Voluntary Tax Disclosure Program And Informer Reward Scheme

The Voluntary Tax Disclosure Program (VTDP) is where a taxpayer confidentially discloses any tax liabilities to the Kenya Revenue Authority (KRA) for the purpose of being granted relief of penalties and interest of the tax disclosed taxes.

This program is aimed at improving revenue collection through enhanced compliance by bringing more taxpayers from the underground economy into the tax net.

This program took effect on 1 January 2021, having been introduced via the Finance Act 2020. It will run for a period of three years, and will operate under the following conditions:

• The application under the VTD program shall be confidential, voluntary and requires disclosure of all material facts
• The disclosed tax liabilities must have been accrued within a period of the last 5 years
• Successful applicants shall be granted a remission of the interest and penalty due as follows:
  

  Program Duration	% of Remission
  1st year	100%
  2nd year	50%
  3rd year	25%

• Applicants will enter into a payment plan with the KRA for the tax due, which will be for a maximum duration of one year. Failure to meet the terms of the payment plan will result in the payment of the full interest and penalty that had been remitted.
• Applicants granted relief shall not seek any other remedy including the right to appeal with respect to the taxes, penalties and interest remitted.
• Successful applicants shall not be prosecuted with respect to the tax liability disclosed. However, where there was failure to disclose material facts, the KRA may withdraw the relief, assess additional tax or commence prosecution, and any person aggrieved by KRA’s decision may appeal to the Tax Appeals Tribunal.

The VTD Programme shall NOT apply to a tax payer whereby:

• They are under audit or investigation for the undisclosed tax, or has been served with a notice of intention to investigate or carry out an audit/compliance check for the undisclosed tax, or is a party to an ongoing litigation in respect to the tax liability or any matter relating to the tax liability
• The tax relief granted shall result in the payment of a refund to the taxpayer of taxes already paid

Informer Reward Scheme

The KRA also has a reward scheme for informants that successfully report a case of tax fraud or tax evasion.

Tax fraud involves tax evasion, which KRA has interpreted to be any deliberate attempt to illegally obtain a tax benefit. This may include forging books of accounts, failure to register as a tax entity, file tax returns, pay taxes, keep records, obstructing, bribing or impersonating a tax officer or aiding and abetting a tax crime.

Informers may submit information in person or proxy to the KRA. The KRA is in the process of implementing an online anonymous reporting system to enable this.

If the case is successful, informers will be rewarded with 5% of the taxes or duties so recovered or KES 2 million per case, whichever is less.

How we can assist

CM Advocates has a fully-fledged tax law advisory business unit that offers a vast range of tax advisory services. Our highly qualified and experienced personnel will assist with your tax matters and ensure that your business is tax compliant, and assist you to analyze and mitigate any tax risks or exposure. We can work with you to take advantage of the voluntary tax disclosure programme while it is in effect.

Kindly get in touch with us for any clarifications and assistance on the above by contacting our Tax Advisory Business Unit members via +254 716209673 or on email via taxteam@cmadvocates.com.