The Tax Procedures (Amendment) (No. 2) Bill, 2024 (National Assembly Bills No. 46)

SPECIAL ISSUE

Kenya Gazette Supplement No.191 (National Assembly Bills No.46)

REPUBLIC OFKENYA

KENYA GAZETTE SUPPLEMENT

NATIONALASSEMBLY BILLS,2024

NAIROBI,1st November,2024

CONTENT

| Bill for Introduction into the National Assembly- | PAGE | |-----------------------------------------------------|--------|

THE TAXPROCEDURES (AMENDMENT) (NO.2)

BILL,2024

A Bill for

• AN ACT of Parliament to amend the Tax Procedures Act;and for connected purposes

ENACTED by theParliament ofKenya,asfollows-

• 1.This Act may be cited as the Tax Procedures (Amendment)(No.2)Act,2024.
• 2.Section 23A of the Tax Procedures Act,hereafter
• referred to as the "principal Act", is amended by -
• (a) inserting the following new subsection immediately after subsection (2)-
• (2A) An electronic tax invoice issued under subsection(2) shall contain the
• following information-
• (a)
• the words"TAX INVOICE";
• (b) the name, address and Personal Identification Number of the supplier;
• (C) the name, addressand Personal Identification Number,if any,of the purchaser;
• (d) the serial number of the tax invoice;
• (e) the date and time which the tax invoice was issued and the date and time which the supply was made,if it is different from the date the tax invoice was issued;
• (f the description of the supply including quantity of the goods or the type of services;
• g
• the details of any discount allowed at the time of supply:
• (h)
• the consideration for the supply;
• Short title.

Amendmentof section 23Aof Cap.469B

• the tax rate charged and total tax
• i) amount of tax charged;and
• ()
• any other prescribed information.
• (b) inserting the following new subsection immediately
• after subsection 3-

(3A) Without prejudice to subsection (3), where a supply is received from a small business or a small scale farmer, whose turnover does not exceed one million the purchaser shall issue a tax invoice for the

purpose of ascertaining tax liability.

• 3.The principal Act is amended by deleting section 37E and substituting therefor the following new section-
• (2) Where all the principal tax due shall not have been paid before the 31st December, 2022, the person from whom the tax is due shall apply to the Commissioner for an amnesty of interest,penalties or fines on the unpaid tax, and propose a payment plan for the outstanding amount.
• (3) For the purposes of subsection (2)-
• (a) the amnesty shall be on interest, penalties or fines on the unpaid tax that have accrued up to the 31st December,2022;
• the amnesty shall only be granted
• (b) once if theperson-
• i) applies for amnesty and pays all the outstanding principal taxes not later than the 30th June, 2025;

Commissioner to refrain from recovering interest, penalties or fines.

37E.(1)Notwithstanding any other fines on tax debt where a person shall have

provision of this Act,the Commissioner shall refrain from recovering penalties or interest or paid all the principal tax due before the 31st December,2022.

Amendmentof

section37Eof Cap.469B.

• (i) does not incur a further tax debt; and
• (iii) gives a written undertaking for the settlement of all outstanding taxes that theperson may owe.
• (4) Despite subsection (2),where a person has paid part of the principal tax due as on the 31st December, 2022,and has been granted amnesty on the unpaid principal tax, and interest, penalties and fines thereon, any amount that remains unpaid on the 3Oth June, 2025, shall attract interest and penalties for whichno amnesty shall be granted.
• 4.The principal Act is amended by inserting the
• following new section immediately after section 37E-

37F. (1) This section applies where the

ofdoubt or difficulty in recoveryof

Reliefbecause Commissioner determines that-

tax.

• (a)it may be impossible to recover an
• unpaid tax;
• (b) there is undue difficulty or expense in therecovery of an unpaid tax;
• C thereishardship or inequity in relation to the recovery of an unpaid
• tax;or
• (d) there is any other reason occasioning
• inability torecover an unpaid tax.
• (2) Despite the provision of any tax law, the Commissioner may,with the prior written approval of the Cabinet Secretary, refrain from assessing or recovering an unpaid tax and the liability in relation to the tax shall be deemed tobe extinguished or the tax shall be deemed to be abandoned or remitted,as the case may be.
• (3) In any case referred to the Cabinet
• Secretary under subsection (1) and where

Insertion of newsection toCap469B.

