Installment Tax Return

It was introduced in 01/01/1991 to replace or modify what was called the provision return which was required after the year end. Installment return is required as the year progresses. This means corporate accounts are supposed to be audited by the fourth month after the end of the financial year so as to determine the actual income tax payable.

Once the tax payable is determined, the balance of tax i.e. after deducting installment tax already paid during the year, must be paid to the tax authorities by the last day of the fourth month. This is 30th April for businesses with 31st December as the year end.

 Who is eligible?

1.    It shall be submitted by All business organizations

2.    Individual whose tax liability for the year will be more than Kes. 40,000 and has not been taxed under P.A.YE.

Therefore, the amount of tax payable shall be determined at the beginning of each year. This is based on the higher of:

                       i.        The budgeted profits of the year or

                      ii.        110% of the last year’s tax liability

When is it paid?

Once determined, the installment tax is payable as follows.

1st installment 25% of tax due by 20th day of the 4th month during the year of income.

2nd installment 25% of tax due by 20th day of the 6th month during the year of income.

3rd installment 25% of tax due by 20th day of the 9th month during the year of income.

4th installment 25% of tax due by 20th day of the 12th month during the year of income.

Final tax (tax balance)

Actual tax payable minus total installment tax paid on the last day of the fourth month after the end of the year of income.

General penalties

1.    Failure to pay tax by the due date attracts a penalty of 20% of that outstanding tax.

2.    If that tax isn’t paid by the due date, then interest at the rate of 2% per month is payable for each month the tax remains outstanding.