Tax Penalties, Interest & Fines (Kenya)

I. Late Filing & Submission Penalties

A. Late Submission of Tax Returns (Section 83, TPA)

• Pay-As-You-Earn (PAYE) Returns: 25% of the tax due or KES 10,000, whichever is higher.
• Company or Partnership Income Tax Returns: 5% of the tax due or KES 20,000, whichever is higher.
• Value Added Tax (VAT) Returns: 5% of the tax due or KES 10,000, whichever is higher.
• Excise Duty Returns: 5% of the tax due or KES 10,000, whichever is higher.
• Monthly Rental Income (MRI) Returns: For individuals: 5% of the tax due or KES 2,000, whichever is higher. For non-individuals (companies, partnerships): 5% of the tax due or KES 20,000, whichever is higher.
• Turnover Tax(TOT):KES 1,000
• Other Documents (e.g., statements, notices): KES 1,000 for each day the default continues, capped at KES 50,000 total.

B. Failure to Submit Third-Party Information Return (Common Reporting Standard – Section 6B & 88A, TPA)

• Reporting Financial Institution: KES 1,000,000 for failure to file an information return or a “nil” return when required.

II. Late Payment & Withholding Penalties

A. Late Payment of Tax (Section 83A, TPA)

• Penalty: 5% of the unpaid tax due for all the taxes (Income Tax, TOT VAT, Excise Duty, PAYE).

B. Late Payment Interest (Section 38, TPA)

• Interest: 1% per month (simple interest) on the unpaid tax amount, accruing from the original due date until fully paid. The aggregate interest cannot exceed the principal tax liability.

C. Failure to Deduct or Withhold Tax (Section 39A )

• The principal tax not deducted or withheld becomes a debt recoverable from the person who failed to do so.
• This recovered amount is subject to the standard 5% late payment penalty (Section 83A) and 1% monthly interest (Section 38).

III. Record-Keeping & Registration Penalties

A. Failure to Keep Required Records (Section 82, TPA)

The penalty is the higher of

• 10% of the tax payable for that reporting period; or
• KES 100,000.

B. Failure to Apply for Registration or Deregistration (Section 81, TPA)

• Penalty: KES 100,000 for every month (or part of a month) of default.
• Cap: Maximum total penalty is KES 1,000,000.

IV. Serious Compliance Failures & Fraud Penalties

A. Tax Shortfall from False/Misleading Statements (Section 84, TPA)

• Base Penalty (Deliberate Act): 75% of the tax shortfall.
• Increase for Repeat Offence: +10 percentage points for a second offence; +25 percentage points for a third or subsequent offence.
• Reduction for Voluntary Disclosure: -10 percentage points if disclosed before KRA discovery or audit.

B. Tax Avoidance (Section 85, TPA)

• Penalty: 200% (double) the amount of tax that was avoided.

C. Fraudulent Refund Claim (Section 88, TPA)

• Penalty: 200% (twice) the amount of the fraudulent claim.

D. Failure to Comply with Electronic Tax System (Sections 86 & 59A, TPA)

• For failing to use required e-tax services (e.g., e-invoice, e-filing, e-payment): A penalty of two times the tax due (200%) applies if the Commissioner rejects the taxpayer’s reason for non-compliance. (Section 86)
• For failing to integrate with KRA’s data system (businesses > KES 5M turnover): Upon conviction, a penalty of KES 100,000 for every month the failure continues. (Section 59A(5

E. Penalties Relating to Common Reporting Standard (Section 88A, TPA)

• Making a false statement or omitting required information in an information return: A penalty of KES 100,000 for each false statement or omission, and/or imprisonment for a term not exceeding three years.
• Failing to file an information return or a “nil” return when required (by a reporting financial institution): A penalty of KES 1,000,000 for each failure.
• General failure to comply with a duty under Section 6B: A penalty of KES 20,000, plus KES 20,000 for each day during which the non-compliance continues, for a period not exceeding sixty (60) days

V. Miscellaneous Administrative Penalties

A. Failure to Appear Before Commissioner (Section 87, TPA)

• For an individual: KES 10,000.
• For any other person (e.g., company): KES 100,000..

VI. Criminal Fines & Sanctions (Upon Prosecution & Conviction)

A. General Offences (Section 104(1), TPA)

• Fine: Up to KES 1,000,000.
• Imprisonment: Up to 3 years.
• Or both.

B. Offences relating to recovery of tax or by officers and staff of the Authority (Sections 98(1), 102(1) & 104(2), TPA)

• Fine: Up to KES 2,000,000.
• Imprisonment: Up to 5 years.
• Or both.

C. Tax Fraud (Sections 97 & 104(3), TPA)

• Fine: Up to KES 10,000,000 or double the tax evaded, whichever is higher.
• Imprisonment: Up to 10 years.
• Or both.

D. Offences by Tax Agents (Sections 92 & 104(4), TPA)

• Fine: Equal to double the tax evaded or up to KES 5,000,000, whichever is higher.
• Imprisonment: Up to 5 years.
• Or both.

E. PIN-Related Offences (Sections 91 & 104(1), TPA)

• Using a false PIN or obtaining a PIN by fraud is a criminal offence.
• Sanction upon conviction: A fine of up to KES 1,000,000, imprisonment for up to 3 years, or both.

