Introduction
Some of the problems that afflict tax collection in Kenya are tax evasion and tax avoidance. The government is using the PIN to minimize the two incidences.
(Post continues after photo)
(Lang’ata Road, Nairobi. Photo by Waka)
What is a PIN?
Personal Identification Number or as it is popularly known PIN is a computer-generated number issued by Kenya Revenue Authority (KRA) to every taxpayer in Kenya. The PIN is the number that allows a person to pay tax, a person cannot pay tax without a PIN.
[bha id=’https://www.bluehost.com/track/wakaguyu’ size=’190×60′ variation=’01’ align=’none’]
Every individual in Kenya who accrues or derives income in Kenya is expected to get a PIN. This is irrespective of whether the individual is a Kenyan citizen or not. To register for a PIN, a person should have attained the age of 18 years and have acquired a National Identity card (ID). For non-Kenyans, a work permit is required which enables issuance of an Alien card.
Equally, all non-individual persons that accrue or derive income in Kenya are expected to register for tax and are issued with a PIN. There most important document that is required is registration certificate.
For example limited liability companies, they require a certificate of incorporation and, memorandum and articles of association. In Kenyan tax, the term person is used to refer to individual and non-individual taxpayers.
Failure to register for PIN is an offence liable to a fine. For example, employing any person who does not have a PIN is an offence liable to a current fine of kshs 2,000 per every month the person is paid without a PIN. KRA has powers to allocate a PIN to any person who has failed to do so. No person is exempted from having a PIN in Kenya.
The challenge
Tax is one of the most important sources of government revenue to service the national budget. However, each year, there is a budget deficit that is funded by international donation and government borrowings from the domestic and international markets. The interest on the debts is too expensive and the timing of the loan repayments is crippling government operations.
Hence, there is a need to increase and improve domestic tax revenue mobilization since tax money is the cheapest source for the government – there are no interests and no repayment timeframes. However, there are inherent problems in domestic tax mobilization among them tax evasion and tax avoidance. These are world-wide problems, not to Kenya.
Consolidation of the taxpayer’s financial data is one of the proposed solutions. The Kenyan government has put in place several tax reform initiatives one of which is the consolidation of taxpayer’s financial data in attempts to minimize tax evasion and tax avoidance. Hence, the use of Personal Identification Number (PIN) has been made a requirement in many transactions in the country.
Why use a PIN?
It is easier to consolidate a person’s financial data using a unique number whose generation is restricted. By making the use of the PIN mandatory, it is easier to track a person’s financial expenditure and compare it with their tax payments.
Though the system requires heavy use of technology, it is envisaged that at the end of the day, KRA will be able to track a person’s financial expenditure especially with the liking of the transactions to i-Tax platform. This will probably go a long way in minimizing tax evasion and tax avoidance in Kenya.
Where PIN is required?
According to the Tax Procedures Act (2015), First Schedule [Section 12], the following are some of the transactions that the government requires that PIN be presented in Kenya.
Some of the transactions that require the use of PIN in Kenya include:
- Registration of titles (land, buildings, other properties etc.)
- Stamping of instruments.
- Approval of development plans (for buildings, roads etc.)
- Payment of water deposits (in County and national governments, water boards etc.)
- Registration of motor vehicles (motorcycles, saloons, pickup trucks and trucks, trailers, tractors etc.)
- Transfer of motor vehicles (motorcycles, saloons, pickup trucks and trucks, trailers, tractors etc.)
- Licensing of motor vehicles (motorcycles, saloons, pickup trucks and trucks, trailers, tractors etc.)
- Registration of business names (by individuals, sole proprietorships, partnerships etc.)
- Registration of companies (private, public etc.)
- Underwriting of insurance policies.
- Trade licensing.
- Importation of goods.
- Customs clearing and forwarding.
- Payment of deposits for power connections (for residential buildings, commercial buildings etc.)
- All contracts for supply of goods and services to government ministries and public bodies (letters of purchase, tenders etc.)
- Opening accounts with financial institutions and investments banks (personal and corporate accounts, current, savings, investments accounts etc.)
This list is not exhaustive. Other transactions are occasionally included and the list is expanding.
There are also private organizations that require PIN. Such organizations as customers and clients, some schools, insurance companies, religious organizations etc. require the use of a PIN.
Conclusion
As we move into the future, more transactions will require use on PIN in Kenya.
Our Call … Remember to subscribe to get our latest tax articles.
[bha id=’https://www.bluehost.com/track/wakaguyu’ size=’190×60′ variation=’01’ align=’none’]
Feel free to send us questions or topics on tax and investments in Kenya that you would wish to be covered in this Website.
Disclaimer
This post is for general overview and guidance and does not in any way amount to professional advice. Hence, www.taxkenya.com, its owner or associates do not take any responsibility for results of any action taken on the basis of the information in this post or for any errors or omissions. Kenyan taxpayers must always rely on the most current information from KRA. Tax industry in Kenya is very dynamic.
©Wakaguyu Wa Kiburi
[about-me id=”1″]
Email: taxkenya@gmail.com
Twitter: @taxkenya
Facebook: fb.me/taxkenya
Youtube: youtube/taxkenya.com shows
