EXPLAINED: Difference Between Tax Amnesty, Waivers And Write-Offs
Government initiatives exist to offer economic assistance to individuals who engage in tax evasion. These programs allow the government to potentially forgive either a portion or the entirety of the financial penalties imposed on citizens, contingent upon specific conditions.
In certain instances, the government may permit taxpayers to settle the entire penalty amount through convenient installment payments over an extended period. Alternatively, the government might opt to provide relief to tax defaulters by requiring them to make partial payments of the outstanding amount.
Despite the government’s implementation of these policies, a common misconception among the majority is to mistakenly associate them with tax amnesty, waivers, or even tax write-offs.
Tax Amnesty
The Tax Procedures Act of 2015 was amended by the Finance Act 2023 through the addition of Section 37E, which granted a tax amnesty for interest and penalties related to tax debt.
Tax amnesty refers to a time-limited proposal extended by the government to taxpayers, allowing them to settle a specified amount in exchange for the pardon of tax interest and penalties associated with prior tax periods. Additionally, participating individuals enjoy immunity from legal prosecution.
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The pardon extends to individuals who have accrued fines and interest but do not have any outstanding principal taxes for periods preceding December 31, 2022. Nevertheless, individuals with principal tax liabilities from January 1, 2023, onward are required to settle their outstanding principal tax debt by June 30, 2024.
The tax amnesty starts from September 1, 2023, and will be effective until June 30, 2024. By agreeing to the terms and conditions of the amnesty, the taxpayer undertakes to adhere to the payment plan specified in the agreement.
Tax Waiver
A tax waiver refers to the removal or elimination of penalties imposed by the revenue authority for delays in filing or failure to file returns. Unlike a tax amnesty, the waiver is not limited by a specific timeframe and can be granted at any point upon the taxpayer’s application.
To obtain a waiver, the taxpayer must submit a letter to the commissioner outlining the reasons they believe the penalties for late filing or non-filing of returns should be lifted or waived.
To qualify for a tax exemption, the request must be substantiated with supporting documentation, and the primary tax should have been settled. Additionally, the taxpayer must have maintained compliance with all other tax obligations.
Tax write-offs
This constitutes a valid cost that is eligible for deduction, thereby reducing your taxable income. A tax write-off is synonymous with a tax deduction.
The primary advantage of a tax deduction is that it decreases your taxable income, leading to a reduction in the amount of taxes you are required to pay.
The 2023 Finance Act eliminated provisions from its sections that previously allowed for the cancellation of taxes and the granting of tax waivers.
Henceforth, the KRA eliminated the process of applying for, processing or approving waivers or reductions for interest, penalties, and fines.
EXPLAINED: Difference Between Tax Amnesty, Waivers And Write-Offs
