Demystifying the Tax Assessments Framework in Kenya

In Kenya, the Tax Procedures Act, 2015 (TPA) provides this essential framework, establishing a multi-faceted approach to tax assessments. Assessments can be classified into:

1. Self-Assessment

The system is built on self-assessment (Section 28). When you file a tax return, you are not just sending information—you are formally stating your own tax liability. This applies to income tax, VAT, excise duty, and other taxes.

• What this means: You are responsible for getting it right. Mistakes in your return, even honest ones, can lead to problems later.

2. Default and Advance Assessments

If you don’t file, or if there’s a risk you won’t pay, KRA has tools to protect government revenue.

• Default Assessment (Section 29): This happens if you fail to file a return. KRA will estimate your tax based on whatever information they have. Along with the estimated tax, you will face late filing penalties and interest.

NB: KRA generally has 5 years to issue this type of assessment, but if there is fraud or deliberate evasion, there is no time limit.

• Advance Assessment (Section 30): KRA uses this in urgent, high-risk situations, such as:

If you are going through bankruptcy or liquidation.

If KRA believes you are about to leave Kenya for good.

If you are closing your business.

Purpose: It allows KRA to secure taxes before money or assets disappear.

3. Amended Assessments

Sometimes the first assessment isn’t right. The law allows for corrections.

• Amended Assessment (Section 31): You can apply to fix an error in your own return. KRA can also amend any assessment (yours or theirs) to reflect the correct tax owed.
• Time limit: Again, the general rule is 5 years to make an amendment, but no limit exists for fraud or evasion.

Your Rights: Disputing an Assessment

If you disagree with an assessment, you have a clear path to challenge it.

1. Object First: You must first object in writing to KRA within 30 days of the assessment notice. This step is mandatory before any appeal.
2. You Carry the Burden of Proof: If you dispute the assessment, the law requires you to prove that KRA’s calculation is wrong. Good record-keeping is your best evidence.
3. Appeal Process: If you are unhappy with KRA’s decision on your objection, you can appeal to the Tax Appeals Tribunal, and later to the courts.

Key Takeaways for Smart Compliance

• Keep Excellent Records: Your records are your main defense if KRA questions your return.
• Know the Deadlines: The 5-year rule provides certainty for routine matters, but fraud creates permanent risk.
• Respond Quickly to KRA: Ignoring a Default or Advance Assessment notice makes things worse. Engage professionally and on time.
• Follow the Dispute Process Correctly: Use the 30-day objection window properly. Pay any tax you don’t dispute to keep your objection valid.

Disclaimer: This guide is based on the Tax Procedures Act. It is for general information and not specific legal or tax advice. Always consult a qualified professional for your particular situation.

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CPA David Ndiritu Mwangi

Tax Disputes Resolution, Transfer Pricing, Tax Agent, Tax Advisory, Tax Consultant, Certified Public Accountant, Business Advisor.