After an earlier warning about intention to deactivate personal identification numbers (PINs) for specific taxpayers in August 2017, KRA finally deactivated the PINs.The person’s PINs were deactivated for reasons related to VAT. It is important to note that currently, there is no separate VAT certificate or number that is given by the KRA.
VAT Obligation
Previously, a PIN certificate and number were used for income tax, and a VAT number and certificate were used for VAT purposes. However, under the continued tax reforms, the PIN is currently used as the main tax identification number for all taxes. Various obligations are indicated on the certificate.
The VAT obligation is included in the PIN certificate. Hence, the PIN certificate is also used as a VAT certificate. Therefore, all actions related to VAT offences are implemented using the PIN. The VAT Act (2013) lays down the offences for cancellation of the registration for offences under the VAT law and other tax laws.
Reasons for Deactivation the PINs
KRA has given the following reasons as the main reasons for deactivating the PINs.
Failure to submit tax returns
The first reason given by the KRA for deactivating the taxpayers is the failure to submit any VAT monthly returns since registration. This means that, for whatever reason, the persons have not been submitting tax returns.
One of the cardinal rules of VAT registration is the requirement to submit monthly VAT returns. The VAT Act (2013) demands that every VAT-registered person must file monthly tax returns for every tax period before the 20th day of the following month.
This is irrespective of whether the VAT monthly return has a nil, credit or debit balance. A VAT monthly return covers one tax period- one calendar month – from the beginning to the end of the month.
According to the VAT Act (2013), failure to file tax returns is one of the reasons for the cancellation of VAT registration. In addition to cancellation, there are penalties, interests and/or jail terms on conviction.
However, this time, the Commissioner did not cancel the registration but deactivated the registration by deactivating the PINs.
Failure to migrate to i-Tax
The second reason is that the VAT-registered taxpayers have been actively trading but have failed to migrate to i-Tax. Earlier, the KRA had issued a public notice for all taxpayers to migrate to i-Tax.
Failure to migrate to i-Tax does not help taxpayers, since their clients and/or customers have migrated to i-Tax. Every month, they report their purchases from all suppliers irrespective of whether they are in i-Tax.
This is when they are claiming input tax. Therefore, the transaction details of the non-compliant taxpayers are already reported in i-Tax platform.
Failure to register for VAT
The third reason is that the persons supplied VAT-registered taxpayers yet failed to register for VAT obligation. This means the transactions between the unregistered person and the VAT-registered client/customer are captured in i-Tax from the monthly VAT returns.
But is every supplier supposed to be VAT registered? The answer is no. However, in this case, the unregistered people conduct transactions that attract VAT. The transactions that attract VAT are not the only requirements for VAT registration.
There is a turnover requirement for registration. The person must transact in taxable goods or services with a turnover of kshs 5 million for 12 months.
Therefore, for the persons to be deactivated, there is evidence collected by the KRA from i-Tax that the persons had transactions of more than kshs 5 million within 12 months. Hence, the persons have failed to register for VAT, an offence under the VAT Act (2013).
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Disclaimer
This post is for a general overview and guidance and does not amount to professional advice. Hence, www.taxkenya.com, its owner or its associates do not take any responsibility for the results of any action based on the information in this post or for any errors or omissions. Kenyan taxpayers must always rely on the most current information from the KRA. The tax industry in Kenya is very dynamic.
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