Section 37

Relief because of doubt or difficulty in recovery of tax

37-Repealed by (Finance Act 2023 wef 1st-July-2023 s55)

(1) This section applies where the Commissioner determines that––
(a) it may be impossible to recover an unpaid tax; 
(b) there is undue difficulty or expense in the recovery of an unpaid tax; or 
(c) there is hardship or inequity in relation to the recovery of an unpaid tax. 
(d) there is any other reason occasioning inability to recover the unpaid tax.(Finance Act 2021- wef-01July2021)
(2) Despite the provision of any tax law, the Commissioner may, with the prior written approval of the Cabinet Secretary, refrain from assessing or recovering an unpaid tax and the liability in relation to the tax shall be deemed to be extinguished or the tax shall be deemed to be abandoned or remitted, as the case may be.
(3) In any case referred to the Cabinet Secretary under subsection (1) and where appropriate, the Cabinet Secretary may direct the Commissioner in writing––
(a) to take such action as the Cabinet Secretary may deem fit; or 
(b) to obtain the directions of the court in relation to the case. 
(4) The Commissioner shall submit a report to the Cabinet Secretary on or before the 30th June and on or before the 31st December of each year containing the details and amounts of taxes abandoned under this section.(Finance Act 2021- wef-01July2021)

37A-Repealed by (Finance Act 2021- wef-01July2021)

37A Commissioner to refrain from assessing in some cases 

Finance Act, 2016Effective 1st January 2017(ss.1 to 3)
(1) Subject to subsection (2) and notwithstanding any other provisions of this Act, the Commissioner shall, with effect from the 1st July, 2015, refrain from assessing or recovering –
(a) Taxes, penalties or interest thereon in respect of any period before and during the 2013 year of income; or 
(b) Penalties or interest thereon in respect of the 2014 and 2015 years of income, where – 
(i) the income is in respect of gains or profits for the use or occupation of property earned by an individual; and 
(ii) the returns or amended returns for the 2014 and 2016 years of income are submitted and the tax paid on or before the 30th June, 2016. 
(2) Where a person has no documentation to support expenditure, such person shall be allowed a deduction of forty percent of the expenditure.
(3) This section shall not apply in respect of any tax where the person who should have paid the tax –
(a) has been assessed in respect of the tax; or
(b) is under audit or investigation in respect of undisclosed income for the years of income to which this section applies or any matter relating to such undisclosed income.

37B-Repealed by the Finance Act,2018 Effective 1st July 2018 
37B Commissioner to refrain from assessing tax for income earned outside Kenya 
Finance Act, 2016Effective 19th January 2016
Notwithstanding any other provision of this act, the Commissioner shall refrain from assessing or recovering taxes, penalties or interest in respect of any year of income ending on or before the 31st December 2016, and from following up on the sources of income under the amnesty where – 
(a) That income has been declared for the year 2016 by a person earning taxable income outside Kenya; and 
Finance Act, 2017 Effective 3 April 2017 
(b) The returns and accounts for the year 2016 are submitted on or before the 30th June 2018: Provided that – this section shall not apply in respect of any tax where the person who should have paid the tax – 
(i) has been assessed in respect of the tax or any matter relating to the tax; or 
(ii) is under audit or investigation in respect of the undisclosed income or any matter relating to the undisclosed income. 
(a) this section shall not apply in respect of any tax where the person who should have paid tax – 
(i) has been assessed in respect of the tax or any matter relating to the tax; or 
(ii) is under audit or investigation in respect of the undisclosed income or any matter relation to the undisclosed income; 
(b) where no funds have been transferred within the period of amnesty, there shall be a five-year period of remittance but a penalty of 10% shall be levied on the remittance. 
Finance Act, 2017 Effective 3 April 2017 
(c) the voluntarily declared funds have been transferred back to Kenya. 

37B Commissioner to refrain from assessing tax for income earned outside Kenya 

Finance Act, 2018Effective 1st July 2018(ss.1 to 4)
(1) Notwithstanding any other provision of this Act, the Commissioner shall refrain from assessing or recovering taxes, penalties or interest in respect of any year of income ending on or before the 31st December, 2017, and from following up on the sources of income under the amnesty where —

• a) that income has been declared for the year 2017 by a person earning taxable income outside Kenya; 
• b) the returns and accounts for the year 2017 are submitted on or before the 30th June, 2019; and 
• c) the funds declared voluntarily have been transferred back to Kenya. 

