Penalties for late company income tax
The penalties and interest a Kenyan company faces for filing or paying income tax late, how they stack up, and what to do once a date is missed.
By Achekam · · 5 min read · For Running a business businesses in Kenya
For a Kenyan company, a late income tax return rarely costs just one penalty. Filing late, paying late and underpaying instalments during the year are treated as separate failures, each with its own charge, and interest keeps running on top. A company that gets behind on all three can end up owing a noticeable amount on top of the tax itself.
The good news is that the rules are predictable. Once you know what each charge is for and when it starts, you can plan to avoid them, or at least stop them growing. This article sets out what KRA and the Tax Procedures Act say, at the time of writing.
The six-month filing deadline
KRA says corporation tax is filed on iTax using the Income Tax Company Return (IT2C) on or before the end of the sixth month after the end of the accounting period. A company with a 31 December year-end therefore has until 30 June of the following year. KRA says filing after six months attracts a penalty.
The deadline runs from your own year-end. A company with a June year-end files by the end of December, and so on. Note it in the calendar the day the year ends, not the day the auditors finish.
The late filing penalty
KRA says late filing of a company or partnership income tax return attracts a penalty of 5% of the tax due or Kshs 20,000, whichever is higher.
The "whichever is higher" matters most to small and loss-making companies. A company with little or no tax to pay still faces the fixed amount if it files late, because 5% of a small figure is less than the minimum. Filing on time, even when the return shows a loss, is the cheapest way to deal with it.
KRA's page on business offences and penalties lists the late filing and late payment penalties for each tax, and is the place to confirm the current amounts.
Late payment and interest
Paying late is a separate failure from filing late. KRA says late payment of income tax by non-individuals attracts a penalty of 5% of the tax due plus interest of 1% per month.
The Tax Procedures Act, in the consolidated version on Kenya Law, sets out how that interest works in section 38:
- It is charged at one per cent per month or part of a month, so paying a few days into a new month costs a full month's interest.
- It is simple interest, calculated on the unpaid tax, not on interest already added.
- It runs from the due date until the tax is paid.
- The accrued interest may not exceed the principal tax.
- It is charged in addition to the late payment penalty, which section 83A sets at five per cent of the tax due.
So a company that files on time but pays late avoids the filing penalty, yet still pays the late payment penalty and the monthly interest.
Instalment underpayment
Companies are expected to pay most of their tax during the year, through instalment tax. KRA says the penalty for underpaying instalment tax is 20% of the difference between the instalment tax payable for the year and the instalment tax actually paid.
This penalty is easy to overlook because it is assessed against the year as a whole rather than one missed date. A company that guessed low on its instalments and then settles the balance with the return can still owe the underpayment penalty. How instalments are worked out is covered in instalment tax in Kenya.
How the charges stack up
Put together, a company that does everything late can face, for one year:
| Failure | What KRA or the Act charges |
|---|---|
| Return filed after six months | 5% of the tax due or Kshs 20,000, whichever is higher |
| Tax paid after the due date | 5% of the tax due |
| Tax still unpaid | 1% per month or part of a month, simple, capped at the principal |
| Instalments too low | 20% of the shortfall in instalment tax |
VAT has its own late penalties, explained in VAT late filing and payment penalties.
Deadlines and review steps in Achekam
Achekam's filing calendar for Kenya works from the administration rules that have been approved in its rule book. Where a deadline's rule is still awaiting approval or is contested, the calendar leaves that deadline out and says why, rather than showing a date nobody has checked. Deadlines are set to the end of the day in Africa/Nairobi time. Achekam also computes objection and appeal deadlines for Kenyan assessments from the approved rule.
A Kenyan tax return in Achekam is prepared by one person, reviewed by a second and approved by a third. Once approved, its rule snapshot and figures are frozen, and an amendment becomes a new version rather than overwriting the old one.
Achekam does not file Kenyan returns. A person with the firm's KRA filing permission files on iTax and uploads the acknowledgement, and a different person verifies it before the return counts as filed. That second check is a useful habit in its own right: a return is not "done" until someone has seen KRA's acknowledgement.
What to do if you are already late
- File now. Waiting longer does not reduce the filing penalty, and the return is the starting point for everything else.
- Pay the principal as soon as you can. Interest runs for each month or part of a month the tax stays unpaid.
- Check the amnesty. KRA says the Finance Act 2026 amnesty covers penalties, interest and fines on liabilities due up to 31 December 2025, provided the outstanding principal tax is paid by 31 December 2026, subject to conditions. It does not remove the principal tax. See the 2026 tax amnesty for the conditions.
- Fix the cause. Was it a late audit, missing records, or nobody owning the date? Put a named person against each deadline for next year.
- Review instalments for the current year, so the next return does not bring an underpayment penalty.
Start with your own year-end: count six months forward, put the date in front of the person who signs, and work backwards from there.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
