Missing a deadline costs more than most people expect. KRA charges a penalty for filing late, another penalty for paying late and interest every month on the unpaid tax. The table below summarises the rates as held in the site's rates tables, which were checked against KRA's published offences and penalties page. Rates and minimum amounts change with Finance Acts, so confirm with KRA before relying on a figure for a large amount.

The structure

Every late return has up to three charges:

  1. A late filing penalty for sending the return after the due date.
  2. A late payment penalty on the tax that was not paid by the due date.
  3. Interest at 1 percent a month on the unpaid tax, charged for each month or part of a month it remains unpaid.

The filing penalty is usually the higher of a percentage of the tax due and a fixed minimum, so even a nil return can attract a penalty if it is filed late.

The table

Tax Late filing penalty Late payment penalty
PAYE 25% of tax due or KES 10,000, whichever is higher 5% of the unpaid tax
VAT 5% of tax due or KES 10,000, whichever is higher 5% of the unpaid tax
Income tax, individuals 5% of tax due or KES 2,000, whichever is higher 5% of the unpaid tax
Income tax, companies 5% of tax due or KES 20,000, whichever is higher 5% of the unpaid tax
Monthly Rental Income tax 5% of tax due or KES 2,000, whichever is higher 5% of the unpaid tax
Turnover tax KES 1,000 for each month 5% of the unpaid tax

Interest at 1 percent a month applies to all of them. The PAYE late payment penalty is 5 percent, not 25 percent, which was a common misunderstanding. The 25 percent applies to late filing of PAYE.

A worked example

An individual owes KES 100,000 of income tax and files the return 30 days late and pays 45 days late. The late filing penalty is the higher of 5 percent (KES 5,000) and KES 2,000, so KES 5,000. The late payment penalty is 5 percent of KES 100,000, which is KES 5,000. Interest is 1 percent for each month or part of a month, so two months, KES 2,000. The total is KES 12,000 on top of the tax. Enter your own numbers in the KRA penalty calculator.

A nil return filed late

If there is no tax due, the percentage is nil, but the fixed minimum still applies. A nil income tax return filed one day late can cost KES 2,000 for an individual. See nil returns explained.

How to reduce the damage

  • File even if you cannot pay. The filing penalty then stops growing, and you can arrange instalments. Many people delay filing because they cannot pay, which makes it worse.
  • Pay what you can to reduce the interest-bearing balance.
  • Ask KRA about payment plans and, where available, tax amnesty programmes: tax amnesty: penalties and interest.
  • Object or apply for waiver if you have a valid reason, such as a system failure, serious illness or an error by KRA, and have evidence.
  • Correct returns quickly. An amended return filed voluntarily is better than one found at audit: what to expect in a KRA audit.

Set up a calendar

The simplest protection is a calendar. The key monthly dates are the 9th for PAYE, the 20th for VAT, turnover tax and MRI. Annual returns are due by 30 June. Use the KRA filing and payment calendar and the KRA filing calendar for small businesses. The tax penalty estimator workbook tallies penalties for several months at once.

Check for pending returns

Before applying for a tax compliance certificate or a tender, check iTax for outstanding returns and penalties. Unfiled months from old obligations still carry penalties until cancelled. See getting a tax compliance certificate and KRA penalties and interest explained.

Caveats

This table summarises the general rules. Additional penalties apply to specific offences such as failing to issue a tax invoice or to use the electronic system: see new penalty for not using the electronic tax system. Check the Tax Procedures Act for the full list.

Frequently asked questions

Does interest stop once I file? No. Interest runs on the unpaid tax until it is paid, whether or not the return is filed.

Is the penalty calculated per month? The filing penalty is generally a one-off charge, while the turnover tax filing penalty is monthly and interest accrues monthly.

Can penalties be waived? KRA can waive in certain cases on application, with reasons and evidence.

Do these rules apply to my case if I paid in instalments? Instalment tax has its own rules on underpayment. Use the calculator and check with KRA.