KRA Penalty and Interest Waivers: What the Rules Allow Now

For most business owners, there is no longer a general waiver to apply for. KRA says waivers on any ground other than a system error or a wrong obligation ended on 1 July 2025. What remains is a narrow waiver power for specific faults, and the separate tax amnesty, which closes on 31 December 2026. A waiver is never an automatic right, and neither route removes the tax itself.

What changed

For years, taxpayers could write to KRA with reasons such as cash flow trouble or bad advice, and ask for penalties and interest to be dropped. Older KRA pages, including a 2022 blog post and a waiver FAQ leaflet, still describe this. Do not rely on them.

The 2022 post cites section 89(7) of the Tax Procedures Act, which the Finance Act 2023 deleted, along with subsections (6) and (8). KRA’s amnesty page now gives 1 July 2025 as the end date for waivers on other grounds. Its amnesty guidelines say interest and penalties on debts outside the amnesty are charged under the law, “which is not subject to waiver”.

So a tight month, a staff change or a missed date is not a listed ground.

What the law allows now

These rules are in section 89 of the Tax Procedures Act, as at 1 September 2026.

Section 89(5A). The Cabinet Secretary for the National Treasury may, on the Commissioner’s recommendation, waive all or part of a penalty or interest caused by:

• an error generated by an electronic tax system
• a delay in updating an electronic tax system
• a duplicated penalty or interest charge
• a malfunction of an electronic tax system
• the incorrect registration of your tax obligations

Section 89(5B). Added by section 49 of the Finance Act 2026, in force from 1 July 2026. The Commissioner may waive all or part of a charge where the liability is no more than KES 2 million and was caused by an electronic tax system error. The other grounds are not covered. The Act does not say how the KES 2 million is measured, for example per charge or in total, so confirm this with KRA.

Both powers are discretionary, so the answer can be no. Both cover penalties and interest only, never the tax.

KRA’s own uses of these powers have been narrow. In July 2025, it covered late filing of 2024 returns after a system failure, on condition they were filed by 5 July. In September 2026, it covered charges tied to verified iTax downtime that month.

How to ask

We could not find a published KRA form or step-by-step process for these two sections, so confirm the route with KRA before you submit anything. KRA’s Finance Act 2026 page advises keeping screenshots, support tickets and correspondence. Its older FAQ leaflet sends charges from a wrong obligation to the debt office at your Tax Service Office, your local KRA office.

1. Pull your iTax ledger. List each charge by tax, period and amount.
2. Match each charge to a listed ground. If you cannot, it is not a waiver case.
3. Gather dated proof. Use screenshots, ticket numbers, emails, receipts and registration records.
4. Submit it in writing to the debt office. Ask which process applies, and keep a stamped copy. You can also ask the call centre on 0711 099 999.
5. Keep filing and paying. Interest on unpaid tax keeps running while you wait.

Be wary of anyone who promises to get your charges waived. The decision belongs to KRA and the Cabinet Secretary.

Other routes that are not waivers

• The tax amnesty. It covers penalties, interest and fines on periods up to 31 December 2025, if you pay all principal tax by 31 December 2026: section 37E. KRA’s guidelines say it applies automatically once the conditions are met. It does not cover periods from 1 January 2026, customs duties or charges you have already paid. After the closing date, it is gone. See our tax amnesty guide.
• An objection. If a penalty or interest demand is simply wrong, you can object within 30 days: sections 3 and 51. See how to object. If the tax is later found not payable, interest you paid on it is refunded: section 38(2).
• Electronic compliance penalties. Before charging one for failing to issue an e-invoice, file or pay electronically, KRA must ask for your reasons and consider them: section 86.
• Relief for doubtful debts. Under section 37F, KRA may stop recovering an unpaid tax on grounds including hardship, with the Cabinet Secretary’s written approval, and must publish the names in the Gazette. Do not plan around this.

If no route fits

Plan to pay. A KRA demand letter sets out your options if one has arrived. The late payment penalty is 5 percent (section 83A). Interest is 1 percent a month, simple, and cannot exceed the tax: section 38. A payment plan spreads what you owe, but it does not remove it, and interest continues.