Avoid KRA penalties in payroll - A guide for HR professionals

KRA is like a rite of passage in Kenya. It is an indication that you are a working adult, a contributor to the country’s economy. As long as you are receiving an income (or your business is receiving a revenue), you are required to pay tax. Of course there are exemptions. For instance, a person who earns less than KES 24,000 per month is not required to pay tax. As a HR professional, you are tasked with ensuring that your company remains compliant when it comes to tax-related issues. Unfortunately, this is not a task that is always done accurately and effectively. In fact, tax season is a stress inducing season for HR professionals in Kenya who pull all-nighters to make sure that their companies are not penalized by KRA. In this piece, we will examine common compliance issues that HR professionals encounter on behalf of their companies and employees.

1) How to submit KRA PAYE on iTax 

Pay As You Earn (PAYE) is a tax collection method under Income Tax Act Cap 470. It requires employers to deduct income tax, NHIF and NSSF from an employee’s commissions, bonuses, salaries, housing allowances and any other income an employee receives while employed. Returns should be filed and tax payable on or before the 9th of the following month.

As a HR professional, you are obligated to submit PAYE to KRA and you can do so on iTAX. Here is a step by step procedure on how you can do this; 

• Login to KRA iTAX portal
• Go to the “Returns” menu item and click “File Returns”.
• Under “Tax Obligation” select “PAYE” then click “Next”.
• Click to download the PAYE excel sheet (P 10 form).
• Download payroll details for employees in your company.
• In the iTax PAYE excel sheet fill in the details of your company and click “Next”.
• Fill in the “Employee Details” section by importing a CSV of employee details from the company.
• Upload the CSV file onto iTAX by logging into iTAX using your company’s PIN and iTAX password.
• Head over to “Returns”. Select “File Return”, “Income tax”, “PAYE” and then “Next” so as to upload the generated CSV file.
• Generate a payment slip by heading to “Payments” and clicking “Payment Registration”.

And viola! You have submitted your KRA PAYE on iTAX. 

2) How to File Employment Income Only using Individual Tax Return (ITR)

Say, an employee approaches you wondering how they can file their income tax on iTAX. Well, since you have been filing their PAYE through iTAX, then they can comfortably file their income tax through the “ITR for Employment Income Only” section on iTAX. Let’s look at how an employee can file employment income only using ITR; 

• Log into their iTAX portal.
• Under the “Returns” tab select “ITR for Employment income only”.
• The page that will open will have pre populated details on “Type”, “Taxpayer Pin” and “Tax Obligation”.
• Under the “Return Period From” fill in the respective year. In the “Return Period To” will automatically generate a date.
• There is a question at the end that needs an individual to affirm that they receive employment income. Click “Next”.
• The next page has details divided into sections (A to T). An employee should fill in every detail that has asterisks. 

• There are details that will prompt other pages to appear i.e., mortgage details, insurance details. Ensure to fill all the details and provide certifications requested. These will enable you to receive mortgage relief, insurance relief etc. 
• If an employee finishes filling the details and the bank details segment is active (allows you to fill in your bank details) that means that they qualify for a tax refund. If the segment is inactive, however, it means that they do not qualify for a refund. Click “Next”.
• The next page is “Section F” which has pre populated information of the individual’s “Employment income” i.e., pin of the employer, name of the employer, gross income etc. Since everything here is pre populated, the person can click “Next”. 
• The next segment is “Section M”. This page entails pre populated information of the employee’s PAYE that was deducted from their salary.  Click “Next”.
• The next section is Q. Here, an individual is required to fill in income tax that has been paid in advance which is a rare case. If at all there is a payment they made, they should fill in the details of that tax payment. Click “Next”.
• Finally, the employee can head over to “Section T” where the details will have been autocalculated and pre populated. Fill in the “Personal Relief” and “Pension” details.
• In these prepopulated sections, an employee can counter-check to see if everything is in line with the information you have.
• After going through the last section and ensuring there is nothing out of place, the employee can submit their form. 
• The individual can download an acknowledgment receipt  from a downloadable link. They can also access this receipt through their email. 

As a HR professional, having such information will help you assist employees to tackle tax-related issues so that they can avoid penalties. In doing so, you will be helping employees stay productive as they will not be agonizing over KRA penalties. 

3) How to file returns with more than one p9 form

Another common question that an employee can ask you is how they can file returns if they happen to have more than one P9 form. 

As a HR professional, you can help them navigate this area by telling them to; 

• Log into their iTAX portal.
• Head over to the “Returns” tab. Select “File Return”.
• Choose “Income Tax- Resident Individual” as Tax Obligation. Click “Next”.
• Select “Click here” to download Income Tax resident Individual Return Form.
• Open the downloaded document and enable content. They can do this by clicking “file select options”, “trust center”, “trust center settings”, “macro settings”.  Here, they should enable all macros then click “OK”.
• Save the file as “Excel Macro Enabled WorkBook”. Close said file.
• Open file (template) anew and fill in mandatory details regarding their basic info. Click “Next”.
• Fill in details of their employment income for the year provided in section F, that is from row A3 to G3 per their first p9 form. 
• Proceed to fill in their details of the employment income for the year starting from A4 to G4 per their second p9 form.
• In case they have more than two P9 forms, the employee can click “ADD ROWS” and provide the employment income details required.
• Afterward they can head over to Section M by clicking “Next”. Here, they can provide PAYE details as per the first P9 form (row A3 to E3) and PAYE details as per the second P9 form (row A4 to E4). If they have more P9 forms they should observe the same process. Click “Next”.
• In “Section T” they can fill in the total pension they received the whole year from all the P9 forms. Here the maximum amount is KES 240,000. They should also fill the personal relief part which has a maximum limit of KES 28,800.
• After ensuring everything is in order, click “Validate” to generate the return file so that you can upload it on iTAX. 
   

And there you have it! Teach employees how to file returns with multiple p9 forms today.

4) How  do you file for corporation tax?

Corporation tax rate for resident companies is 30% while corporation tax for non-resident companies is 37.5%. Corporation tax is normally paid prior to or on the sixth month after a company’s accounting period. If you file company returns after 6 months, KRA will penalize your company. 

You can file corporation tax by filling in an Income Tax Company Return form otherwise known as the IT2C form. 

Once you finish filing Company returns you can generate a payment slip from iTAX and make a payment via approved KRA banks.

What are the consequences of not being KRA compliant?

Below is a table stipulating penalties that one can incur if you are not KRA compliant; 

Filing returns can be cumbersome as the process is quite manual. As a result, mistakes can be made and this can gravely affect your company’s finances and reputation. To avoid KRA-related compliance issues and the resulting penalties use ElevateHR payroll software. 

 How to avoid penalties by using ElevateHR payroll software

ElevateHR is a cloud-based HR platform that is dedicated to serving the African market on all matters HR. One of the solutions we provide for HR professionals is the payroll software. 

By using this software you will be able to; 

• Access an automated and seamless process of managing statutory deductions such as PAYE, NHIF and NSSF. 
• Pay your taxes on time and accurately such that you do not attract penalties. 
• Invest the time and energy you could have been using on meeting statutory obligations on other HR tasks, a factor that boosts productivity among employees.
• Receive a statutory report with details of all the tax payments made to KRA on behalf of the company. 

Even with the debut of a digital platform where people can file returns and pay taxes, this process is still a handful as this process needs you to fill in details manually and go over them to ensure that you did not misrepresent particular data. 

ElevateHR’s payroll software can save you this hussle by automating this entire process for you such that you do not have to break into hives every month and year. Automate your tax compliance process by requesting a demo of the payroll software today!