appropriate,the Cabinet Secretary may direct

the Commissioner in writing

• (a)
• to take such action as the Cabinet Secretary may deem fit;or
• (b) to obtain the directions of the court
• in relation to the case.
• (4) The Commissioner shall, at least every four months,publish a notice in the Gazette, the names of the taxpayers, the relevant
• reasons under subsection (l) and the amount of taxesabandoned.
• (5) A notice under subsection (4) of this
• section shall be laid before the National Assembly without unreasonable delay,and a resolution may be passed by the National Assembly within twenty-one sitting days on which it next sits after the notice is so laid, that the notice-—
• (a)
• be approved;or
• (b) be annulled and it shall thenceforth be void, but without prejudice to the validity of anything previously done
• thereunder.
• 5.Section 42A of the principal Act is amended-
• (a) in subsection (1), by deleting the proviso;
• (b) by deleting subsection (4C) and substituting therefor the followingsubsection-
• (4C) A person who is required under this section to withhold tax and,without reasonable cause-
• (a) fails to withhold the whole amount of the tax which should have been withheld;or
• (b)fails to remit the amount of the withheld tax to the Commissioner by the fifth working day after the deduction was made,

Amendmentof section42Aof Cap.469B

shall be liable to a penalty of ten per cent of the

amountnotwithheld orremitted.

6. Section 47 of the principal Act is amended by deleting subsection (l) and substituting therefor the 2. followingnew subsection-

• (1) Where a taxpayer has overpaid a tax under any tax law, the taxpayer may apply to the Commissioner in the prescribed form-

4. 1tax against the taxpayer'soutstanding tax debtsandfuture tax liabilities including instalment taxes and input 5. (a) to offset theoverpaid value added tax;or 6. (b) for a refund of the overpaid tax -— 7. (i) in the case of income tax, within five years from the date on which the tax was overpaid;or 8. (i) in the case of any other tax,within six 9. months from the date on which the tax was overpaid. 7. Section 59A of the principal Act is amended-- 11. (a) by inserting the following subsection 12. new immediately after subsection(1)- 13. (1A) The Commissioner may,by notice in writing,require a person to integrate the electronic tax system authorised under section 75 to the system referred to in subsection (1) for the purposes of submission of electronic documents including detailed transactional data in theprescribed form. 14. (1B)A notice under subsection (lA) shall be for a reasonable period but not exceeding one year and depending on the nature of the business of that person. 15. (1C) The provisions of subsection (lA) shall only apply to a business whose turnover exceeds five million shillings.

Amendment ofsection47 of Cap. 469B.

Amendment ofsection 59A of Cap. 469B.

• (b) by adding the following new subsections
• immediately after subsection(4)-
• (5)A person who fails to comply with the notice given under subsection (1A) commits an offence and shall be liable,on conviction,to a penalty not exceeding five hundred thousand shillingsfor every month or part thereof that the failure continues.
• (6) Aperson who fails to comply with the notice given under subsection (2) commits an offence and shall be liable,on conviction,to a penalty not exceeding five hundred thousand shillingsfor every
• month or part thereof that the failure continues.

8. Section of 77 of the principal Act is amended by:

• (a) by renumbering the current provision as subsection
• (1);
• (b) by adding the following new immediately after subsection(1)-
• subsection
• (2) In computing the period for the lodgement of an objection to the Commissioner under section 51, an appeal to Tax Appeals Tribunal under section 52, an appeal to the High Court under section 53 or an appeal to the Court of Appeal under section 54,the computation shall not include Saturdays,Sundays or public holidays.
• 9.
• Section 83ofprincipal Act is amended-
• (a) by deleting the marginal note and substituting
• therefor the following new marginal note--

"Penalties for late submission and failure to

submit returns."

• the following new subsection
• (b) by inserting immediately after subsection(1)-
• (1A) An export processing zone enterprise that fails to submit a return as required under paragraph 4of the Eleventh Schedule to the Income Tax Act shall be liable to a penalty of twenty thousand

Amendment

to section77 toCap469B

Amendment of section83 of Cap. 469B.

shillings per month for each month or part thereof that the failure continues.

10. The First Schedule to the principal Act is amended by inserting the following new paragraph immediately after paragraph15-

• (16) Registration of an employee working remotely outside Kenya for an employer in Kenya, excluding an employee outside Kenya working for thenational carrier.

Amendment of the First Schedule to Cap.469B.

MEMORANDUM OFOBJECTSANDREASONS

The principal object of the Bill is to amend the Tax Procedures Act.

Clause 1 of the Bill provides for the short title of the Act.

Clause 2 of the Bill proposes to amend Section 23A of the Tax Procedures Act to prescribe information that must be contained in an electronic tax invoice to clarify the contents of an electronic invoice in order to prevent disputes since tax laws are interpreted strictly and not based on intent. The clarity will also guide the taxpayers on the contents of

avalid electronic tax invoice.

Clause 3 of the Bill proposes to amend section 37E of the Tax Procedures Act to extend the tax amnesty programme from 30th June 2024 to 30th June 2025.The extension of theprogramme was necessitated by the Court of Appeal decision on the Finance Act,2023.

