Voluntary Disclosure Programme

The Tax law amendment Act 2020 assented by the president introduced various changes in the tax regime alleviating the adverse impact of covid pandemic , these has being in favor for all nature of business entrepreneurs and Government.

Under the Tax Procedure Act, 2015 a new section 37D was introduced such as; Voluntary Tax Disclosure Programme.

What is Voluntary Tax disclosure programme? (VTDP)

Many of us would like to know exactly why there is introduction of such new tax regime as VTDP.

The VTDP is an opportunity offered by the Kenya Revenue Authorities to allow previously non-complaint tax payer to correct their tax affairs under specified terms, for purpose of being granted relief of penalties and interest on the tax disclosed. The established(VTDP) shall be for a period of three years with effect from 1st January 2021.

Now, suppose a person has tax liability, then can apply to commissioner for relief with respect to tax liabilities that accrued within a period of five years prior to 1st July, 2020.

If the person is granted relief, then it means that person will not be prosecuted with respect to tax liability, including other privileges granted by tax authorities as follows:-

  1. If the person makes disclosure and pays tax liability that is the principal amount, in (FIRST YEAR) then there will be full remission of interest and penalty.
  2. If the person makes disclosure and pays tax liability in the (SECOND YEAR) then remission is 50% of interest and penalty.
  3. If the person makes disclosure and pays tax liability in the (FINAL YEAR) then remission of 25% of interest and penalty is applicable.

Consequently, this program will benefit everyone involved, taxpayers making disclosure, compliant tax payers and governments.

Several countries currently operate explicit voluntary disclosure program. Such programs provide opportunity to facility compliance in timely and cost–effective manner, saving costly and contentious audit litigation and criminal proceeding.

It is obvious guidance on compliance risk management need to be elaborated by Tax administrators and distinguish importance of being tax compliant.

As tax payer one would have several questions in mind, before proceeding to make voluntary disclosures. But it is important to realize that risk of detection has increased, therefore as tax payers, there will be greater willingness to disclose and correct the situation before it’s too late!

If you have any questions relating to Voluntary Tax Disclosure Programme or other tax matters, do not hesitate to contact ranpara@kenexnbi.com. Please note this email is for general information only and should not be relied upon without seeking specific subject matter legal advice.

By: Daksha Ranpara F.C.C.A., C.P.A.(K)

Partner

CAVEAT

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