2.

Discuss various tax returns and assessments in Kenya

In Kenya, small enterprises are subject to various tax returns and assessments. The tax system is

administered by the Kenya Revenue Authority (KRA). Here are some key aspects of taxation for

small enterprises in Kenya:

1. Corporate Income Tax (CIT): Small businesses are required to file annual corporate income

tax returns. The standard corporate tax rate is 30% for resident companies and branches of

foreign companies. The fiscal year for tax purposes in Kenya runs from 1st January to 31st

December. Companies must file their tax returns by June 30th of the following year.

2. Value Added Tax (VAT): Businesses with a taxable turnover exceeding a certain threshold

must register for VAT. Small enterprises may opt for voluntary registration if their turnover is

below the threshold. VAT returns are filed on a monthly basis, and the due date for submission is

the 20th day of the following month.

3. Pay As You Earn (PAYE): If a small enterprise has employees, it is required to deduct PAYE

from their salaries and remit it to the KRA. Monthly PAYE returns must be submitted by the 9th

day of the following month.

4. Withholding Tax: Small enterprises may be required to withhold tax on payments made to

non-residents and certain resident individuals and entities. Withholding tax returns are generally

submitted monthly.
5. Turnover Tax (TOT): Turnover tax is a simplified tax regime for small businesses with an

annual turnover of less than KES 5 million. TOT returns are filed on a monthly basis, and the

due date is the 20th day of the following month.

6. Annual Declaration of Income: Besides the annual CIT return, businesses may be required to

file an Annual Declaration of Income and Claims for initial allowances and industrial building

deductions.

7. Presumptive Tax: Certain small businesses may be subject to presumptive tax, which is a

simplified tax calculation based on a predetermined rate applied to gross turnover. Presumptive

tax returns are filed on a quarterly basis.

8. Excise Duty: Some products and services are subject to excise duty. Small enterprises engaged

in the production or sale of excisable goods are required to pay excise duty.

9. Capital Gains Tax: Capital Gains Tax is applicable when small enterprises dispose of certain

capital assets. The tax is calculated on the gain realized from the sale.

10. Stamp Duty: Stamp duty is applicable on various transactions, including property transfers

and certain legal documents.

Small enterprises should maintain accurate records of their financial transactions to facilitate the

preparation and submission of these tax returns. It's advisable for businesses to seek professional

advice to ensure compliance with tax regulations and to optimize their tax position. The tax

landscape may evolve, so it's crucial to stay informed about any changes in tax laws and

regulations.
3. Roles and challenges experienced by KRA

The Kenya Revenue Authority (KRA) plays a critical role in the country's economic

development by collecting revenue to fund public services and government projects. However,

like any tax authority, the KRA faces various roles and challenges. Here's an overview:

Roles of KRA:

1. Revenue Collection; The primary role of KRA is to collect revenue for the government. This

includes taxes such as income tax, value-added tax (VAT), excise duty, customs duties, and other

levies.

2. Tax Administration: KRA is responsible for the administration and enforcement of tax laws

and regulations. This involves assessing, collecting, and accounting for taxes in accordance with

the law.

3. Customs Control: KRA oversees customs functions, ensuring compliance with import and

export regulations. This involves the collection of customs duties and preventing illegal trade

activities.

4. Taxpayer Education: KRA engages in initiatives to educate taxpayers about their rights and

responsibilities. This includes providing information on tax compliance, filing procedures, and

changes in tax laws.

5. Policy Implementation: KRA collaborates with the government in the formulation and

implementation of tax policies. This includes providing insights on tax matters, proposing

amendments, and ensuring effective policy implementation.

6. Data Management: KRA maintains databases of taxpayers and their financial transactions,

enabling efficient tax administration, risk management, and strategic planning.

7. International Collaboration: KRA engages in international collaboration to combat tax

evasion, money laundering, and other financial crimes. This involves sharing information with

other tax authorities and participating in global initiatives.

Challenges Faced by KRA:

1. Tax Evasion and Avoidance: One of the significant challenges is the constant battle against tax

evasion and avoidance. Some individuals and businesses engage in strategies to minimize their

tax liabilities, leading to revenue loss.

2. Informal Economy: The large informal sector in Kenya poses a challenge for tax authorities.

Many businesses operate in the informal economy, making it difficult to track and collect taxes

from them.

3. Technology Infrastructure: Adequate technology infrastructure is crucial for effective tax

administration. KRA faces challenges in keeping up with technological advancements to enhance

its data management, compliance monitoring, and service delivery.

4. Compliance Issues: Ensuring full compliance with tax regulations can be challenging. Some

taxpayers may intentionally or unintentionally fail to comply, leading to revenue leakage.

5. Taxpayer Education: Despite efforts in taxpayer education, there is still a need for more

comprehensive programs to ensure that individuals and businesses fully understand their tax

obligations and benefits.

6. Corruption - Corruption can undermine tax collection efforts. Instances of bribery or

collusion between taxpayers and tax officials may occur, affecting the integrity of the tax system.

7. Global Economic Factors: - Economic fluctuations, both locally and globally, can impact tax

revenues. Changes in economic conditions may affect businesses, leading to variations in their

taxable incomes.

8. Legal and Policy Changes: - Frequent changes in tax laws and policies can pose challenges

for both taxpayers and tax authorities. Staying abreast of these changes and ensuring effective

implementation can be demanding.