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Mati Benson Njiru: Tax Obligations for Entrepreneurs

Mr. Njiru began the presentation by a brief introduction of his firm, Cezam and Associates Ltd, and the services they offer.  Cezam and Associates Ltd are a registered consultancy firm offering a range of professional services such as: Statutory and Internal Audit, Accountancy, Management Consultancy and Taxation.

Under Taxation, some of the services rendered are:

  • Ensuring compliance with all aspects of Corporate Taxation (including preparation of tax computations and submission of statutory tax returns to KRA),

  • Confirming compliance on all aspects of PAYE and statutory deductions (including preparation)

  • Submission of monthly returns and certifying compliance on all aspects of VAT (including preparation and submission of monthly VAT returns to KRA).

The presentation was tailored towards enlightening entrepreneurs’ on the types of tax obligations which include: Income Tax, Value Added Tax (VAT) and Excise Duty.

Income Tax is a direct tax that is imposed on income derived from business, employment, rent, dividends, interests, pensions etc. Every taxpayer with income chargeable to income tax is required to have a Personal Identification Number (PIN). All taxpayers are supposed to file a return declaring their income(s) while computing their tax liability. The returns of income and accounts for the year of income should be submitted on or before the 30th June of the following year. If one does not submit their returns by due date, he or she is liable to a penalty at the rate of 5% on due tax for every year. An interest of 1% per month is also accrued.

Pay As You Earn (PAYE) is a method of collecting tax at source from individuals in gainful employment, this method of deducting Income tax applies to all income from any office or employment. The employer is liable of remitting the tax to KRA.

Value Added Tax (VAT) is a multi-stage consumption of tax charged on taxable goods and services sold locally or imported into the country. Any entity supplying or expects to supply taxable goods and services of the value of Kshs 5 million or more in a year  qualifies to register  for VAT. The current VAT rate is 16%. Registered taxpayers are required to file VAT returns and remit tax to KRA by 20th day of each calendar month. Failure to which a penalty of Kshs 10,000 and an additional tax interest of 1% per month on the unpaid tax.

Excise Duty, the third tax obligation looked at, is a levy that is applied selectively on particular goods and services. This tax may be applied to either production or sale to domestic output or imported. The tax is paid directly by the manufacturers. Kenya’s main excisable commodities at the moment are soft drinks, alcoholic beverages, tobacco, fuel and motor vehicles. It is charged on specific basis i.e. per volume or quantity.

The newest development to taxation is iTax. KRA rolled out iTax to enable taxpayers file tax returns regardless of location or time. Therefore, all taxpayers should file-self assessment returns through the iTax system.

Mati Benson Njiru is expected to graduate with a Bachelor of Commerce degree this year an alumni of Strathmore University School of Accountancy (SOA). He is an active member of the Strathmore University Alumni Entrepreneurs Network.

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