(2) This section shall not apply in respect of any tax where the person who should have paid the tax —

• a) has been assessed in respect of the tax or any matter relating to the tax; or 
• b) is under audit, investigation or is a party to ongoing litigation in respect of the undisclosed income or any matter relating to the undisclosed income. 

(3) Where no funds have been transferred within the period of the amnesty, there shall be a five year period for remittance but a penalty of ten percent shall be levied on the remittance.

(4) The funds transferred under the amnesty shall be exempt from the provisions of Proceeds of Crime and Anti-Money Laundering Act, 2009 or any other Act relating to reporting and investigation of financial transactions, to the extent of the source of the funds excluding funds derived from proceeds of terrorism, poaching and drug trafficking.

37C Commissioner to refrain from recovering penalties or interest from companies that list on the growth segment 

Finance Act, 2019Effective 7thNovember 2019(ss.1-4) 
(1) Notwithstanding any other provision of this Act, the Commissioner shall refrain from recovering penalties or interest from a company that lists on the growth segment of a securities exchange in Kenya, in respect of any year of income prior to the date of listing where the company makes full disclosure of its past income, assets and liabilities for the two years immediately preceding the date of listing: Provided that the principal tax shall be paid in full. 

(2) This section shall not apply in respect of any tax where the person who should have paid the tax— 

• (a) has been assessed in respect of the tax or any matter relating to the tax; or 
• (b) is under audit or investigation in respect of the undisclosed income or any matter relating to the undisclosed income. 

(3) Notwithstanding subsection (1), a company that delists from the exchange in which it is listed before the expiry of five years from the date of listing shall be assessed for all taxes, penalties or interest for the years it was in operation prior to listing. 

(4) The provisions of subsection (1) shall cease to apply after three years from the commencement of this section. 

 (Finance Act 2020- wef-01January2021)(ss1-13)

37D. Voluntary Tax Disclosure Programme

• (1) There is established a programme to be known as the Voluntary Tax Disclosure Programme which shall be for a period of three years with effect from the 1st January, 2021.
• (2) For purpose of this section, “voluntary tax disclosure programme” means a programme where a person discloses the person’s tax liabilities to the Commissioner for the purpose of being granted relief of penalties and interest on the tax disclosed.
• (3) A person with a tax liability may apply to the Commissioner for relief in the prescribed form with respect to tax liabilities that accrued within a period of five years prior to the 1st July, 2020.
• (4) A person granted relief under this section— 
• (a) shall not be prosecuted with respect to the tax liability disclosed under this section; and
• (i) where the disclosure is made and tax liability paid in the first year of the programme, a full remission of the interest and penalty;
• (ii) where the disclosure is made and tax liability paid in the second year of the programme, remission of fifty per cent of the interest and penalty; and
• (iii) where the disclosure is made and tax liability paid in the final year of the programme, remission of twenty-five per cent of the interest and penalty.
• (5) An application under subsection (3) shall be voluntary and disclose all material facts.
• (6) Where the Commissioner is satisfied with the facts disclosed in the application under subsection (3), the Commissioner shall grant the relief applied for: 
• Provided that the relief shall not result in the payment of a refund to the person.
• (7) Where the Commissioner grants relief under subsection (6), the Commissioner shall enter into an agreement with the person setting out the terms of payment of the tax liability and the period within which the payment shall be made which shall not exceed one year from the date of the agreement.
• (8) Where a person fails to meet the terms of the agreement under subsection (7), that person shall be liable to pay the full interest and penalty that had been remitted under the agreement.
• (9) A person granted relief under this section shall not seek any other remedy including the right to appeal with respect to the taxes, penalties and interest remitted by the Commissioner.
• (10) Where, before the expiry of the agreement between the Commissioner and the person, the Commissioner establishes that the person failed to disclose a material fact in respect of the relief granted under this section, the Commissioner may—
• (a) withdraw any relief granted;
• (b) assess and collect any balance of the tax liability; or
• (c) commence prosecution under section 80.
• (11) A person aggrieved by a decision of the Commissioner under subsection (10) may appeal against the decision.
• (12) This section shall not apply to a person if the person—
• (a) is under audit, investigation or is a party to ongoing litigation in respect of the tax liability or any matter relating to the tax liability; or
• (b) has been notified of a pending audit or investigation by the Commissioner.
• (13) The disclosure of a tax liability under this section shall be confidential.

