Fresh relief for defaulters in KRA aircraft, land, cars seizure law
Times Tower, Kenya Revenue Authority headquarters in Nairobi. KRA will be barred from seizing the assets of tax defaulters such as ships, planes, land, buildings, and cars which are already protected from disposal by a court, the new Finance Bill 2023 proposes, handing some relief to the debtors.
The Kenya Revenue Authority (KRA) will be barred from seizing the assets of tax defaulters such as ships, planes, land, buildings, and cars which are already protected from disposal by a court, the new Finance Bill 2023 proposes, handing some relief to the debtors.
The Finance Bill proposes that although the KRA Commissioner for Domestic Tax has powers to freeze and seize ships, aircraft, land and cars and sell them off within an agreed period to recover the tax owed, assets already blocked from disposal would not be touched.
Section 40 of the Tax Procedures Act empowers the KRA Commissioner for Domestic Taxes powers to freeze and seize assets by issuing directives to respective registrars.
The commissioner will alert a defaulter of the seizure notification to the registrar within seven days in writing. Such notifications made to the registrar will only be lifted upon payment of all dues as directed by the KRA commissioner.
The Finance Bill 2023 however seeks to prohibit the Commissioner from seizing assets already docked by court.
“A registration under subsection (2) shall, subject to any prior restraint on disposal, mortgage or charge, operate as a legal restraint on the disposal, mortgage, or charge on, the property to secure the amount of the unpaid tax, and any prior restraint shall supersede the Commissioner’s notification,” the Bill says in part.
This comes as a fresh relief for tax defaulters who were last year allowed to negotiate payment plans to avoid a swift sale of their assets through changes introduced by the Finance Act 2022.
Negotiation window
The Finance Act 2022 opened a window for the negotiation of payment plans.
“Provided that where a plan has been agreed between the taxpayer and the commissioner, the liability shall be settled within the agreed payment plan before the notification by the Commissioner is lifted,” the Finance Act 2022 says.
The provision for negotiated payment plans was in synch with the recommendations by the Finance and Planning Committee of the National Assembly to amend the section.
The committee had recommended changes to the Finance Bill 2022 to forestall the sale of frozen assets within two months to recover unpaid taxes, saying it would hand defaulters more time to settle their dues.
The Finance Bill 2023 has retained the negotiation window although the KRA Commissioner could still proceed and dispose of the seized assets within two months if defaulters failed to step forward to negotiate a payment plan.
“Where the taxpayer fails to pay the tax liability described in the notification under subsection (1) within two months after receipt of the notification, the Commissioner or authorised officer may, at the cost of the taxpayer, dispose of the property that is the subject of the restraint on disposal, mortgage or charge, by public auction or private treaty, or as provided for under the relevant Act for the recovery of the tax,” the Bill said in part.
“Provided that where a plan has been agreed between the taxpayer and the Commissioner, the liability shall be settled within the agreed payment plan before the notification by the Commissioner is lifted,” it said.
