Part One
By Jacqueline Waihenya
The Kenya Revenue Authority Personal Identification Number (sometimes referred to as PIN Number) has now become an integral part of commercial and financial life. It was initially introduced into our local systems at the turn of the millennium to enable the Kenya Revenue Authority (KRA) in its mandate of collecting and receiving all government revenues.
Initially, the PIN was created for administrative purposes to enable KRA create a tax base and otherwise identify the taxpayers.
The Tax Procedures Act
It was not until the enactment of the Tax Procedures Act, Act No. 29 0f 2015 (Tax Procedures Act) that the PIN was grounded in statute at section 11. In the intervening period, the PIN has grown from being merely an identifying number and/or symbol ascribed to an individual or person for tax purposes. The PIN has become a significant document for identification, a verification tool for the access of a wide variety of government services and participation in the financial and economic sphere in our country.
The PIN is now an essential tool in commercial life
As set out in the First Schedule to the Tax Procedures Act, Act No. 29 0f 2015 the PIN Number is now required for:
- registration of titles and stamping of instruments;
- approval of development plans and payment of water deposits;
- registration of motor vehicles, transfer of motor vehicles, and licensing of motor vehicles;
- registration of business names;
- registration of companies;
- underwriting of insurance policies;
- trade licensing;
- importation of goods and customs clearing and forwarding;
- payment of deposits for power connections;
- all contracts for the supply of goods and services to Government Ministries and public bodies;
- opening accounts with financial institutions and investment banks.
In a nutshell, it is the defacto identification number for taxation and all and any financial and commercial services that may have a remote impact on the taxation of an individual. Arguably, sufficient statutory, administration and government policy requirements and statements have been put in place to determine whether and to what extent an individual or entity can take part in our financial and economic life.
What then is a KRA PIN?
So what is this PIN? The PIN is issued under the Tax Procedures Act to a person registered for the purposes of any tax law when they have an accrued tax liability or they reasonably expect to incur a tax liability under the Income Tax Act or Value Added Tax Act or they otherwise expect to manufacture, import and/or supply excisable goods.
In addition to this a person who has not been registered under section 8 of the Tax Procedures Act but who requires a PIN for the purposes of a transaction specified in the First Schedule may apply to the Commissioner for a PIN.
An individual or entity can only hold one PIN. The Tax Procedures Act provides that only one PIN is assignable to a person at any given time. One therefore makes an application for a PIN in the prescribed form and must be accompanied by documents that the Commissioner may require including documents of identity or registration. At the moment these requirements are outlined in the Kenya Revenue Authority iTax website to be:
- The Kenyan national card identification number for a Kenyan Resident or the Alien’s identification card number for a non-Kenyan Resident.
- For non-resident foreigners who can demonstrate their actual or potential tax liability passports may be used.
- Where the applicant is a corporate entity they require to provide the Instrument of Incorporation e.g. the Certificate of Incorporation or Registration as well as their Constitutive Documents e.g. Memorandum & Articles of Association or Constitution & By-laws.
The application is filed online on the iTax portal. Once approved and registered the PIN Number is issued and an email generated copy is emailed to the taxpayer via the email details submitted in the application.
Getting registered for a KRA PIN is as easy as that. Tomorrow, we consider the importance and emerging legal issues.
TO BE CONTINUED
Jacqueline Waihenya is an Advocate of the High Court of Kenya currently pursuing LLM (Masters in Law) specializing in Public Finance and Financial Securities at the University of Nairobi – Mombasa Campus.
Part Two
By Jacqueline Waihenya
Considering the importance of the PIN, an individual or entity is the only person entitled to utilize the PIN for tax identification and tax verification purposes. The only other party empowered by law to utilize the issued PIN is the taxpayer’s agent or a legal practitioner. The agent or legal practitioner may require the PIN to act on behalf of the tax payer for purposes of:
- making returns,
- completing transactions
- submitting/ lodging notices or other documents
- for the purposes of any documentation required for a transaction specified in the First Schedule of the Tax Procedures Act.
