There are several ways individuals and organisations evade tax in Kenya. We are going to share tricks they use to pocket 100 % of the profit from their businesses.
File zero returns
If a company holds a KRA PIN, it should pay tax but what happens every year is surprising. Most profitable companies regularly file zero returns even after registering profits. The good impression about KRA is that they work with the figures you give them; they don’t investigate what the company acquired before declaring tax.
Declare your company as a foreign subsidiary
There are people in Kenya who own companies and declare them as foreign subsidiaries. When a company running in Kenya is proclaimed as a subsidiary of a parent company located outside the country, that company submits its tax to the mother country-even employees of that organisation are taxed based on the tax rates of the parent company.
Avoid having KRA PIN.
Without having a KRA PIN, there is no way the government will know you are not paying tax. What most individuals do is, register a company and work without a KRA PIN until the company or organization breaks even, or when they want to ask for a tender.
Hundreds of companies in Kenya work without a KRA PIN.
Operate a charitable organisation/foundation
Several politicians and wealthy people in business operate humanitarian organisations and foundations to evade tax. Though this is constitutionally acceptable, it’s one way some politicians use to make money and avoid paying tax.
Sell products through social media.
There are thousands of people in Kenya who make millions per month through social media, yet they don’t pay tax. This is because it’s hard to determine how much someone earns through the platforms.
Don’t register your company.
If your company is not enrolled, it’s hard for KRA to track you. Most people in Kenya opt not to register their companies to dodge paying tax.
Though these are fascinating ways you can easily avoid tax, you should be cautioned that tax is against the law. It’s a good practice to pay tax to support the country to develop.
ways to minimise your tax burden legally
there are legal means of minimising your taxable income and eventually your tax liability without going into the bad books of the taxman (KRA, Kenya Revenue Authority). Call it tax planning or just making use of all beneficial provisions in the law to your benefit. Here’s how.
- Contributions to a registered Home Ownership Savings Plan (HOSP)
- Take mortgage for your residential premises as opposed to an ordinary loan
- Take that insurance cover
- Invest in retirement benefit schemes, old age is real
- Register your ‘hustle’ as a business entity
- If disabled, apply for a disability certificate