Have you recently been impacted by unusually new tax balances on your KRA iTax portal? Well, it might be because of the migration of your legacy ledger balances to iTax by the Kenya Revenue Authority (KRA).
On February 14, 2020, KRA issued a public notice notifying all taxpayers of its intention to undertake a reconciliation exercise on taxpayers’ old legacy ledger balances system. The aim of this exercise was to migrate these balances to the new digitised iTax system.
How the migration of legacy ledger balances to iTax works:
During the exercise, taxpayers received emails that their KRA legacy ledger balances have been updated. The migration, which kicked off with large and medium taxpayers, is evidently now being rolled out to small businesses.
Taxpayers who find the legacy ledger balances conflicting with their own records during verification are required to provide documentation to support their case. This is to ensure tax records are accurate on both the KRA and taxpayer’s ends. Importantly, the verification should be conducted before the December 31, 2024 deadline. If the balances remain unresolved, they will be confirmed, and you will be issued with demand notices.
Why the system migration?
Before the introduction of the iTax system in 2014, KRA utilised the manual or semi-automated legacy system for tax administration. The legacy system could only be accessed by KRA staff. Taxpayers were therefore required to physically submit manual tax returns. As a result, the accuracy of records and data held by KRA was a challenge. This is where the digitised iTax system came in.
As such, taxpayers need to carefully verify the data sent by KRA during review and consequently respond in case of any difference in the legacy ledger balances. This is to correct any tax liabilities that should not be carried forward to the iTax system.
Controversy around Legacy Balances Verification
Taxpayers are required to keep records for a period of 5 years from the reporting period as per the Tax Procedure Act, 2015. KRA has also given a window period of up to December 2024 for data verification before the tax is confirmed and demand letters are issued. Some of the balances also date up to as late as 1994. What happens in case of lack of supporting documents? In most cases, the burden of proof lies with the taxpayer. Reconciliation can only be possible where proof of payment is available.
For further information on the legacy ledger balances migration, contact our tax experts and have your tax compliance matters sorted on time. Don’t let the deadline get to you. Act quickly and let us assist you with the transition of accurate balances to the iTax system.