Changes In Filing KRA Tax Returns For 2023 & What Is Expected

Paying taxes has always been a long and tedious process, especially for ordinary Kenyans who do not understand how to do it. Additionally, the new changes in 2023 to the KRA Tax returns process might not make it any better. 

In 2023, The Kenyan Parliament introduced the Finance Act of 2023, which amended various tax rates and levies. The amendment took effect on July 1, 2023. One significant change the Act made was to the Tax Returns Processing Module, which affected the Income Tax Act, affecting how ordinary citizens could file returns to the taxman. 

Let us discuss the new KRA tax amendments, how to file tax returns in Kenya, and how to ensure compliance with regulations.

Tax Filing in Kenya

The Kenya Revenue Authority (KRA) requires every registered taxpayer, both employed and unemployed, to file their returns before the end of every financial year. Likewise, non-residents working in the country must also pay the taxman for any income earned or derived from the country. 

It is easy to wonder why you must file tax returns in 2023, primarily for employees, yet the employer already deducts tax as PAYE. Filing an individual income tax report is crucial as it indicates a person's total income that year, their tax liability, and refundable claims. An income tax return shows how much an individual has earned and how much tax they have paid that year. 

In Kenya, there are two types of income tax returns. The first is for employed or salaried individuals who require a P9 Form to file returns. Likewise, a person who did not have any income the previous year should still file their returns as Nil Return to avoid attracting penalties. 

What Is The Return Period For KRA?

As previously mentioned, income tax returns assess the amount of tax paid on income every year. In Kenya, the KRA requires individuals and companies to file tax returns for every period between 1 January and 31 December. The tax returns deadline is 30th June of every year. If a person fails to file your returns by this time, it will attract a penalty of 5% on your regular tax or KES 10,000 for non-individual taxpayers. 

Everything that has Changed Between Filing Tax in 2022 and 2023

The Finance Act of 2023 made several changes to the tax returns processes. Here is a breakdown of some of the noticeable amendments to the Income Tax Act:

1. Change in the Turnover Tax Change of Tax Rate

Turnover Tax, or TOT, is a tax charged on any business whose gross turnover is more than KES. 1,000,000 but does not exceed KES. 25,000,000 during any income year. With the implementation of the new amendments, the TOT rate changed from 1% in 2022 to 3% starting 1st July 2023. 

2. Changes in Value-Added Tax Returns

Additionally, the Finance Act of 2023 also made some amendments to the Value-Added Tax (VAT) return rates. For the 01/08/2023 return periods, all Sheet ``C_other_related_sales” of the VAT Returns will be unavailable to companies and individuals. 

Likewise, taxpayers will not claim G_other_rated_purchases whose invoice date is between 01/08/2023 to 30/06/2023. However, from 30/06/2023, the sheets will be available with the six months in between greyed out. 

If people or companies want to file tax returns ahead of time, they must download the latest VAT3 Return from the KRA portal. However, this should not worry anyone, as the KRA portal will hold the updated VAT tax returns. 

3. Change in the PAYE (P10) Return

The Income Tax Act amendments also released the new PAYE band bracket for tax payments, which took effect on 1 July 2023. Below is a general breakdown of the latest personal income rates in the country. 

Every individual is entitled to a personal relief of KES. 28,800 per annum. Taxpayers can access the new PAYE P10 rates on the KRA Website. 

4. Filing of Income Tax Returns for Spouses

 The Tax Returns Processing Module amendments also delinked individuals from filing returns for spouses in their Income Tax Resident return. The iTax website has disabled the Tributary Bond Option and the Do You Want to Declare Wife Income option while filing individual returns. 

5. Affordable Housing Levy

Lastly, the Finance Act of 2023 enacted changes to the PAYE (P10) return by adding the Affordable Housing Levy. The Affordable Housing Levy is a deduction from an employee’s gross salary to help the Government develop affordable housing in the country. 

The Taxman has enhanced this payment registration module by allowing people to regenerate a payment slip separately from the PAYE and other payroll levies they might incur, such as NITA. 

What You Need Before Filing Taxes in Kenya

You can file tax returns online using the iTax KRA self-portal in Kenya. There are a couple of things that a person should have before filing their returns. They include:

For people with employment income only

• A P9 form from your employer. 
• An Insurance Policy Certificate, i.e., NHIF or SHIF, and other insurance policies if applicable. 
• A mortgage certificate, if applicable. 
• Tax exemption certificate, if applicable.

For people with other forms of income

• Income statements.
• Balance sheets.
• Records of advance tax instalment payments.
• Copies of withholding certificates, if any. 

What is the P9 Form used in Filing Tax Returns in Kenya?

A P9 Form is a Tax deduction document issued by employers to employees. It shows an employee’s basic salary, benefits, allowances, gross pay, pension contributions, personal relief, and pay-as-you-earn (PAYE). This form is critical to file tax returns. 

The Gross Pay on the P9 form indicates an employee’s sum of basic pay and other taxable allowances and benefits that their employer compensates them. 

On the other hand, if a person has mortgage interest, pension contribution, and home ownership savings, they are considered deductible contributions. They are deducted from the gross pay to determine an employee’s taxable income. 

However, these contributions are subject to various conditions. A taxpayer’s mortgage interest or money borrowed to purchase or improve real estate is only deductible up to a maximum of KES. 25,000 per month or KES. 300,000 annually. 

A person paying for health insurance like NHIF or SHIF, life insurance, or education insurance is also entitled to 15% of their premiums paid as insurance relief. However, the amount paid for the insurance policy should not exceed KES 60,000 annually. 

