What is Tax Health Check?

  • Tax Health Check, when simply put it means checking on the position that a taxpayer is in terms of taxes according to the prevailing law. It is more of an audit of your accounting records and tax to ascertain your compliance on prompt filing and payment of taxes.
  • Key components of a tax health check include but not limited to the following:
    • Analysis of taxpayer’s tax position
    • Checking on compliance with the tax laws
    • Review of the tax returns through an understanding of specific issues in taxpayer’s industry and activities of the management
    • Advise on the changes in the legislature or induction of new legislation
    • Evaluation of the internal controls.
    • Documentation review
    • Optimizing opportunities
    • Identification of tax risk exposure

Need for Tax Health Check

  • Tax regimes around the world keep changing. Tax revenue authorities are working towards meeting the revenue targets and this leads to aggressive ways of meeting these targets. In Kenya, in the financial year 2022/2023, Kenya Revenue Authority realized revenue collections of 2.166 trillion compared to the set target of 2.273 trillion. The Revenue Authority missed its target by 107 billion shillings. In order to meet the set revenue targets, tax authorities engage in tax audits leading to backdated tax demands. These tax demands result to significantly huge amounts of principal taxes, fines, interest and penalties. This may have a ripple effect on the cashflow management of the taxpayer due to the unforeseen cash outflow.
  • Many taxpayers often end up paying more taxes than they should have and many end up spending more because they missed out on filling and paying the taxes they are obligated to pay in time. There is a need to be proactive by involving a tax advisor or expert to check on the health of your tax status before you get into problems with the revenue authorities.

Benefits of a Tax Health Check

  • Mitigation of risk.

It gives a taxpayer an opportunity to draw up a strategy to prepare and lessen the risks that comes with tax exposures on business activities.

  • Financial savings

Tax health check paves way to tax planning which helps in saving finances that could have been used as a result of wrong tax filling and interests and penalties that may arise out of late filling and payment of taxes.

  • Improved processes

Tax reporting depends on the internal processes and controls. Tax health check spearheads a need to improve the internal processes and controls with an aim to lessen tax exposure.

  • Compliance Assurance

Measures undertaken will enable the taxpayer to adhere to the policies, regulations and processes thus reducing the risk of penalties and interests from incorrect and late tax filling.

  • Informed decision making

Tax health check is rich in information on tax matters enabling the taxpayer to make informed decisions concerning tax affairs and financial planning.

  • Managing reputational risk exposure

Tax disputes can ruin the reputation of a taxpayer in the eyes of the public. Tax health check helps in managing the reputation that comes with tax disputes.

  • Simply peace of mind

The readiness to any tax audits from authorities gives some peace of mind to the taxpayer.

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