Advance Tax
In this comprehensive guide, we will explore the concept of advance tax in Kenya. Whether you are an individual taxpayer or a business owner in Kenya, understanding advance tax is crucial to avoid any legal issues related to taxation. This guide aims to provide you with all the necessary information about advance tax.
1. What is Advance Tax in Kenya and How Does it Work?
Advance Tax is a tax payment in Kenya that requires taxpayers owning a public service vehicle (PSV) or a commercial vehicle to pay their taxes in advance, before they present the vehicle for the annual vehicle inspection.
Advance tax is not a final tax and every taxpayer who have paid advance tax at the end of the year is required to declare the same in their income tax returns submitted annually.
2. Exempted Vehicles
Tractors and trailers used for agricultural purposes are exempted to pay advance tax.
3. What Penalties Are You Subject To If You Fail to Make Payment For Advance Tax?
Advance tax is due and payable to KRA on or before the 20th day of January of the year of income, or in cases of transfer of ownership of the commercial vehicle, before the new owner is registered.
Failure to pay advance tax on time can result in serious penalties and in addition interest being charged on the amount due.
4. Calculating Advance Tax in Kenya
Any person who owns a commercial vehicle or a public service vehicle (PSV) is liable to pay advance tax. Advance tax is payable each year of income at the rates specified below:
|
Type of Vehicle |
Capacity Rate |
Minimum Rate Per Year |
|
Vans, Pick-ups, Trucks, Prime movers, Trailers, Lorries |
Ksh. 2,500 per tonne of load capacity. |
Ksh. 5,000 |
|
Saloons, Station-Wagons, |
Kshs. 100 per passenger capacity per month. |
Ksh.5,000 |
Taxpayers who have paid advance tax are required to declare the same in their annual income tax returns submitted yearly and pay any additional tax due.
5. Conclusion
In conclusion, paying advance taxes is a legal requirement in Kenya. By understanding the basics behind how it works and who needs to pay it, taxpayers can avoid penalties associated with non-payment or late payment.
It is advisable to seek professional advice from a qualified accounting professional or tax consultant regarding your specific circumstances.
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