What happened

The Kenya Revenue Authority (KRA) announced a new mechanism that permits taxpayers to settle outstanding tax debts through scheduled instalments rather than a lump‑sum payment. The move, disclosed in a recent Nairobi Wire release, aims to provide relief to businesses and individuals struggling with cash‑flow constraints while ensuring the tax base remains intact. Under the new scheme, eligible taxpayers can apply for a repayment plan that spreads the balance over several months, with interest rates and penalties clearly defined by KRA. The announcement signals a shift from the traditional one‑off settlement approach that many SMEs found difficult to meet.

Context and background

KRA has historically faced challenges in collecting tax arrears, with a sizable portion of liabilities remaining unpaid for extended periods. The authority’s annual reports have highlighted that delayed payments erode government revenue and increase the administrative burden of enforcement actions. In response, KRA has periodically introduced measures such as penalty reductions, amnesty programmes, and digital filing incentives. The latest instalment option builds on these efforts, reflecting a broader strategy to modernise tax administration and align with international best practices.

The decision follows extensive stakeholder consultations that included the Federation of Small and Medium Enterprises (FSME), the Kenya Association of Manufacturers, and professional bodies such as the Institute of Certified Public Accountants of Kenya. Participants cited the high cost of capital and unpredictable market conditions as primary reasons for defaulting on tax obligations. By offering a structured repayment path, KRA hopes to convert dormant arrears into regular cash inflows while preserving the credibility of the tax system.

While the exact rollout date was not specified in the Nairobi Wire summary, KRA indicated that the instalment framework will be operational within the current fiscal year. The authority has prepared guidelines outlining eligibility criteria, required documentation, and the calculation method for interest and any applicable penalties. Taxpayers are expected to submit applications through the iTax portal, where automated checks will assess compliance history and determine the feasible repayment schedule.

Compared with what is normal

Historically, KRA required full settlement of tax debts before granting a waiver of penalties or interest. This approach often forced businesses to either secure short‑term financing at high rates or face escalating enforcement actions. The new instalment model differs in three key ways:

• Flexibility: Payments can be spread over a period of up to twelve months, reducing immediate cash outflow.
• Transparent costing: Interest rates are set by KRA and disclosed up‑front, unlike ad‑hoc negotiations that previously occurred.
• Retention of penalties: While interest is applied, certain penalties may be waived if the taxpayer adheres to the agreed schedule, contrasting with the all‑or‑nothing stance of earlier policies.

Why it matters

For Kenyan SMEs, the instalment scheme could be a lifeline. Many small firms operate on thin margins and face seasonal revenue fluctuations, making large, unexpected tax bills a significant threat to solvency. By allowing debt to be cleared gradually, the policy may prevent closures, protect jobs, and sustain supply‑chain stability. Moreover, the scheme encourages voluntary compliance; taxpayers who might otherwise evade or delay payments now have a clear, affordable pathway to regularise their accounts. From a macro perspective, smoother revenue collection supports the national budget, which funds critical infrastructure and social services.

Practical steps

• Log into the iTax portal and review your outstanding balances to confirm eligibility for the instalment plan.
• Gather required documents such as recent financial statements, cash‑flow forecasts, and proof of previous tax filings before initiating the application.
• Use the online calculator provided by KRA to estimate the total interest payable over the proposed repayment period.
• Submit the instalment request through the portal and keep a record of the acknowledgement reference for future follow‑up.
• Monitor your repayment schedule monthly to ensure payments are made on time and avoid re‑incurring penalties.

Beavoren Ventures’ Tax Planning & Compliance team can help you assess whether the instalment option is suitable for your business, prepare the necessary documentation, and liaise with KRA to secure favourable terms.

Need help with compliance? Email info@beavorenventures.co.ke or call +254 716 296 857.

Disclaimer: This article is informational and does not constitute formal tax, audit or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.