Missed your KRA return or payment deadline? Learn the official 2025 tax penalties in Kenya for VAT, PAYE, Turnover Tax, Nil returns, and more — including interest, legal backing, and tips to avoid fines.
⚖️ Where Do Tax Penalties Come From?
All tax penalties in Kenya are backed by the Tax Procedures Act (Cap. 469B) — and regularly updated by the Finance Act. These penalties apply to both individuals and businesses who:
- File returns late
- Fail to pay tax on time
- Understate income
- Fail to register for tax obligations
- Ignore KRA correspondence
📌 The penalties apply regardless of whether the return is a nil or tax-paying return.
🚨 Common KRA Penalties in 2025
| Tax Type | Filing Penalty | Payment Penalty | Law Reference |
|---|---|---|---|
| VAT | Ksh 10,000/month or 5% of tax due (whichever is higher) | 5% of tax due + 1% interest/month | TPA Sec. 83–89 |
| Income Tax (Resident) | Ksh 2,000/month (individuals) or Ksh 20,000 (companies) | 5% of tax due + 1% monthly interest | TPA Sec. 83 |
| Turnover Tax (TOT) | Ksh 1,000/month (individuals) or Ksh 5,000 (companies) | 5% of tax due + 1% per month | Income Tax Act Sec. 12C + TPA Sec. 83 |
| PAYE | Ksh 10,000/month or 25% of tax due | 5% of tax due + 1% per month | TPA Sec. 83 + 85 |
| Nil Returns (All types) | Same penalty as above for failing to file | Not applicable | TPA Sec. 83(2) |
🔍 Even Nil Returns attract the full filing penalty if not submitted on time.
🧮 How Is the Penalty Calculated?
Filing Penalty:
You’ll be charged per return, per month of delay.
E.g. If you file 3 months late → 3 × Ksh 10,000 = Ksh 30,000
Payment Penalty:
- 5% of tax due (one-time)
- Plus 1% interest on the outstanding amount every month (compounding)
📘 Example:
Let’s say your business had a VAT liability of Ksh 50,000 in April but filed and paid in June:
| Penalty Type | Calculation | Amount |
|---|---|---|
| Filing | Ksh 10,000 × 2 months | Ksh 20,000 |
| Payment | 5% × 50,000 = 2,500 |
- 1% × 50,000 × 2 months = 1,000 | Ksh 3,500
| Total | | Ksh 23,500
🛡️ How to Avoid or Reduce Penalties
- ✅ File on time — even if you owe nothing
- ✅ Register for relevant tax obligations (VAT, PAYE, TOT) if eligible
- ✅ Pay using the correct PRN on iTax before the 20th for past errors or omissions
- ✅ Deregister for VAT or PAYE if your business is inactive or below the threshold
💬 FAQs
Q: I filed a nil VAT return late. Do I still pay Ksh 10,000?
✅ Yes. The penalty is based on non-filing, not the tax amount.
Q: Can KRA waive penalties?
✅ Only under Voluntary Disclosure or KRA’s remission framework (upon request and in specific hardship cases).
Q: How do I know if I’ve been penalized?
Check your iTax account for demand notices, penalty assessments, or balance due under each tax obligation.
📣 Call to Action
Don’t let tax penalties catch you off guard!
💼 Whether you owe tax or not — you must file your returns on time.
💬 Need help with compliance or past penalties? Ushuru.com can help you clean up and stay compliant.