of the options available to them when such disputes arise. These include either filing a dispute at the Tax Appeals Tribunal or moving to the Courts for assistance.
A businessperson also has the option of referring the dispute to the ADR (Alternative dispute resolution) forums, where the same may be resolved in an informal setting, thus avoiding the Tribunal and the Courts and the higher costs involved therein.
Avoiding penalties.
Once KRA communicates its demands or assessments to a businessperson, the clock starts running, and during this time, the businessperson must respond to KRA and communicate the way forward.
So, what happens if they do not give a response within the set time? In such cases, KRA can conclude that the taxes demanded from the said business are due and owing, and, therefore, they have the right to impose penalties, interest, etc., as the case may be, on the taxes. That means that without even knowing it, a business can find itself bombarded with financial and legal obligations arising from its ineffective response.
To Conduct Tax Planning.
As the old adage goes, prevention is better than cure. And when it comes to tax matters in Kenya, the truth is that most tax disputes in Kenya are avoidable with a bit of tax planning. Tax experts in Kenya can teach you the preventive measures to put in place to enable you to not only avoid tax disputes but also deal with the same quickly when they happen.
These practices fall within business tax planning, which teaches you a wide range of things, including:
- Your tax obligations,
- How to register for the tax obligations, if need be,
- When to do your returns,
- The business records to keep and how to acquire them.
It also teaches you how and when to present the said business records to the KRA, where necessary.
To Remain Objective in the Light of Tax Disputes.
When it comes to who needs tax experts in Kenya, the assumption is often that only laypeople need this help. However, the truth is that tax experts in Kenya may also need to delegate their tax matters to other professionals. Why is this? It all comes down to objectivity.
You see, when dealing with our personal tax disputes, we are not always able to clearly deal with the same because sometimes, emotions like anger get into the matter. At other times, we fail to fully realize the implications of the disputes facing us, or we fail to accord them the necessary time required to deal with them. So, in the same way that doctors are advised not to treat themselves, it is advisable to hire another tax expert to help you sort out your tax matters when they arise.
The Financial Implications of Not Hiring Tax Experts in Kenya.
As mentioned before, a business can be liable to pay taxes in the following cases: it accepts the demands that KRA has set out, it fails to respond to the tax assessments or demands from KRA on time, or it responds ineffectively to the tax assessments or demands from KRA. In such cases, the businessperson can either pay the required amount, or KRA can take on several approaches to recover the amounts owed to it, which it does through enforcement.
In the latter case, various methods can be applied, including:
- Agency notices that include the freezing of accounts.
- Selling the business property to effect the enforcement.
These are but some of the methods that KRA is legally able to use in order to recover amounts owed from a business. As you can see, these approaches can have negative implications for the business to the point of even shutting it down. But luckily, you can avoid these scenarios by engaging with tax experts in Kenya who can protect the financial health of your business.
Which Tax Experts in Kenya Should You Hire?
Tax experts vary based on the services that they offer. So, who should you hire and for what?
Tax accountants and CPAs. If you need help with activities such as filing your annual tax returns, bookkeeping, managing your eTIMs, and other such activities that are typical in the operation of your business, these are the professionals for you. They are specifically trained to deal with numbers and can help you with your tax planning, thus providing you with that preventative care we talked about earlier.
Authorized KRA tax agents. These professionals are reliable when it comes to navigating KRA ledger conciliations, going through administrative portals, and handling the minor disputes that can arise from improper filing. They can also advise you on what to do to remain tax compliant.
Tax lawyers and legal consultants. In the event that you are facing a demand notice or assessment from KRA, what you need is legal help. These professionals offer a wide range of perks, including representing you in court, ensuring that your discussions remain privileged, and interpreting the law to ensure that you have crossed all your Ts and dotted all your Is. Their work as legal representatives goes beyond tax disputes and also encompasses handling issues relating to fraud and other matters that could land you in criminal court systems.
Get Unmatched Legal Defense.
KRA disputes may seem straightforward on paper, but when it comes down to it, they are quite complex as they involve different laws and different procedures that apply to each dispute. Furthermore, their complexity is often compounded by the strict time boundaries within which you must respond. To ensure that your response does not land you in hot water or give KRA the legal right to use enforcement approaches that could negatively impact your business, it is important to engage a tax expert.
We, at The Law and You, have handled tax disputes of all kinds, and we know exactly how to go about tax disputes, be it at the Tax Appeals Tribunal, in court, or even through Alternative Dispute Resolution. Thus, you can trust us to cover all your legal and financial bases.
To learn more about how we can work together, you can use the form below to contact our team, and we will get back to you as soon as possible.
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