What Has Changed?
The Finance Act, 2026 retained amendments dealing with penalties and interest arising from errors or malfunctions in electronic tax systems.
Under Sections 89(5A) and 89(5B), the Commissioner may waive penalties or interest arising from errors generated by an electronic tax system where the amount does not exceed KES 2 million.
This gives the Commissioner direct authority to handle qualifying electronic-system cases within the KES 2 million threshold.
What Does This Mean for Taxpayers?
If a taxpayer faces penalties or interest arising from an electronic tax system error, there is now a specific waiver framework to address such cases.
However, amounts above KES 2 million may require additional approvals and could involve a more complex process.
Section 112(2)
The Act also retained an amendment allowing regulations to provide for the submission of tax returns based on pre-populated returns generated by the Commissioner.
Key Takeaway
Electronic tax systems are becoming an increasingly important part of tax compliance. Taxpayers should keep proper records and evidence of system-related challenges and corrective action taken.
Source: Finance Act, 2026 — Sections 89(5A), 89(5B) and 112(2), Tax Procedures Act.
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