KRA Sends Warning to Kenyans Filing Nil Returns

The Kenya Revenue Authority (KRA) has issued a stern warning to Kenyans who file nil tax returns despite earning income, stating that it will enforce tax laws more strictly as the filing season approaches.

In a statement issued on March 30, the taxman reminded Kenyans that filing nil returns while earning income is not only false but also against the law.

KRA explained that nil returns are meant only for businesses that are not generating income, emphasizing that active businesses earning income must not file nil returns.

“A message to habitual NIL filers: The truth is this, if you are earning income from your business, you cannot declare NIL returns,” KRA stated.

KRA also reminded Kenyans of the importance of filing honest tax returns based on their earnings.

KRA Crackdown on Non-Compliant Taxpayers

The agency made it clear that filing nil returns should not be viewed as a tactic for business survival or growth.

“A NIL return is not a growth strategy. If you have income, file TODAY!” KRA warned, urging immediate compliance among taxpayers who may be underreporting their earnings.

According to the authority, declaring nil returns for active businesses contradicts the principles of business expansion and financial transparency.

It also raises red flags within KRA’s digital monitoring systems, potentially triggering high-risk audits.

Also Read: KRA Introduces Pre-Filled Tax Returns to Simplify Filing for Salaried Kenyans

Penalties and Legal Consequences

The KRA issued a warning to taxpayers who would fail to file their tax returns by June 30, stating that they would be subject to various penalties, including a fine of between Ksh 2,000 and Ksh 20,000 or 5 percent of the tax amount due.

Moreover, there would be a penalty of up to 25 percent of the tax amount in cases of false declarations, in addition to a 1 percent interest charged on the amount due on a monthly basis.

False declarations would also subject offenders to criminal prosecution, with a fine of up to Ksh 10 million or a 10-year jail sentence.

Expanding the Tax Base

Recent information from KRA reveals that, whereas there are more than 22 million registered taxpayers in Kenya, only 7 million are active taxpayers.

The majority of these are employees of companies that pay taxes through the Pay As You Earn (PAYE) system.

KRA Commissioner for Micro and Small Taxpayers, George Obell, was recently quoted as saying that the taxman plans to increase the number of active taxpayers to 11.5 million by June 2027.

Also Read: Step-by-Step Guide to Filing KRA Nil Returns

In his words, “Targeting nil filers is key to this plan. We should start having a culture of people filing consistently. So as KRA, we are moving closer to the people to top the number of filers. Why should someone declare nil returns yet their businesses are recording millions in profits?”

Pressure on Small Businesses

KRA is planning to amend the Value Added Tax (VAT) system by removing the Ksh 5 million annual turnover threshold for Value Added Tax registration.

If implemented, this will see small businesses pay the standard 16 percent tax, thus expanding the tax bracket.

However, KRA claims that this is aimed at promoting equality and eliminating loopholes that are exploited for tax evasion.

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KRA officers busy at work. PHOTO/KRA