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Here are the Accounting Guidelines for Corporate Tax Rates for 2020/21, According to KRA

NAIROBI, Kenya, Jan 27 – Kenya Revenue Authority has urged corporations to pay the correct amount of tax for the years of income 2020 and 2021.  

This follows the release of guidelines outlining the application of corporate tax rates for the intervening period by the Authority.

As such, resident corporates with accounting periods ending on or before 30th March 2020 have been advised to apply the 30 percent rate.

KRA, however, says such corporations will get a reduced COVID relief rate of 25 percent for the income generated in the period between 1st April 2020 and 31st December 2020.

This is in line with the lower rate of 25 percent which was introduced in April last year as tax relief to counter the negative effects of COVID-19 on businesses and employment incomes.

For income earned in the period on or after 1st January, the applicable rate is 30 percent.

KRA Commissioner for Domestic Taxes Rispah Simiyu says taxpayers whose accounting period ends after January 1st, 2021, shall determine the income for the accounting period and apportion the same between the two periods and charge the applicable rates.

“The process of enhancement of the iTax System is already underway to incorporate this interpretation,” she said.

She further clarified that “any erroneous penalties or interest that may arise’ in the intervening period “shall be corrected when the system is fully deployed,” she added.

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KRA’s guidelines are expected to clarify Corporation Tax rate changes introduced through the Tax Laws (Amendment) Act published on 25th April 2020 and the Tax Laws (Amendment) Act No. 2 of 2020 published on 24th December 2020, which provided for resident corporation tax rates of 25 percent and 30 percent respectively.

Last December, Corporation Tax recorded a performance rate of 93.5 percent against the target. The performance was negatively affected by a decline in instalment remittance from banks by 25.3 percent which reflects the impact of COVID on business performance.

The guidelines which are expected to clarify to taxpayers the treatment of corporation tax in the two years of income are expected to boost Corporation Tax performance this month through the submission of withheld declarations.

KRA is also forecasting a rebound from the ongoing implementation of the Post Covid-19 Economic Recovery Strategy 2020-2022, expected to accelerate revenue performance to achieve the forecast.

The Authority says it has intensified compliance enforcement efforts by rolling out the implementation of the new tax measures including Digital Service Tax, Minimum Tax, Voluntary Tax Disclosure Programme.

The programme is intended to provide relief through waiver of interest and penalties on disclosed tax liabilities that accrued in the period 2015 to 2020.

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