Okulo Jnr

One thing KRA got right in the current tax amnesty is that, There is no human interaction. You do not apply or beg any KRA officer to waive your penalties. You only log into iTax. Anytime. Find out how much you owe KRA. Pay the amount, without the penalties and interest. Then relax. The system will do the rest of penalties deletion. No human being approves anything. This has cancelled kickbacks and bureaucracy, and the process is much easier for taxpayers. You only have next month. Take advantage of the amnesty to stay debt free with KRA.

In the real world, If I owe you Sh 200,000 and you owe me Sh 100,000, we can simply agree that I pay you the difference of Sh 100,000 and the debt is settled. Isn't it? Now, imagine I tell you I cannot pay you your 200k until you first pay me my 100k. That you must go and find the money, pay me, then I will look for 200k and pay you. How insane is that? That is exactly what KRA did to Easton Petroleum Ltd. Over several months, Easton had accumulated an outstanding VAT liability of about 12 million. In subsequent months, however, it accumulated valid VAT credits of 19 million from its purchases. Meaning, even after settling the 12 million liability, KRA would still owe Easton about 7 million. As Easton was busy praying for its fuel to cross safely through the Strait of Hormuz, KRA was busy hatching a plan to drown its business. When the plan was finalized, KRA swung into action. KRA sent Easton demands to pay the 12 million. When Easton explained that KRA was holding 19 million in valid VAT credits, KRA got tired and froze their bank accounts. Next morning, Mr. Yakub, Easton director tried to send money from the company's accounts. Pesa haiendi. He tried to deposit money, pesa inaingia. He Wondered what witchcraft had entered bahali yake. He called his bank manager to report the witchcraft, only to be told that KRA had frozen the accounts and ordered the money in them transferred to KRA. Easton was officially stuck. It could not pay suppliers, transporters, employees or anyone. Then the accountant came up with a plan. - We owe KRA 12 million. But KRA owes us 19 million. Let us formally apply to have the 12 million deducted from our VAT credits. That way, the debt is settled and KRA will still owe us 7 million. The Tax Procedures Act provides for this. Director said perfect. Haraka haraka, they sent the application to Times Tower. When KRA saw the request, KRA ran mad and instantly rejected the request. Its argument was that excess input VAT should be carried forward to subsequent tax periods, not used to offset past tax debts. Easton got tired, ran to Court and argued that. KRA had violated their legal right to have their tax debts deducted from their overpaid taxes. The tax tribunal agreed KRA had acted illegally and unreasonably. It held that where a taxpayer has sufficient available tax credits to cover an admitted tax liability and formally requests a set off, KRA must fairly and reasonably consider that request before resorting to enforcement. The Tribunal then ordered KRA to: - Set off the KSh 12 million liability against the available 19m credit. - Unconditionally unfreeze Easton bank accounts Case closed. Lesson. - If KRA is holding valid tax credits belonging to you, you have a legal right to apply to use those credits to settle your outstanding tax liabilities.