Pending Government Bills and Tax Payment: KRA Enforcement Relaxation Guidelines

The Kenya Revenue Authority has published taxpayer guidelines that allow for relaxation of enforcement measures in verified cases where outstanding tax liabilities arise from pending bills owed by national government ministries, departments and agencies (MDAs), county governments, and state corporations. This article summarises the guideline in plain language so affected taxpayers can understand the conditions, the process, and what relief may involve.

At a Glance

Who It Applies To

The guideline states that it applies to:

• Enforcement actions undertaken by the Large and Medium Taxpayers (LMT) and Micro and Small Taxpayers (MST).
• Taxpayers whose outstanding taxes are directly attributable to pending national or county government contracts or supplies.

Its stated purpose covers tax liabilities arising from bills owed to taxpayers by national and county government, including their ministries, departments, agencies (MDAs) and state corporations.

The Five Conditions for Relaxation

Relaxation is granted only where the following conditions are satisfied:

a) Formal Application

The taxpayer must submit a written application to the Head of Debt at the Tax Service Office (TSO) requesting an extension of time to pay the tax due. The application must specify:

• The tax period, tax type and amount outstanding.

The taxpayer must also demonstrate invoice-level reconciliation, showing the link to the pending government contracts and private sector receivables.

b) Documentary Proof

The taxpayer shall provide verifiable supporting documentation, which may include:

• A letter confirming pending bills from the authorised accounting officer or Head of Finance of the relevant MDA or county.
• Copies of valid contracts, delivery notes, invoices, or payment certificates.
• Evidence of effort to recover the pending bills.
• Bank statements showing delayed receivables.
• Audited financial statements.
• VAT invoice-level reconciliation schedules where applicable.

Not accepted: unverified letters, undocumented claims, supplier disputes, or general assertions of hardship.

c) Verification

Verification is done using official MDA or county communication channels, designated customer contact persons, authorised signatories, and standardised verification templates. KRA states it will maintain a centralised, continuously updated database of MDA and county contacts to support verification.

d) Return Filing Compliance

The taxpayer should have filed all relevant tax returns relating to the cash flow constraints, including pending bills, on time as required by law, even if unable to pay on time.

e) Agency Notice

The taxpayer countersigns the Agency Notice addressed to the Accounting Officer or Head of Finance of the national or county government entity (or private entity) that owes the pending bill.

What Relief May Look Like

After verification and approval, the following measures may be considered (the guideline states "including but not limited to"):

• Temporary relaxation of enforcement actions for the specific verified debt. This may include non-issuance of a Tax Compliance Certificate (TCC) and/or distress.
• The extension is valid for a defined period decided by the Commissioner, subject to review.
• The Commissioner notifies the taxpayer in writing of the decision within 30 days of receiving the application for extension of time.
• Upon relaxation, the taxpayer countersigns an Agency Notice addressed to the Accounting Officer of the government entity or private entity that owes the pending bill, invoice, or contract.

Decision Timeline, Review and Revocation

• Decision: The Commissioner notifies the taxpayer in writing within 30 days of receiving the application for extension of time.
• Review: Every three months, or earlier if circumstances change.
• Enforcement resumes where verification fails, or where the pending bill, invoice or contract remains unsettled after the agreed extension period.
• Revocation of an extension: The Commissioner shall revoke any extension and reinstate enforcement measures at any time it comes to his notice that the taxpayer violated the conditions for granting the extension.
• Tax Compliance Certificate: revoked upon default, emergence of new unarranged debt, or misrepresentation.
• KRA will not engage directly with suppliers or intervene in commercial disputes; its relationship is solely with the taxpayer.
• The taxpayer must notify the Commissioner immediately if payment is made without deducting the tax due as provided under the countersigned agency notice.

Interest Still Applies

Even if granted an extension of time to pay, or permission to pay by instalments, the taxpayer is liable for late payment interest from the original date the tax was due.

FAQ

Source & Disclaimer

Source: KRA Taxpayer Guidelines on Relaxation of Enforcement Measures in Collection of Taxes Arising from Pending Bills by Government Ministries, Departments, Agencies (MDAs), County Governments, and State Corporations