NB

• Waiver for KRA I. Late Filing & Submission Penalties

A. Late Submission of Tax Returns (Section 83, TPA)

• Pay-As-You-Earn (PAYE) Returns: 25% of the tax due or KES 10,000, whichever is higher.
• Company or Partnership Income Tax Returns: 5% of the tax due or KES 20,000, whichever is higher.
• Value Added Tax (VAT) Returns: 5% of the tax due or KES 10,000, whichever is higher.
• Excise Duty Returns: 5% of the tax due or KES 10,000, whichever is higher.
• Monthly Rental Income (MRI) Returns: For individuals: 5% of the tax due or KES 2,000, whichever is higher. For non-individuals (companies, partnerships): 5% of the tax due or KES 20,000, whichever is higher.
• Turnover Tax (TOT): KES 1,000
• Other Documents (e.g., statements, notices): KES 1,000 for each day the default continues, capped at KES 50,000 total.

B. Failure to Submit Third-Party Information Return (Common Reporting Standard – Section 6B & 88A, TPA)

• Reporting Financial Institution: KES 1,000,000 for failure to file an information return or a “nil” return when required.

II. Late Payment & Withholding Penalties

A. Late Payment of Tax (Section 83A, TPA)

• Penalty: 5% of the unpaid tax due for all the taxes (Income Tax, TOT, VAT, Excise Duty, PAYE).

B. Late Payment Interest (Section 38, TPA)

• Interest: 1% per month (simple interest) on the unpaid tax amount, accruing from the original due date until fully paid. The aggregate interest cannot exceed the principal tax liability.

C. Failure to Deduct or Withhold Tax (Section 39A )

• The principal tax not deducted or withheld becomes a debt recoverable from the person who failed to do so.
• This recovered amount is subject to the standard 5% late payment penalty (Section 83A) and 1% monthly interest (Section 38).

III. Record-Keeping & Registration Penalties

A. Failure to Keep Required Records (Section 82, TPA)

The penalty is the higher of

• 10% of the tax payable for that reporting period; or
• KES 100,000.

B. Failure to Apply for Registration or Deregistration (Section 81, TPA)

• Penalty: KES 100,000 for every month (or part of a month) of default.
• Cap: Maximum total penalty is KES 1,000,000.

IV. Serious Compliance Failures & Fraud Penalties

A. Tax Shortfall from False/Misleading Statements (Section 84, TPA)

• Base Penalty (Deliberate Act): 75% of the tax shortfall.
• Increase for Repeat Offence: +10 percentage points for a second offence; +25 percentage points for a third or subsequent offence.
• Reduction for Voluntary Disclosure: -10 percentage points if disclosed before KRA discovery or audit.

B. Tax Avoidance (Section 85, TPA)

• Penalty: 200% (double) the amount of tax that was avoided.

C. Fraudulent Refund Claim (Section 88, TPA)

• Penalty: 200% (twice) the amount of the fraudulent claim.

D. Failure to Comply with Electronic Tax System (Sections 86 & 59A, TPA)

• For failing to use required e-tax services (e.g., e-invoice, e-filing, e-payment): A penalty of two times the tax due (200%) applies if the Commissioner rejects the taxpayer’s reason for non-compliance. (Section 86)
• For failing to integrate with KRA’s data system (businesses > KES 5M turnover): Upon conviction, a penalty of KES 100,000 for every month the failure continues. (Section 59A(5

E. Penalties Relating to Common Reporting Standard (Section 88A, TPA)

• Making a false statement or omitting required information in an information return: A penalty of KES 100,000 for each false statement or omission, and/or imprisonment for a term not exceeding three years.
• Failing to file an information return or a “nil” return when required (by a reporting financial institution): A penalty of KES 1,000,000 for each failure.
• General failure to comply with a duty under Section 6B: A penalty of KES 20,000, plus KES 20,000 for each day during which the non-compliance continues, for a period not exceeding sixty (60) days

V. Miscellaneous Administrative Penalties

A. Failure to Appear Before Commissioner (Section 87, TPA)

• For an individual: KES 10,000.
• For any other person (e.g., company): KES 100,000..

VI. Criminal Fines & Sanctions (Upon Prosecution & Conviction)

A. General Offences (Section 104(1), TPA)

• Fine: Up to KES 1,000,000.
• Imprisonment: Up to 3 years.
• Or both.

B. Offences relating to recovery of tax or by officers and staff of the Authority (Sections 98(1), 102(1) & 104(2), TPA)

• Fine: Up to KES 2,000,000.
• Imprisonment: Up to 5 years.
• Or both.

C. Tax Fraud (Sections 97 & 104(3), TPA)

• Fine: Up to KES 10,000,000 or double the tax evaded, whichever is higher.
• Imprisonment: Up to 10 years.
• Or both.

D. Offences by Tax Agents (Sections 92 & 104(4), TPA)

• Fine: Equal to double the tax evaded or up to KES 5,000,000, whichever is higher.
• Imprisonment: Up to 5 years.
• Or both.

E. PIN-Related Offences (Sections 91 & 104(1), TPA)

• Using a false PIN or obtaining a PIN by fraud is a criminal offence.
• Sanction upon conviction: A fine of up to KES 1,000,000, imprisonment for up to 3 years, or both.

NB

• Waiver for KRA System Errors (Section 89(5A)): The Cabinet Secretary may waive penalties/interest caused by proven errors of the KRA’s electronic system (e.g., iTax malfunctions).
• No Double Jeopardy (Section 80): A person cannot be subject to both a penalty and a prosecution for the same act.
• Official Demand Required (Section 89(3)): An administrative penalty is only due after the Commissioner serves a written demand notice. System Errors (Section 89(5A)): The Cabinet Secretary may waive penalties/interest caused by proven errors of the KRA’s electronic system (e.g., iTax malfunctions).

Disclaimer: This summary is based on the Tax Procedures Act and amendments valid as of 24 January 2026. Tax laws are subject to change through new legislation. For critical decisions, always consult the latest official texts on the Kenya Law Reform Commission website or seek advice from a qualified tax professional.

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