37E: Commissioner to refrain from recovering interest, penalties or fines. (Finance Act 2023 wef 1st-September-2023 s56)  

(1) Notwithstanding any other provision of this Act, the Commissioner shall refrain from recovering penalties or interest on tax debt where a person had paid all the principal tax due before the 31st December, 2022. 

(2) Where all the principal tax due had not been paid before the 31st December, 2022, a person shall apply to the Commissioner for an amnesty of interest or penalties on the unpaid tax, and propose a payment plan for the outstanding amount. 

(3) For the purposes of subsection (2)— 

(a) the amnesty shall be on interest or penalties on the unpaid tax that have accrued up to the 31st December, 2022; 
(b) the amnesty shall only be granted once if the person— 
(i) applies for amnesty and pays all the outstanding principal taxes not later than the 30th June 2024; 
(ii) does not incur a further tax debt; and 
(iii) signs a commitment letter for the settlement of all outstanding taxes that the person may owe. 

(4) Despite subsection (2), any amount of principal tax as at 31st December, 2022 that remains unpaid on the 30th June, 2024, shall attract interest and penalties for which no amnesty shall be granted under this section. 

(5) Despite subsection (1) the Commissioner shall not remit, in whole or in part, any penalty or interest payable by a person, imposed under section 85. 

37E.Commissioner to refrain from recovering interest, penalties or fines.  (TPAA 2024 wef 27th December, 2024 S4)

(1) Notwithstanding any other provision of this Act, the Commissioner shall refrain from recovering penalties or interest or fines on tax debt where a person shall have paid all the principal tax due before the 31st December, 2023. 

(2) Where all the principal tax due shall not have been paid before the 31st December, 2023, the person from whom the tax is due shall apply to the Commissioner for an amnesty of interest, penalties or fines on the unpaid tax, and propose a payment plan for the outstanding amount. 

(3) For the purposes of subsection (2) — 

(a) the amnesty shall be on interest, penalties or fines on the unpaid tax that have accrued up to the 31st December, 2023; 

(b) the amnesty shall only be granted once, if the person— 

(i) applies for amnesty and pays all the outstanding principal taxes not later than the 30th June, 2025; 

(ii) does not incur a further tax debt; and 

(iii) gives a written undertaking for the settlement of all outstanding taxes that the person may owe. 

(4) Despite subsection (2), where a person has paid part of the principal tax due as on the 31st December, 2023, and has been granted amnesty on the unpaid principal tax, and interest, penalties and fines thereon, any amount that remains unpaid on the 30th June, 2025, shall attract interest and penalties for which no amnesty shall be granted. 

37F Relief because of doubt or difficulty in recovery of tax.  (TPAA 2024 wef 27th December, 2024 S4)

(1) This section applies where the Commissioner determines that— 

(a) it may be impossible to recover an unpaid tax; 

(b)it is in public interest not to recover an unpaid tax; 

(c)there is undue difficulty or expense in the recovery of an unpaid tax; 

(d)there is hardship or inequity in relation to the recovery of an unpaid tax; or 

(e)there is any other reason occasioning inability to recover an unpaid tax. 

(2) Despite the provision of any tax law, the Commissioner may, with the prior written approval of the Cabinet Secretary, refrain from assessing or recovering an unpaid tax and the liability in relation to the tax shall be deemed to be extinguished or the tax shall be deemed to be abandoned or remitted, as the case may be. 

(3) In any case referred to the Cabinet Secretary under subsection (1) and where appropriate, the Cabinet Secretary may direct the Commissioner in writing— 

(a)to take such action as the Cabinet Secretary may deem fit; or 

(b)to obtain the directions of the court in relation to the case. 

(4) The Commissioner shall, at least every four months, publish a notice in the Gazette, the names of the taxpayers, the relevant reasons under subsection (1) and the amount of taxes abandoned. 

(5) A notice under subsection (4) of this section shall be laid before the National Assembly without unreasonable delay, and a resolution may be passed by the National Assembly within twenty-one sitting days on which it next sits after the notice is so laid, that the notice— 

(a)be approved; or 

(b)be annulled and it shall thenceforth be void, but without prejudice to the validity of anything previously done thereunder.

  Previous         Next