Taxation is the mode by which governments across the world raise revenue from their citizens. Taxes are levied on all individuals and businesses either directly or indirectly. Paying taxes is a civic duty for all citizens. There are various Laws enacted by the government to ensure the legality of tax collection from all. Since taxation is certain and compulsory it is, therefore, paramount that as an individual whether in business or not you have a tax expert or consultant for tax advice. This article explores why it’s very important to have a tax expert not only for your business tax issues but as well for your personal taxes and finances.

A brief overview of Taxation.

 Tax is a compulsory contribution levied on individuals or corporations by a government entity (Ref:  https://www.investopedia.com/terms/t/taxes.asp). The tax could either be a direct tax or an indirect tax.

A direct tax is a tax whose incidence and impact is on an individual and it cannot be transferred to a different person, example of direct tax includes employment income, personal income, corporate tax etc. On the other hand, an Indirect tax is a type of tax whose incidence and impact can fall on a different person. A good example of an indirect tax is Value Added Tax (VAT) which is transferred to the final consumer in a supply chain. 

Taxation of Individuals and Business in Kenya

In Kenya taxation is administered by the Kenya Revenue Authority (KRA). Various laws are the legal basis for the government imposing taxes, the supreme law being the superior one.  Article 209 of the Kenyan Constitution outlines the Power to impose taxes and charges. Other Laws that guide Taxation in Kenya Include:

• The Income Tax Act
• The Tax Procedures Act
• Exercise Duty Act
• Value Added Tax Act
• East African Customs Management Act

The Laws outline how tax is to be imposed on which incomes, how it should be collected, the due dates, and as well dictates the penalties for non-compliance to the tax laws.

List of Various Taxes in Kenya

Regarding the above Laws there are various types of taxes in Kenya including but not limited to:

• Employment Income Tax – PAYE (Pay As You Earn)
• Turnover Tax
• Withholding Tax
• Value Added Tax
• Corporate Tax

Taxation is a wide thematic area that needs a tax expert who has studied taxation discipline in finance, accounting, MBA, and as well with experience to decipher. Most of the tax practitioners are Certified Public Accountants (CPAs) and Lawyers.

To understand taxation, you need a tax consultant for your business and personal finances for the following reasons:

1.Professional advice and guidance.

Having a tax consultant is having a professional at your disposal, tax experts are knowledgeable on tax issues from tax planning, assessment of tax and tax payments. These are areas that not many other professions can handle, it’s also important to note that not all accountants are knowledgeable on tax matters. The tax consultant will guide you, especially for a business case on how to take advantage of tax initiatives to reduce tax liability legally, such as claiming tax reliefs.

2.Tax Compliance with Existing Laws.

It is very important to comply with tax laws for business continuity, non-compliance with tax laws especially on filing is very punitive where a business is penalised. For example, not filing taxes on time attracts a penalty of Ksh 2,000 for Individuals and Ksh 20,000 for Companies or 5% of the tax amount due whichever is higher.

A business needs to comply with the tax laws for it to even get a Tax Compliance Certificate. The Certificate is a document issued by KRA showing that a business has filed its taxes and as well paid taxes, this document is required whenever doing business, especially government tenders.

With a tax consultant, you will be in good books with the taxman since the consultant will guide you or your business in all tax matters and you will rarely find yourself on the wrong side of the law.

3. Time saving

For one to run a business smoothly there is nothing important like saving on time, as a business executive you do not have to be involved in the small issue and micro-managing the business operations but instead delegate to professionals and focus on other important managerial matters.

Having a tax expert in your business will save you time that you would have taken on preparing taxation records, this is because taxation is different from accounting where accounting is done based on accrual concept but taxation is based on cash concept.

A tax expert has to prepare the tax records again from what an accountant has prepared. In preparing a tax return the tax expert has to recompute the net profit given by the account by deducting any unallowable deductions by the taxman.

4. Tax Planning and Advisory

Tax payable to the government is a major cash outflow in a business that needs to be considered when doing financial planning. As other expenses such as payroll and rent are considered in the process of budgeting, taxation must be considered as an expense as well.

This can only be done by a tax expert who applies the knowledge in tax to get estimates of the tax payable. For instance, some taxes such as VAT can affect a business’s cash flow where proper tax planning is not considered. The VAT tax is due by the 20^th of Every month and is payable the earlier of either; invoice date, delivery of a product/service, or payment.  This means where a business has to invoice a client VAT and is not paid on time will have to pay that Vat from its cash reserve and not from the vat payment on the invoice.

How and where to get a tax consultant in Kenya

After getting to know why it’s important to have a tax consultant, the next question you could be having is where do I get a good tax consultant and what factors to consider when looking for one.

You can get a tax consultant from an online search on business directories such as Google my business and yellow pages. You should look for one who is a licensed KRA Tax agent, a Certified Public Accountant or one with both qualifications.

We pride ourselves as a reputable firm offering taxation services with seasoned tax experts who are Licensed KRA Tax agents and also Certified Public Accountants. You can engage us to be your tax expert and consultant. Our experience over the years will be of value to you and your business. This is evident in accolades we have been awarded for our exemplary service

You can contact us for Tax Consultancy services Email: info@anzianoconsultants.com Cell: +254706600875 / +254710818481 Tell: +254202300190