11/06/2018
Another big scam in Kenya is asking the youth to register companies without any training on how to handle taxes.
Unknowingly the youth go ahead & also register for VAT with new companies making below 5M then unknowingly the youth also fail to file VAT monthly attracting 10k fine per month and interest.
By the time you realize your mistake, it's a year down the line and you owe KRA 120,000 plus interest. You are still yet to get that yagpo tender (30% for youth). If you were lucky to get a tender from county & supplied, they haven't paid, So whatever you borrowed for capital is earning interest, you are now in even more debt.
Then say you're lucky and on year 2 you get a contract that requires you to provide tax compliant certificates... You're not compliant you owe 200k to 300K in debt to KRA to be compliant, your profit from this new contract is going to be about 250K, you also owe the bank capital or need capital to deliver the new contract, basically your business ends up dying.
I honestly don't understand why Startups & SME's that are less than 3 years old, or less than 5 staff members or have revenues less than Ksh "5M" do not have Tax abatement. You struggle to build a product, raise capital, get customers & then before you can breath KRA give's you a karate chop on the neck.
We kill companies that could be big tax payers in 10 year before they are 3 years old, very counterproductive, but that seems to be a culture in our country. Time to change, hope someone pays attention to the cries of startups & smes.
My advice, before you register that company, learn as much as you can about taxes and your tax obligations and ask yourself if you are ready for the challenge ahead.
Courtesy of Sam Gichuru
