The TPA allows the Commissioner to issue to a tax payer a default assessment, amended assessment or an advance assessment (Section 29 to 31 TPA). It is on the basis of these sections that the KRA undertakes audits on taxpayers.
Open periods for KRA Audit
Under the TPA the KRA is allowed to carry out audits for a period of 5 years from the year of assessment (Section 31 TPA). In cases of gross or willful neglect, evasion, or fraud by, or on behalf of, the taxpayer, the KRA may undertake an audit for any period (Section 31 TPA).
Maintenance of tax documents
The TPA requires that a taxpayer maintains tax documents in any of the official languages (Section 23 TPA).
The TPA provides that documents should be maintained for a period of 5 years from the end of the reporting period to which the documents relate or such shorter period as may be specified in a tax law (Section 23 TPA).
Management of KRA Audit
During the audit the KRA will ordinarily require a taxpayer to provide information needed by the KRA to undertake the audit. It is very important at this point to have a solid tax advisor to help prepare the right documents.
If they choose to carry the documents let them sign a note on receipt of these documents.
If the audit is done at tax payers office the tax advisor is critical to answer all questions regard tax.
Issue of audit findings
On the conclusion of the audit the KRA will ordinarily give their findings prior to the assessment. This is a critical point in resolving audit issues before proceeding to an assessment
Taxpayer with help from the tax advisor may engage with the KRA to settle the issues rose in the KRA findings. This is an opportunity to manage disputes with the KRA.