What happened

The Kenya Revenue Authority (KRA) has announced that the deadline for its current tax amnesty programme is rapidly approaching. Taxpayers who have outstanding liabilities can now apply for a structured payment plan that spreads the amount due over several months, reducing the immediate cash burden. The amnesty scheme, known locally as Hivileo, offers reduced penalties and interest for those who enrol before the cut‑off date. KRA officials have urged all businesses, especially small and medium enterprises (SMEs), to take advantage of the window while it remains open, warning that once the deadline passes the regular, higher rates will apply again.

Context and background

The tax amnesty programme is part of KRA’s broader effort to improve compliance and broaden the tax base after several years of sluggish collections. Historically, the authority has launched similar initiatives during periods of economic slowdown to encourage voluntary compliance. The current round was introduced earlier this year after consultations with the Ministry of Finance and the private sector, aiming to address the backlog of unpaid taxes that grew during the pandemic. KRA’s Director of Tax Compliance, Mr. James Mwangi, highlighted that the amnesty could bring in up to Sh10 billion in additional revenue if fully utilised, a figure that reflects both the scale of arrears and the potential boost to the national treasury.

Eligibility for the payment plan under the amnesty is broad. It includes corporate entities, sole proprietors, and informal traders who owe income tax, value‑added tax (VAT), customs duties, or excise. Applicants must submit a completed form KRA Form P4, detailing the total liability, proposed instalment schedule, and supporting financial statements. The authority will then assess the proposal, taking into account the taxpayer’s cash‑flow situation, past compliance record, and the overall amount owed. Successful applicants receive a formal agreement that locks in the reduced rates and outlines the repayment timeline, typically ranging from six to twelve months.

In the past, similar amnesty schemes have seen mixed results. The 2019 amnesty, for example, attracted over 30,000 participants but fell short of its revenue target due to limited awareness and procedural bottlenecks. Learning from those challenges, KRA has streamlined the application process this time, introducing an online portal and a dedicated help‑desk to guide taxpayers through each step. The agency also launched a series of outreach programmes in Nairobi, Mombasa, and Kisumu, using radio spots and community workshops to reach businesses that may lack internet access.

Compared with what is normal

Under ordinary circumstances, late‑payment penalties for tax arrears can reach up to 25 % of the outstanding amount, with interest accruing at the Central Bank of Kenya’s base rate plus 2 percentage points. The amnesty reduces these charges to a flat 5 % penalty and a modest interest rate of 1 % per annum, representing a substantial saving for most debtors. Historically, SMEs in Kenya have faced cash‑flow constraints that make lump‑sum payments challenging, especially after the economic disruptions caused by COVID‑19. By contrast, the payment‑plan option spreads the burden, allowing businesses to align repayments with their revenue cycles.

• Normal penalty: up to 25 % of tax due plus interest at CBA + 2 %.
• Amnesty penalty: flat 5 % plus interest at 1 % per annum.
• Typical repayment period without amnesty: immediate full payment or high‑interest short‑term loan.

Why it matters

For Kenyan SMEs, the timing of the amnesty is crucial. Many small firms operate on thin margins and keep most of their capital tied up in inventory or payroll. A sudden demand for full tax payment can force owners to take costly short‑term loans or, in worst cases, shut down operations. By offering a manageable instalment schedule, the amnesty helps preserve working capital, protects jobs, and reduces the risk of defaults that could trigger audits or enforcement actions. Moreover, compliance under the amnesty restores a business’s good standing with KRA, which is essential for accessing government contracts, bank financing, and import licences. In a broader sense, higher compliance rates improve the fiscal health of the country, enabling the government to fund infrastructure projects that benefit the private sector.

Practical steps

• Visit the KRA online portal (kra.go.ke) and download Form P4. Gather recent financial statements, bank statements, and a list of all outstanding tax items.
• Calculate the total liability, including any penalties and interest that would apply without the amnesty. Use the reduced rates provided in the amnesty guidelines to see the potential savings.
• Complete the payment‑plan proposal, specifying a realistic instalment amount that matches your cash‑flow projections. Submit the form online or at the nearest KRA office before the deadline.
• Monitor the status of your application through the portal’s “My Applications” dashboard. If KRA requests additional information, respond promptly to avoid delays.
• Once approved, set up automatic bank transfers or use the KRA mobile payment system to ensure each instalment is paid on time, thereby preserving the reduced penalty benefits.

Our Tax Planning & Compliance service at Beavoren can guide you through the amnesty application, help you prepare accurate financial statements, and ensure you meet all deadlines without stress.

Book a consultation with Beavoren Ventures today and let us handle your compliance, books, and advisory in one place.

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.