Clause 4 of the Bill also proposes to insert a new section 37F to the principal Act to provide for relief because of doubt or difficulty in recovery of tax (tax abandonment). The clause seeks to provide a legal framework for reliefwhere there is doubt or difficulty in recovery of tax (tax abandonment) thatmake it impossible to collect taxrevenue.

Clause 5of the Bill proposes to amend section 42A of theprincipal Act by deleting the proviso to subsection (1) and inserting a new subsection (4C) to prescribe a penalty of 10% forpersons who fail to withhold and remit tax.

Clause 6 of the Bill proposes to amend section 47 of the principal Act toprovide timelines for application for offset ofoverpaid tax.For income tax,within fiveyears and for any other tax,within six months.

Clause 7 of the Bill proposes to amend section59A of theprincipal Act to provide for integration of electronic tax system with iTax for purposes of submission of electronic documents and facilitate uptake and deployment of technology to facilitate cost effective revenue collection. The integration of the systems will also facilitate the transmission of electronic documents for taxpurposes thusminimizing human interaction and enhancing revenue mobilisation.

Clause 8 of the Bill proposes to amend section 77 of the principal Act toprovide that in the computation of the period for lodgement of objections to the Commissioner under section 51,appeals to Tax Appeals Tribunal under section 52,appeals to the High Court under section 53 and appeals to the Court of Appeal under section 54,the computation of time shall not includeSaturday,Sunday ora publicholiday.

Clause 9 of the Bill proposes to amend section 83 of the principal Act to provide for a penalty of twenty thousand shillings per month for an export processing zone enterprise that fails to submit required returns.

Clause 10 of the Bill proposes the amendment of First Schedule to the principal Act to require forregistration of an employee workingremotely outside Kenya for an employer in Kenya,excluding an employee outside Kenya working for the national carrier.

Dated the23rd October,2024.

KIMANIICHUNG'WAH, Leader of Majority.

Section 23A of Cap469B which it is proposed to amend-

23A.Electronic tax invoices

• (1) The Commissioner may establish an electronic system through which electronic tax invoicesmay be issued and records of stockskeptfor the purposes of this Act.

2. (2)A person who carries on business shall —(a)issue an electronic tax invoicethroughthesystem establishedundersubsection(1); and(b)maintain a record of stocks in the system established under subsection (l). 3. issued by a resident person or the permanent establishment of a nonresident person, that invoice shall be generated through the system established under subsection (1). 4. (4)The electronic tax invoice referred to in subsection (3) may exclude emoluments,imports,investment allowances,interest,airline passenger ticketing and similar payments.(5)The Commissioner may,by notice in the Gazette,exempt a person from the requirements of this section.

Section 37E of Cap469Bwhich it is proposed to amend-

• 37E. Commissioner to refrain from recovering interest,penalties or fines.
• (1) Notwithstanding any other provision of this Act,the Commissioner shall refrain from recovering penalties or interest on tax debt where a person had paid all the principal tax due before the 31st December, 2022.
• (2) Where all the principal tax due had not been paid before the 31st December,2022,a person shall apply to the Commissioner for an amnesty of interest or penalties on the unpaid tax, and propose a payment plan for the outstanding amount.
• (3) For the purposes of subsection (2)-
• (a) the amnesty shall be on interest or penalties on the unpaid tax that have accrued up to the31st December,2022;
• (b) the amnesty shall only be granted once if the person-
• (i) applies for amnesty and pays all the outstanding principal taxes not later than the30th June2024;
• (ii) does not incur a further tax debt; and
• (ii) signs a commitment letter for the settlement of all outstanding taxes that theperson may owe.

• (4) Despite subsection (2), any amount of principal tax as at 31st December,2022 that remains unpaid on the30th June,2024,shall attract interest and penalties for which no amnesty shall be granted under this section.
• (5) Despite subsection (1) the Commissioner shall not remit,in whole or in part,any penalty or interest payable by a person,imposed under section85

Section 42A of Cap.469Bwhich it is intended to amend-

42A.Appointment of Value Added Tax withholding agent

• (1) The Commissioner may appoint a person to withhold two per cent of the taxable value on purchasing taxable supplies at the time of paying for the supplies and remit the same directly to the Commissioner:

Provided that the withholding tax shall not apply to the taxable value of zero-rated supplies and registered manufacturers whose value of investment in the preceding three years from the 1st July,2022 is at least three billion.

• (4C) A person who is required under this section to withhold tax commits an offence if theperson—
• (a) fails to withhold the whole amount of the tax which should have been withheld;or
• (b) fails to remit the amount of the withheld tax to the Commissioner by the fifth working day after the deduction was made.

