Upon registration with under the relevant law, an entity automatically acquires legal obligations which must be met for the entity to remain compliant. These obligations relate to taxation, annual returns through the relevant regulatory bodies and other licenses as may be required.
1. Charitable Entities (NGOs, Trusts, & PBOs)
- Annual Returns: Must file annual reports and audited financial accounts with the relevant governing body.
- Income Tax Exemption: Exemption certificates are not automatically granted. However, once granted they are valid for 5 years. Organizations must submit annual tax returns.
- Guidelines Check: The KRA Income Tax Act Charitable Organisation Rules strictly outline criteria for public benefit and organizational governance.
2. Business Entities
- Business Registration Service (BRS): All businesses, whether sole proprietorships, partnerships, or limited companies, must file annual returns to remain active and avoid deregistration.
- CR12 Document: Companies require to keep an up-to-date CR12 (list of directors and shareholding) generated by the Registrar of Companies. Whenever there are changes in the office of directors, these changes have to be filed and a new CR12 generated.
- County Licensing: Businesses must secure an appropriate Business Permit (where required) from the relevant county government under whose jurisdiction they operate.
3. General & Tax Compliance (Both Sectors)
- KRA & iTax Obligations: All entities require a KRA PIN and must file regular returns on the KRA iTax Portal. Failure to file returns incurs penalties.
- Tax Compliance Certificates (TCC): This is required for applying for income tax exemptions.
- Payroll Statutory Deductions: If you have employees, you must register, compute, and remit the following every month:
- Pay As You Earn (PAYE)
- National Social Security Fund (NSSF)
- Social Health Insurance Fund (SHIF)
- Withholding Tax (WHT) & Value Added Tax (VAT): Entities are not automatically exempt from Withholding Tax on professional/management fees or VAT on standard business purchases. These must be deducted and remitted on time.
Failure to uphold these filings can lead to revoked tax exemptions, operational suspensions, or the deregistration/dissolution of your organization.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Organizations should consult us for specific legal counsel.