Tax objections promote democracy in tax administration by fostering accountability, transparency, and fairness. They protect the taxpayer’s rights against the Kenya Revenue Authority (KRA) and the state. Above all, objections serve as a much-needed check and balance, giving citizens a voice and the means to dispute the power yielded by the government. Despite this protection by the law, businesses in Kenya don’t fully benefit from these provisions.
Tax objection is a legal process that demands evidence and legal grounds of objection. Failure to fulfill these requirements makes it hard for taxpayers to win tax disputes against the KRA. In this post, we examine the top mistakes businesses make when filing KRA objections and how to avoid them for favorable outcomes in tax disputes. Keep reading to learn the best practices when filing KRA tax objections.
What is a KRA Objection?
A KRA objection is a formal application to the KRA to challenge a tax decision. A taxpayer lodges an objection after receiving a tax decision following a tax assessment. You can object to a tax decision, such as additional taxes, a penalty, or the denial of refunds, among others. We’ve discussed KRA tax objections and the procedure for objections to a tax decision in Kenya in detail. Read our step-by-step guide for more information.
Why Evidence and Legal Grounds Matter in KRA Objections
One of the major weaknesses of tax objections in Kenya is the lack of evidence. The burden of proof in a tax objection case lies with the taxpayer. It’s your duty to prove that, indeed, the tax decision was incorrect, unfair, and disputable. Another aspect that makes KRA disregard and reject tax objections from taxpayers is the lack of legal grounds.
Unfortunately, you can’t argue your case through emotions and empathy. You have to show how the KRA tax decision violated legal provisions under the Kenyan tax laws. You must use facts and explanations that prove you fulfilled your obligation as a taxpayer and show how KRA is wrong. Supporting documents may include tax returns, sales invoices, bank statements, correspondence emails with KRA, and financial records.
Top Mistakes Businesses Make When Filing KRA Objections
Without further ado, let’s look at the top mistakes businesses make when filing KRA objections.
Missing Deadlines
Missing the 30-day deadline is one of the most costly mistakes that a business can make when filing a tax objection. In fact, missing the provided deadline almost takes away your legal right to challenge a tax decision. It doesn’t matter how strong your legal grounds or arguments are; you lose the right to pursue the case further. While you may request an extension, KRA rarely grants extensions. When you miss a tax objection deadline, the tax decision becomes final and conclusive. You have to pay the penalties, interests, and other liabilities stated in the tax assessment.
Vague and Unsupported Grounds of Objection
KRA only accepts objections based on misinterpretation of tax laws, errors in tax calculation, wrong tax classification, and misunderstanding of facts. Businesses that use vague grounds of objections lose the case to KRA, wasting their time and resources. Statements like “the tax assessment is incorrect” should be followed by explanations and supporting documents.
Failure to Attach Adequate Evidence
Another huge mistake that businesses make when filing KRA objections is providing insufficient evidence and supporting documents. As a rule of thumb, every legal ground of objection should have a relevant supporting document or evidence. Attach the necessary evidence to back every assertion made in the letter of objection. This is why it’s important to number your grounds of objection and the attached documents.
Misinterpreting Tax Laws
As we mentioned earlier, objecting to a tax assessment on legal grounds is one of the best ways to argue and win a tax dispute against KRA. However, the tax law must be relevant and apply to your specific tax decision. You can’t quote VAT tax laws on a PAYE tax decision. The mistake businesses make here is relying on outdated tax clauses that have been updated. Additionally, tax laws are complex for the regular taxpayer. This is why it’s important to engage a tax agent or a tax lawyer when handling a KRA tax objection.
Selective or Incomplete Responses
A KRA tax decision may raise multiple tax issues that affect a taxpayer’s compliance status. For example, KRA may dispute your VAT returns for your business, PAYE returns for your employees, the late filing of returns, and failure to pay taxes on time. These are four issues that must be addressed separately. If your objection letter only challenges the VAT returns issue, KRA will assume the other issues are not disputed.
To avoid this, provide a point-to-point objection to ensure all disputable issues are addressed and amended.
Technical Errors on iTax
This is an underrated mistake when filing KRA tax objections. You can prepare a solid objection with strong legal grounds, only for your objection to be rejected for technical mistakes on iTax. KRA primarily accepts objections via iTax. You should be vigilant when filling out the online form to ensure minor errors don’t invalidate your objection. Attach supporting documents in the provided formats, don’t exceed file size limits, and upload non-corrupted files.
Failure to Follow Up
We can’t talk about objection mistakes without mentioning the failure to follow up. When you submit a tax objection, KRA can request additional documents, seek clarification, or amend the tax assessment. If you don’t track your iTax notifications or emails from KRA, you may miss these updates. Follow-up requests usually have short-term deadlines of up to 14 days, and missing them may ruin your chances of winning the tax dispute.
Best Practices When Filing KRA Objections
Do you want to strengthen your case and improve the likelihood of a favorable outcome in a KRA objection? Follow these best practices:
- The earlier the better; file the objection within the 30-day statutory deadline.
- Make sure your grounds of objection are legal, clear, and evidence-based.
- Provide complete and verifiable supporting documents.
- Be point-specific in your response. Address all the issues raised in the tax assessment.
- Be vigilant when submitting the objection via iTax to avoid technical errors.
- Work with an expert tax consultant, KRA tax agent, or tax attorney to ensure proper documentation, accurate use of tax laws and clauses, and stronger arguments.
Final Thoughts
The KRA tax objection process is complex. Businesses make some costly mistakes that negatively affect the outcome in a KRA objection. Top mistakes like missing deadlines, vague grounds, incomplete evidence, and a lack of follow-up compromise a favorable outcome. Avoid these mistakes to improve the likelihood of a favorable outcome. It’s also best to work with an experienced tax consultant for expert guidance. Contact Gichuri & Partners for assistance with KRA objections.