PIN Cancellation
A feature introduced by the Tax Procedures Act and which is arguably unique to Kenya is the provision for cancellation of the PIN per section 14 of the Tax Procedures Act. Cancellation may be done by:
- a person issued with a PIN but who is not registered
- the Commissioner.
What the taxpayer requires to do is to notify the Commissioner in writing that they no longer require the PIN for the purposes of a transaction specified in the First Schedule.
The Commissioner is also empowered to cancel the PIN of a person in writing when satisfied that:
- the person has been deregistered,
- the person is required to notify the Commissioner under the Act but has failed to do so;
- the person has notified the Commissioner that a PIN has been issued to the person under an identity that is not the person’s true identity or
- the person had been previously issued with a PIN that is still in force.
The Commissioner may at any time and in writing cancel a PIN issued to a person and issue the person with a new PIN.
The Uniqueness or Otherwise of the KRA PIN
The uniqueness of the Kenyan provision arises first from the fact that it is legislated in statute which is not the norm around the world. Secondly, a reading of the section gives the impression that KRA actually cancel and decommission the PIN. In most leading jurisdictions the tax authority generally suspends the tax identification number and the implication is that once a PIN has been issued and assigned to an individual or entity then the number remains and belongs to that entity in perpetuity. As such the tax identification number will never be assigned to any other person and at most these tax authorities merely deactivate the number.
The Commissioner General did in fact deactivate PINs in August 2017 on the grounds that the affected taxpayers:
- had never filed any tax returns,
- had failed to migrate to the iTax platform or
- were subject to VAT and had filed to register for it
Is PIN Cancellation Fair Administration Action?
In carrying out this exercise the authority has variously referred to it as cancellation and deactivation sometimes indicating that the PIN Numbers had been “removed”. This cancellation further generated some debate as to whether it conforms to the provisions of Article 47 of the Constitution as read together with the Fair & Administrative Actions Act, Act No.4 of 2015 which guarantees every person’s rights to fair and administrative action. Also, there were allegations that the grounds outlined by the Commissioner General did not strictly speaking mirror what is provided for by the Tax Procedures Act.
The fact that the cancellation of PIN has for a good number of people and companies substantially affected and prejudiced their commercial interests may expose KRA to judicial review declaring the directive and action taken by the Commissioner to have been unprocedural. It is not however clear whether any individual or entity has taken any steps to have this question determined by a court of law.
KRA PIN Checker vs Data Protection
The other important issue that may come to bear in due course is the question of data protection of a registered tax payer issued with a PIN. The iTax portal carries a feature it has named the KRA Pin Checker in which any member of the Public may input an issued PIN and is thereafter issued with the basic details of the taxpayer the holder of the PIN. The issue that arises is whether or not this contravenes the provisions of the section 6(1) of the Access to Information Act, Act No. 31 of 2016 which specifically limits the Constitutional Right of Access to Information where disclosure is likely to:
- impede the due process of law;
- endanger the safety, health or life of any person;
- involve the unwarranted invasion of the privacy of an individual, other than the applicant or the person on whose behalf an application has, with proper authority, been made;
- substantially prejudice the commercial interests, including intellectual property rights, of that entity or third party from whom information was obtained; or
- infringe professional confidentiality as recognized in law or by the rules of a registered association of a profession.
Ideally the principles of data protection should apply to the use of the PIN and the taxpayer’s general information. As such where the PIN checker is used in the first instance the registered tax payer ought to be notified automatically about when and who was accessing their information, and personal data maintained must be accurate and up to date. Where data is provided to third parties then it is critical that the same does not open the individual or entity up to cybercrime and/or identity theft. It is therefore imperative that KRA ensures complete security of the personal data and especially relating to protection against unauthorized or unlawful processing or access and against accidental loss, destruction or damage.
Read Part One HERE.
Jacqueline Waihenya is an Advocate of the High Court of Kenya currently pursuing LLM (Masters in Law) specializing in Public Finance and Financial Securities at the University of Nairobi – Mombasa Campus.