KRA has finally realised their mistake.

In last year's budget,the law was changed to exclude certain income categories from TOT....professional services (lawyers,doctors,accountants etc); rent (commercial & residential) etc.

This change took effect from 1st January this year. However,there are thousands of taxpayers in these categories that had already registered into the TOT regime. They were never notified of the changed law and have so far paid two quarters of TOT (Mar31 and June 30).

KRA never communicated to them to inform them to stop paying TOT and convert to the income tax.

Now,KRA has a very strict policy on how a taxpayer can be removed from one regime to another...you don't just stop paying TOT because the minister said so; you wait until you get written communication from the Commissioner.

This was never done...but now they are drafting the public notice. It should be out in a matter of weeks.

The question they are grappling with is,what to do the TOT already paid by non-qualifying taxpayers. Two suggestions are on the table:


To transfer these taxpayers income tax wtf 1st July 2009. That way,they will need to opnly account for their incomee from 1/7/09 to 31/12/09 in their tax returns next year.
To transfer the taxpayers to income tax wtf 1st January 2009. This way,they will account for income during the whole of 2009 and then get a weiver for the amounts paid under TOT.

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My take:

This TOT thing was never thought out properly before implementation. Apart from the current fiasco,here some others:


TOT was suppopsed to start from 1st January 2008,but registration of taxpayers started in late March.....I was amongst the first people to enlist and had been going to KRA every month from September 2007 looking for lapplication forms. The forms came out in mid Feb 2008
The TOT tax return forms were not available until April 17 2008 yet the first quater returns were supposed to be filed by 20th April. Taxpayers had only three days to do the returns!
The daily takings record books were also late. They came out in May 2009. Thus KRA could not verify the returns indicated by taxpayers in respoect of the first quarter.
The TOT return form has one great error,it has no space for the taxpayer to sign. Thus one can deny that the information contained in the form was filled in by him/her.


Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow)

@Pablo:

The budget (Finance Act) of 2008 also removed Limited Co's from the list of those who qualify. This is the reason why you were denied registration for your Co.

VAT is NOT mandatory for those whose turnover is below Sh5m (except for certain categories of businesses,e.g professional services). But,even if your TO is below the threshold,you can still register if for VAT if you wish.

TOT is also NOT mandatory for qualifying business categories. They are allowed to chose whether to be in the normal INCOME TAX regime or to migrate to TOT.

As explained here last year,TOT replaces INCOME TAX for qualifying businesses. If you get into TOT you don't pay INCOME TAX and you don't fill end of year tax returns.

BUT as explained in the above post,not every business or individual can get registered.

Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow)