Penalties for late VAT returns and payments
What a Kenyan business pays when it files or pays VAT late: the filing penalty, the payment penalty, monthly interest and the cap on that interest.
By Achekam · · 4 min read · For Running a business businesses in Kenya
VAT is the tax a Kenyan business deals with most often, which also makes it the one most often handled late. A month with staff off sick, a supplier dispute holding up the purchase figures, or simple forgetfulness, and the 20th has come and gone.
The costs of that are set out plainly by KRA and in the Tax Procedures Act. There are two separate charges, one for filing late and one for paying late, and interest runs on top of the second. Understanding how they stack up helps you decide what to do first when a deadline has already been missed.
The due date: the twentieth of the following month
KRA says the VAT return and the VAT payment are both due on or before the 20th day of the following month, and returns are submitted online through iTax. The VAT Act, as published on Kenya Law, puts it the same way from the other direction: every registered person must submit a return for each tax period not later than the twentieth day after the end of that period.
One date, two obligations. A business can be on time with one and late with the other, for example filing the return on the 18th but paying on the 25th, and each failure has its own consequence.
The late filing penalty
KRA says late filing of a VAT return attracts a penalty of 5% of the tax due or Kshs 10,000, whichever is higher, at the time of writing.
The "whichever is higher" part has a sting for small and nil returns. A worked example in words: a business has very little VAT to pay for a quiet month, or none at all. Five per cent of a small amount, or of nothing, is less than Kshs 10,000, so the Kshs 10,000 figure applies. A late nil return is therefore not free. The habit to build is to file every return on time, especially the ones with nothing to pay, because they are the easiest to forget and the most expensive in proportion.
The late payment penalty and interest
Paying late is a separate matter. KRA says late payment of VAT attracts 5% of the tax due plus interest of 1% per month. The Tax Procedures Act supplies the detail behind those figures: section 83A sets a late payment penalty of five percent of the tax due, and section 38 charges late payment interest of one per cent per month or part of a month, as simple interest, from the due date until payment. The interest is in addition to the penalty.
Two phrases deserve attention:
- "Per month or part of a month" means a payment one day into a new month attracts a full month's interest for that month. Paying on the 21st rather than the 20th already costs a month of interest.
- "Simple interest" means the interest is worked out on the unpaid tax only, not on interest already charged.
KRA's page on business offences and penalties lists the VAT penalties alongside those for other taxes, and is the page to check if the figures change.
Interest capped at the tax itself
There is a ceiling. The Tax Procedures Act says the accrued interest may not exceed the principal tax. However long a VAT debt sits unpaid, the interest on it stops growing once it equals the tax.
That is cold comfort for a business with old arrears, since the total owed can still be the tax, plus the penalty, plus interest equal to the tax. But it does mean the debt has a ceiling, which makes it possible to plan a settlement. The mechanics are covered in late payment interest and its cap, and arrears from earlier years may be affected by the Finance Act 2026 tax amnesty.
Deadlines in Achekam's calendar and why some may be missing
Achekam keeps a filing calendar, but it is careful about what it shows. Its calendar leaves out any deadline whose rule is awaiting approval or contested, and says why, rather than showing a date it cannot stand behind. Deadlines it does show are set to the end of the day in Africa/Nairobi. If you see a note that a VAT deadline is waiting on approval, that is a prompt for whoever looks after your tax settings to approve the rule, not a sign that no return is due. A wider view of Kenyan dates is in Kenya's tax calendar.
Where KRA raises an assessment, Achekam computes the objection and appeal deadlines for Kenyan assessments from the approved administration rule.
Filing itself happens on iTax. Achekam does not file Kenyan returns: a person with the business'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 safeguard against the most common way businesses fall into late filing, which is believing a return went in when it did not.
What to do if you are already late
- File the overdue return now, even if you cannot pay yet. The filing penalty and the payment consequences are separate, and filing deals with one of the two.
- Pay as soon as you can. Interest runs per month or part of a month, so each new month adds to it.
- If more than one month is outstanding, list each return and payment with its due date before you start.
- If iTax will not accept the current return, an earlier one may be missing; see why iTax will not take this month's return.
- Upload each acknowledgement to Achekam for a second person to verify, so the record matches what KRA holds.
- Look at why the deadline was missed, and fix the cause before next month's 20th.
Start with the oldest unfiled return. Getting the filings in first gives you, and KRA, an accurate picture of what is owed.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
