In our years of working with businesses across Kenya, we've seen the same tax mistakes repeated over and over. Here are the top 7 — and how to avoid each one:
1. Filing Late or Not at All
Even if you have no tax to pay, you must file a nil return. Late filing attracts a penalty of KSh 10,000 for individuals or 5% of the tax due for companies (whichever is higher).
2. Mixing Personal and Business Finances
Running personal expenses through your business account creates a false picture of profitability. Always keep separate accounts.
3. Not Registering for VAT When Required
Once your turnover exceeds KSh 5 million per year, VAT registration is mandatory. Failure to register is a criminal offence.
4. Incorrect PAYE Computation
Many employers use old tax tables or fail to apply personal relief correctly, leading to over- or under-deduction.
5. Ignoring Withholding Tax
Payments to consultants, landlords, and service providers above KSh 24,000/month require withholding tax deductions.
6. Not Keeping Records for 5 Years
KRA can audit your business for up to 5 years back. Businesses that can't produce records are assessed estimates — often higher than actual tax.
7. Missing Tax Planning Opportunities
Legal deductions like capital allowances, wear and tear, and investment deductions are regularly missed. Strategic tax planning can significantly reduce your liability.
