Introduction

Early this month, KRA deactivated more than 95,000 PINs in connection with compliance issues related to VAT.

After deactivation PINs, KRA has come to the rescue of the deactivated persons by issuing PIN Reactivation Guidelines.

We call it a rescue because after adhering to the requirements of the VAT Act (2013), the affected taxpayers will be able to reactivate the PINs.

How to Reactivate the PINS

To reactivate the PINs, KRA has issued the following guidelines:

a) Use KRA PIN Checker to establish the status of the PIN. It is indicated whether the PIN is valid or suspended. It is only those persons whose PINs are indicated suspended that need to act further. For the PIN Checker visit KRA website.

b) In case the PIN is suspended, the person should contact KRA to obtain the reasons for the deactivation. The taxpayer can do either of the following:

1. Pay a visit to their tax station which is their PIN base, the nearest KRA station or Service Centre.
2. Call KRA Contact Centre on +254 (020) 4999 999 or +254 (020) 099 999.
3. Log in to KRA website and download the PIN reactivation request form. The completed form should be emailed to pinreactivatio@kra.go.ke

PIN Reactivation Request Form

The PIN reactivation form is a request for general information. The details required are about the company, directors and the contact person in the company.

Company’s name, PIN, physical location, telephone numbers and emails address are required. In addition, the director’s details (names, PIN, telephone numbers and email addresses) are also wanted.

Further, the company’s contact person details such as name, telephone and email address are needed.

The Taxpayer

On receipt of the PIN reactivation form KRA, will provide the reasons for the deactivation via the email provided by the taxpayer. The taxpayers will be expected to address all the non-compliance issues identified and communicated in the email properly or as advised by the station.

 What does this mean?

The taxpayer is expected to address all the VAT non-compliance issues identified that resulted in the PIN deactivation. The communication from KRA will address the following three advanced reasons for the deactivation.

1. A VAT registered person who has never filed any VAT returns.
2. Trading but PIN is not updated in i-Tax
3. Supplying VAT registered taxpayers but not registered for VAT obligation.

The following is an explanation of what to do.

What should the taxpayer do?

From the three reasons that have been advanced by KRA as main reasons for the deactivation, the taxpayer will be expected to do the following:

a) VAT registered person who has never filed any VAT returns

One of the registration requirements under the VAT Act (2013) is filing of monthly VAT returns. This is irrespective of whether it is a nil, credit or debit returns.

Failure to file the tax returns attracts a fine of kshs 20,000 or 5 % of any tax due whichever is higher per every return that is not filed on time.

In addition, there are penalties and interests for any tax that remains unpaid. Note that when penalties and interests remain unpaid, they become due tax.

The affected taxpayers will be expected to file all the VAT returns that are pending. In addition, the taxpayers will also be expected to pay the fines for non-filing of the tax returns. Further, the taxpayers will be expected to pay any penalties and interests.

b) Trading but PIN is not updated in i-Tax

KRA issued out a public notice for all taxpayers to migrating to i-Tax platform. Any taxpayer whose PIN has been deactivated because of failure to migrate to i-Tax will be expected to migrate to i-Tax immediately and start transacting their tax business through i-tax.

c) Supplying VAT registered taxpayers while not registered for VAT obligation

In this case, the affected taxpayers may have reached the threshold for VAT registration but they have failed to register. Alternatively, the affected taxpayers may not have reached the threshold for VAT registration but they have been charging VAT.

Failure to register for VAT while liable to register is an offence. In addition, charging VAT when not registered for VAT is also an offence. The VAT Act (2013) prescribes the specific penalties, interests and jail terms for the two.

Therefore, the taxpayer will:

1. Pay any VAT that may have been charging.
2. Pay penalties and interests.
3. Pay fines for failure to register for VAT.
4. The persons may be compulsorily registered by the Commissioner.

Compulsory registration

The persons who have failed to register for VAT may be registered by the Commissioner compulsorily. In addition, the VAT registration may be backdated.

In case the VAT registration is backdated, the persons will be required to pay all the VAT they have been charging, fines for non-compliance, penalties and interests. In addition, there will be no input tax to deduct.

Compulsory registration also has income tax implications. The persons will also be given an income tax bill plus penalties and interests. The persons may not be allowed to deduct any expenses for income tax. Hence, the persons will be required to pay the full income tax.

Way forward

For any taxpayer whose PIN has been deactivated, they are aware why. Hence they should keep all the documents ready for the tax assessments. The persons should calculate the taxes owed plus penalties and interests.

In addition, they should have money to pay the fines, interests and penalties. In case the tax bill is high, talk to KRA and make instalment arrangements to pay the tax liabilities.