- A tax health check is a methodological approach that we adopt in reviewing financial transactions to advise on the nature and extent of the exposure of organizations regarding tax liabilities.
In the review, the health check observes areas that organizations can confront in a bid to minimize these tax liabilities. At the end of the review, we are able to help organizations come up with a formidable tax plan that minimizes tax risks, maximizes tax opportunities, and helps reframe tax objectives and goals.
The key areas of focus in undertaking this assignment are;
- Areas of tax risks
- Areas of tax opportunities yet to be utilized
- Measures available to the company for tax planning purposes
- The health check can save money at both corporate and individual levels. Through these reviews, organizations are informed on how to utilize allowable deductions such as investment allowances, losses brought forward, pension contributions, mortgage contributions and even advised if they qualify for tax exemption.
- In a Tax Health Check, compliance plays a fundamental role in ensuring the accuracy and security of your tax position.
Common non- compliance issues might include the following
- Missed tax filings or late submissions.
- Unclaimed tax deductions or credits that you’re entitled to.
- Errors in tax calculations due to misunderstandings or missed updates in tax laws.
- Improper application of tax reliefs or incentives
By proactively identifying and rectifying any compliance issues, you significantly reduce the risk of facing penalties and interest charges from the Kenyan Revenue Authority (KRA).
To ensure smooth and accurate tax filings companies need to ensure adherance to all relevant tax laws and regulations
- From our experience and industry practice, the tax health check enables individuals to be aware of the offers adverse opportunities that reduce the tax liability of individuals as highlighted below;
- Pension contributions to a registered pension scheme reduce the chargeable pay up to a maximum of Kes 20,000 per month.
- Interest expenses on mortgage contributions toward purchasing or improving an affordable house are allowable deductions up to a maximum of kes 25,000 per, month.
- Meals provided by employers on behalf of employees are non-taxable up to the tune of Kes 4,000 per month.
- Running Small & Medium sized businesses in Kenya involves navigating tax regulations.
Some strategies to consider maximizing your tax efficiency and minimizing your tax burden legally could involve ;
- Taking Advantage of Deductions and Credits i.e. Identify Eligible tax-deductible Expenses and exploring the tax credits that the Kenyan government offers for certain industries or activities.
- Employing Tax Planning Strategies such as offering tax-exempt employee benefits like health insurance that can reduce a company’s taxable income and separate Business and Personal Expenses for the company to claim legitimate business-related expenses for tax deductions.
- Proper record-keeping of income, expenses, assets, and liabilities is crucial. This simplifies tax filing and helps substantiate deductions and claims.
- Retain all receipts, invoices, and other relevant documents for at least five years after filing your tax returns. These documents prove your business transactions and support your tax calculations.
CONCLUSION
The tax season is almost over since many organizations will file their annual corporate returns on or before June. During this time, organizations can conduct their statutory audits and tax health check exercises concurrently. This will help reduce any tax exposures by ensuring any income and expenses are accounted for accurately.
