Understanding Advance Tax: Essential Information for Vehicle Owners.

 

Welcome to the latest edition of the RWK & ASSOCIATES CPA(K) Newsletter. In this issue, we focus on Advance Tax, a critical requirement for all commercial and public service vehicle owners. Understanding how this tax operates and how to manage it effectively can save you time and avoid unnecessary complications.

Advance Tax is a mandatory prepayment needed before a commercial or public service vehicle can be registered or licensed. The tax amount is determined by the vehicle's type and capacity. For example, vans, pick-ups, trucks, and similar vehicles incur a fee of Kshs. 2,500 per ton of load capacity or kshs 5000 whichever is higher. In contrast, saloons, station wagons, mini-buses, buses, and coaches are charged Kshs. 100 per passenger capacity per month or kshs 5000 annual amount whichever is higher.

It is important to note that Advance Tax is not a final tax. Taxpayers must report this payment in their annual income tax returns and settle any additional taxes that may be due. Exemptions are available for public institutions and specific organizations, but they must provide valid documentation to the Commissioner to confirm their exempt status.

How to Pay the Advance Tax.

To facilitate the payment of Advance Tax, log in to the iTax system, navigate to Payments > Payment Registration, and select Income Tax under Tax Head and Advance Tax under Tax Subhead. Payments can be made through a bank e-slip or via MPESA using Paybill number 572572, with the payment registration number as the account number. Ensure payments are completed by January 20th or before transferring vehicle ownership to stay compliant.

Penalties and Interest

Late payment will attract a penalty of 55 of the tax due and a payable and a late payment interest at a rate equal to 1% per month on the amount unpaid from the period the tax becomes due until the tax is fully paid.

Thank you for staying informed with RWK & ASSOCIATES CPA(K). We hope this information helps streamline your vehicle registration process. As always, feel free to reach out with any questions or for further assistance.


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