Most Kenyan businesses don't know this: KRA is waiving 100% of pre-2026 penalties and interest - until 31 Dec 2026.Check if you qualify →
The administrative backbone of Kenyan tax: registration duties, filing and payment deadlines, penalties, interest, audits and — since 2023 — electronic tax invoicing (eTIMS).
Why this law matters
Almost every KRA penalty an SME meets is computed under this Act. If the VAT Act says what you owe, the TPA says what happens if you get it wrong — and by when.
Official text: KRA penalties & offences guidance
The provisions that matter
What it saysThe penalty for failing to file a return by the due date is the higher of KES 10,000 or 5% of the tax due, with late-payment consequences under s.40.
What it means for your businessEven a nil return filed late can trigger the KES 10,000 minimum. 'I owed nothing' is not a defence to late filing.
What it saysTax unpaid by the due date attracts a penalty of 5% of the unpaid amount plus compounding interest of 1% per month until paid.
What it means for your businessA KES 100,000 VAT bill ignored for a year grows by roughly KES 17,000+ in penalties and interest alone — and the interest keeps compounding while you wait.
What it saysRegistered persons must use KRA's electronic tax invoice management system to issue invoices; failure to integrate or comply carries escalating penalties, including up to KES 100,000 per month (capped) for integration failures under s.59A(5).
What it means for your businesseTIMS is not optional software advice — it is a statutory duty. The penalties for ignoring it are in the same Act as the duty.
What it saysFor electronic filing and payment non-compliance, the penalty from 1 July 2026 is the higher of 5% of the tax due, KES 100,000 (companies) or KES 10,000 (individuals). Before 1 July 2026 the regime was two times the tax due (Finance Act 2023).
What it means for your businessUninvoiced or wrongly invoiced sales now cost at least ten thousand shillings per failure for individuals — the minimums made small-business enforcement realistic for KRA.
What it saysA person required to register who fails to apply is liable to a penalty of KES 100,000 per month for the period of failure.
What it means for your businessStaying invisible to KRA is the most expensive strategy available: the non-registration penalty accrues monthly and can dwarf the tax originally at stake.
What it saysKRA may waive or vary penalties on application; the 2026 amnesty (under the Tax Procedures (Tax Amnesty) Regulations, 2026) waives 100% of pre-2026 penalties, interest and fines for applications made before 31 December 2026.
What it means for your businessPenalties are negotiable through the statutory process — but only if you apply. Most SMEs never ask, which is exactly why the waiver process exists.
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