How to File KRA Tax Returns in Kenya For 2023

Though filing your tax returns might seem tedious, it is not too complicated. Here is a step-by-step guide on how to file KRA return taxes after the implementation of the amended Tax Returns Processing Module in the Finance Act of 2023: 

Filing returns using the P9 Form

If a person wants to file their income tax returns using the P9 Form, they should:

1. Visit the iTax KRA self-portal 
2. Use their KRA PIN and password to log into the iTax account. 
3. Find and click on the Returns and scroll to the File Returns. 
4. Once the page loads, most fields, including the Taxpayer PIN field, are automatically generated. The only field you will need to fill is the Tax Obligation. 
5. Kenyan residents will have to click on Income Tax -Resident Individual. However, non-residents should choose the Income Tax Non-Resident Individual option. \
6. Click on Next. 
7. Afterwards, download the Return Form by following the instructions on the site. 
8. You should unzip the Return Fill and open the Excel sheet. 
9. Fill out the Excel sheet with all the relevant information that might be missing. 
10. Once you complete the Excel Sheet, click on the Tax Computation button. 
11. Afterwards, upload the Excel sheet to the portal.
12. Ensure all fields, including the Return Period From and Return Period To fields, are correctly filled in. 
13. Remember to read the Terms and Conditions and tick the I agree to the Terms and Conditions checkbox.  
14. Finally, download a copy of the eReturn Acknowledgement Receipt for safekeeping. 

Important Note

If you notice a positive figure while validating your KRA returns on the Excel Sheet, you owe the taxpayer money. On the other hand, if the validation results in a negative figure, it means that KRA owns your money. 

Filing Nil Returns

Individuals without a source of income should also file tax returns to comply with Kenyan regulations. In this case, the individuals should file Nil Returns. Here is a step-by-step procedure on how to do so:

1. Visit the iTax KRA self-portal
2. Use the KRA PIN and password assigned to you during registration to log into the portal.
3. Select the Return option on the portal and select File Nil Returns. 
4. Once the page loads, most of the fields will automatically generate. The only field you will need to fill is the Tax Obligation.
5. Residents should select the Income Tax -Resident Individual option, while non-residents should select the Income Tax—Non-Resident Individual option. 
6. Click on Next.
7. Ensure the Return Period From and Return Period To fields are correctly filled. 
8. Read the Terms and Conditions before ticking the I agree to the Terms and Conditions checkbox and click Submit.
9. Ensure you download the eReturn Acknowledgement Receipt. 

Filing KRA Tax Returns If You Have Other Sources of Income Apart from Employment

It is also crucial to file returns if you have a source of income other than employment. Taxpayers should keep detailed accounting books showing their income and expenses to ensure tax compliance.  

Individuals should follow the same procedure for filing returns using the P9 form when filing their taxes. Once they have downloaded the form, they should manually input all the required data, if applicable, validate all the information, and click on the Tax Computation button before uploading it to the portal. For a more detailed procedure on filling out the P9 form, have a look at our step-by-step instructions.

Afterwards, to pay any pending taxes, they should follow the steps:

1. After logging into the iTax KRA self-service portal, head to the Payments option and scroll down to Payment Registration. 
2. The PIN, Taxpayer Name, Taxpayer Address, and Email ID fields should be auto generated. However, if they are not, ensure you fill them. 
3. Go to the Tax Head field and select Income Tax. 
4. In the Tax Sub Head field, select Income Tax- Resident Individual for residents and Income Tax -Non-Resident Individual for non-residents. 
5. On the Payment Type field, select Self Assessment Tax.
6. In the Liability Details, select the tax period you are paying for and click Add. 
7. Select the Mode of Payment you want to use and then click Submit. 
8. Download the Payment Slip and pay to the nearest KRA partner bank on the slip, or follow the instructions if you request to pay using mobile money. 

Other Things To Remember When Filing Returns

Additionally, there are a couple of things that you should keep in mind when you are about to file your KRA tax returns after the amended Income Tax Act in 2023. They include:

• A person can make amendments if they determine they made a mistake while filing returns using the iTax self-portal. 
• Individuals who lost employment in 2023 must still file tax returns for that year. 
• People who are employed and still have other sources of income should still declare the income in addition to their jobs. 
• All estate beneficiaries should also file tax returns. 
• Partners in a firm are also required to file returns. 
• A person who earned any foreign income in 2023 should also declare their income.

Final Thoughts

The changes to filing KRA tax returns for 2023 include several significant amendments aimed at streamlining the process and improving compliance with the Income Tax Act. Implementing the Finance Act of 2023 resulted in changes to turnover tax rates, value-added tax returns, PAYE brackets, and the filing process for spouses. These changes are intended to create a more structured and transparent tax system.

Taxpayers must now navigate new forms and follow updated procedures, such as the increased TOT rates and PAYE bands. The changes to the VAT return process, while temporarily restrictive, are intended to improve the accuracy and integrity of the tax filing system. Furthermore, delinking spouses in tax returns simplifies individual filings, and the Affordable Housing Levy funds national housing initiatives.

Taxpayers must become acquainted with the procedures in the updated guidelines for successful compliance. Whether filing as an employee using the P9 form, submitting nil returns, or declaring additional sources of income, following the detailed procedures ensures that all tax obligations are met efficiently.

Have a look at our blog for more information about tax compliance in Kenya and other African nations. Additionally, Workpay produces the leading payroll software in Africa, automating all employee records and payments, making it easier to remain compliant with regulations without too much hassle.  

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