What is an income tax return?
An Income tax return is a declaration made by a person showing all income earned from all their sources of income during a tax period (usually one year). Under the Kenya tax regime, it is expected any individual or business operating under its umbrella to declare their previous year’s Income and therefore file their income tax return in the absence of this, one gets a penalty from KRA making it hard to get a Tax compliance certificate (TCC).
The annual tax filing period usually starts on 1st January of the following year with the deadline for Income tax filling being on 30th June.
Filling of an Income tax return should be done by every person (individual, company, partnership, etc.) with a KRA PIN.
Individual Tax payers expected to file their Annual tax returns include Sole Proprietors and business people who fall under Individual Residential income tax returns & Individual non-Residential income tax returns
Individuals with an income, individual Income Tax is charged for each year of income on all the income of the person, whether resident or non-resident, which accrued in or was derived from Kenya, using the individual tax bands and rates. For non-residents Any amount paid to Non-Resident individuals in respect of any employment with or services rendered to an employer who is resident in Kenya or to a permanent establishment in Kenya is subject to income tax charged at the prevailing individual income tax rates.
Individuals with Employment income only (either one or more), income tax return should be accompanied by a P9 form issued by the Employer or a return can also be done without a P9 through the itax portal. For individuals with Employment income and other sources of income (Business, Farming, Rental, etc.), additionally books of Accounts must be prepared. These include an income statement, a balance sheet, and copies of withholding certificates (if any) and a record of any advance payment made during the year, including instalment tax.
A corporation is a legal entity that is separate and independent from the people who own or run the corporation. Unlike for sole proprietorship and partnerships. A corporation has direct responsibility of paying taxes., thus the entity files its own Income tax return. In Kenya all resident limited companies are subject to corporate income tax rate of @ 30% on any profits they makes. Whereas for non-residential companies the corporate tax rate is 37.5%.
A Partnership is an association between two or more people in business seeking a profit.
For the purposes of tax a partnership is recorgnised a tax-reporting entity, not a tax paying entity. A partnership must file an income tax return with the KRA to report income/ losses from operations, but it does not pay income tax. Profits and Losses are passed through to the owners based on their profit sharing percentages outlined in the Partnership Agreement. Each partner pays taxes on their share of the profit/loss
A Nil return should be Filled for all persons (individual, company, partnership, etc.) with a KRA PIN that had no Income for the year in consideration.
For more details on how to file your income tax returns and any other assistance pertaining tax that you may require, kindly get in touch with us.
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