Background
Kenya Revenue Authority (KRA), through continuous stakeholder engagement, recognises that some taxpayers face genuine cash flow challenges arising from delayed settlement of receivables. These challenges may stem from pending bills owed by National Government Ministries, Departments and Agencies (MDAs), County Governments and State Corporations. These delays may limit a taxpayer’s ability to meet tax obligations within statutory timelines, notwithstanding their commitment to comply.
In response, and in line with KRA’s commitment to fair administration and facilitative compliance, the Authority is implementing relaxation of enforcement measures in verified cases. This approach seeks to balance understanding for taxpayers’ circumstances with the need to safeguard public revenue, promote voluntary compliance, and support business continuity within the broader framework of economic recovery.
These guidelines therefore set out a structured, grounded framework for managing taxpayers affected by government pending bills.
Purpose
This guideline provides guidance to Taxpayers on debt enforcement where outstanding tax liabilities arise from pending bills owed to taxpayers by National and County government including their related ministries, departments, agencies (MDAs)and state corporations. The objective is to ensure fairness in the administration and collection of taxes while safeguarding revenue and supporting voluntary compliance.
Scope of Application
These guidelines apply to:
- Enforcement actions undertaken by the Large and Medium Taxpayers (LMT) & Micro and Small Taxpayers (MST).
- Taxpayers whose outstanding taxes are directly attributable to pending National or County government contracts or supplies.
Conditions for Relaxation of Enforcement Actions
A taxpayer who is not able remit outstanding tax liabilities on time due to the delay in settlement of pending bills shall be granted relaxation of enforcement actions only where the following conditions are satisfied
a) Formal Application:
- The taxpayer shall make an application in writing to their respective Head of Debt at Tax Service Office(TSO) requesting for extension of time to pay the tax due.
- Taxpayer must specify the tax period, tax type, and amount outstanding.
- Taxpayer must demonstrate invoice level reconciliation while demonstrating the link to the pending government contracts and private sector receivables.
b) Documentary Proof:
A taxpayer seeking relaxation shall provide verifiable supporting documentation, which may include:
- Letter confirming pending bills from the authorised accounting officer’s or Head of Finance of the relevant MDAs or counties.
- Copies of valid Contracts, delivery notes, invoices, or payment certificates; or
- Evidence of effort to recover the pending bills; and
- Bank statements evidencing delayed receivables; and
- Audited financial statements; and
- VAT invoice level reconciliation schedules where applicable.
Unverified letters, undocumented claims, supplier disputes, or general assertions of hardship shall not be accepted.
c) Verification shall be done using;
- Official MDA or county communication channels;
- Designated customer contact persons and authorised signatories; and
- Standardised verification templates.
A centralised and continuously updated database of MDA and county contacts shall be maintained to support verification.
d) Return Filing Compliance:
The taxpayer should ensure they have filed all the relevant tax returns relating to the cash flow constraints including pending bills on time as require in law, even if they are unable to make payment on time.
e) Agency Notice
Taxpayer to Countersign the Agency Notice addressed to the Accounting Officer or Head of Finance of the respective National or County Government or Private entity that owes the pending bill.
Forms of Enforcement Relaxation
Upon verification and approval, the following measures may be considered:
- Relaxation of Enforcement Actions
- Temporary relaxation enforcement actions including but not limited to non-issuance of TCC and/or distress, for the specific verified debt.
- The extension shall be valid for a defined period as shall be determined by the Commissioner subject to review.
- The Commissioner shall notify the taxpayer in writing of the decision regarding the application for extension of time and relaxation of enforcement measures within 30 days of receiving the application for extension of time.
- Upon relaxation, the applicant(taxpayer) to countersign an Agency Notice addressed to the Accounting Officer of the respective National or County Government entity or private entity that owes the pending bill invoice or contract.
Oversight Process and revocation
- Enforcement measures including agency notices shall resume where verification fails or pending bill, invoice or contract remains unsettled after the agreed extension period.
- KRA shall not engage directly with suppliers or intervene in commercial disputes, as its relationship remains solely with the taxpayer.
- The taxpayer shall notify the Commissioner immediately where the payment is made without deducting the tax due as provided under the agency notice that was countersigned.
- Review frequency: Every three (3) months, or earlier if circumstances change.
- A Tax Compliance Certificate shall be revoked upon default, emergence of new unarranged debt, or misrepresentation.
- The Commissioner shall revoke any extension and reinstate the enforcement measures at any time where it comes under his notice that the taxpayer violated conditions for granting extension under this guideline.
- The taxpayer, despite being granted an extension of time to pay a tax or permission to pay a tax due by instalments by the Commissioner, a taxpayer shall be liable for any late payment interest arising from the original date the tax was due for payment.