Section 47of Cap.469Bwhichit is intended to amend-

47. Offset or refund of overpaid tax

• (1) Where a taxpayer has overpaid a tax underany tax law, the taxpayer may apply to the Commissioner, in the prescribed form-

2. (a) to offset the overpaid tax against the taxpayer's outstanding tax debts and future tax liabilities;or 3. (b) for a refund of the overpaid tax within five years,or six months in the case ofvalue added tax,after the date on which the tax was overpaid.

Section59Aof Cap.469Bwhichitisintended toamend-

59A.Data management and reporting system.

• (1)The Commissioner may establish a data management and reporting system for the submission of electronic documents including

detailed transactional data relating to those documents.2)The Commissioner shall notify in writing the persons required to submit electronic documents through the system established under subsection (1).3)The electronic documents referred to in subsection (2) include electronic invoice returns -(a)of payments made by a person in the ordinary course ofbusiness swheregoodswere exchangedfor consideration by a person not employed in the business;(b)for payments made by a person in the ordinary course of business where services were rendered,or in anticipation of services to be rendered,by a person not employed in the business;(c)for payments for services rendered,or in anticipation of services to be rendered,in connection with the formation, acquisition, development, or disposal of a business or a part of it, by persons not employed in the business;(d)for periodical or lump sum payments in respect of a royalty; or(e)for such other commercial or financial transaction as may be designated by the Commissioner.(4)For the and addresses of each person to whom a payment was made;(ii)where the payment is for services,the amount of the payment specifying whether the payment is a commission of any kind or is for expenses incurred in connection with rendering the services;(iii)where the payment is in any form of valuable consideration other than money,the particulars of the consideration; and(iv)such other particulars as the Commissioner may specify;(b)references to payments for services include references to payments in the nature of commission of any kind and references to payments in respect of expenses incurred in connection with the rendering of services;and(c)references to the making of payments include references to the giving of any form of valuable consideration,and the requirement imposed by paragraph (a)(iii) to state the amount of a payment shall, in relation to any consideration given otherwise than in the form of money, be construed as a requirement to give particulars of the consideration.

Section 77 of Cap.469B which it is proposed to amend-

77.Due date for submission and payment

If the date for-

• (a) submitting or lodging a tax return, application, notice, or other
• document;
• b) thepaymentof a tax;or
• (C) taking any other action under a tax law,

falls on a Saturday,Sunday,or public holiday in Kenya,the due date

shall be the previousworking day:

Provided that where a person who submits a notice of objection in electronic form or a tax return in electronic form, or pays the tax electronically,the due date shall remain the date specified in the relevant taxlaw.

Section83of Cap.469Bwhich it isproposed to amend-

83.Late submission penalty

(1)A person who submits a tax return after the due date shall be liable to a penalty-(a)of twenty five percent of the tax due or ten thousand shillings whichever is higher,if it is in relation to a return required to be submitted on account of employment income;(b)one thousand shillings if it is in relation to a return required to be submitted under Turnover Tax; thousand shillings,whichever is the higher,if it is in relation to value amount of tax payable under the return or twenty thousand shillings, whichever is the higher,in respect of a person other than an individual; or(ii)five per cent of the amount of tax payable under the return or two thousand shillings,whichever is the higher, for an individual: Provided that in the calculation of the late submission penalty for purposes of this section,the amount of taxpayable or due under thereturn shall be reduced by the amounts already paid and withholding tax credits.(2)A person who fails to submit a document,other than a tax return,as required under a tax law by the due date shall be liable to a penalty of one thousand shillings for each day or part day of default but the total penalty shall not exceed fifty thousand shillings.(3)For the purposes of subsection (2), a person ceases to be in default at the time the document is received by the Commissioner.

FirstSchedule to Cap.469B it is proposed to amend-

FIRST SCHEDULE[s.12]

TRANSACTIONSFOR WHICH A PIN IS REQUIRED

• (1 Registration of titles and stamping of instruments
• (2)
• Approval of development plans and payment ofwater deposits
• 3) Registration of motor vehicles, transfer of motor vehicles, and
• licensing of motor vehicles.
• 4 Registration of business names.
• 5
• Registration of companies.
• 6)
• Underwriting of insurance policies.

• (7) Trade licensing.

2. 8) Importation of goods and customs clearing and forwarding.

• 9) Payment of deposits for power connections.
• (10) All contracts for the supply of goods and services to Government Ministries and public bodies.
• (11) Opening accounts with financial institutions and investment banks.
• (12) Registration and renewal of membership by professional bodies and other licensing agencies.
• (13) Registration of mobile cellular pay bill and till numbers by telecommunication operators.
• (14) Carrying out business over the internet or an electronic network including through a digital marketplace.
• (15) Registration of a trust.