How Individuals and Businesses are Taxed in Kenya

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Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” This is a famous line attributed to Benjamin Franklin who once wrote in his letter back in 1789.

Tax is a compulsory contribution to state revenue levied by the government on individuals and business profits or added to the cost of some goods, services and transactions.

The government of Kenya, just like any other countries, relies on taxes from the citizens to run it’s day-to-day activities including funding development projects.

In Kenya, taxes are collected and accounted by the Kenya Revenue Authority (KRA), an independent body that was established by an act of parliament in 1995.

Taxes in Kenya are categorized into two; direct and indirect taxes. According to the KRA, Direct taxes refers to the money one remits directly to the government while indirect taxes are charges on goods and services – Value Added Tax  or VAT (which is normally 16% on goods and lately 8% on petroleum), excise duty and custom taxes.

The percentage that individuals or businesses pay directly to government through the KRA is known as Income Tax which includes Pay As You Earn, Corporate tax, withholding tax and Advance tax.

Pay As You Earn (PAYE)

This is the percentage of money that is deducted by employees from one’s salaries, allowances, commission or bonuses either weekly, monthly or annually and channeled to the government through KRA.

They are charged as follows:

  • 10% on Kshs. 11,180 and below
  • 15% on Kshs. 11,181 to Kshs 21,714
  • 20% on Kshs 21,715 to Kshs 32,248
  • 25% on Kshs 32,249 to 42,781, and
  • 30% on Kshs. 42,782 and above.

Withholding Tax

This is also charged at varying rates both on residents and non-residents and ranges between 3 to 30 per cent of payments that include dividends, interests, pensions/retirement annuity, appearance or performance fee, commissions, royalties, consultancy and contracts.

Advance Tax

This caters for Public Service Vehicles (PSVs) and is paid in advance by the owners of PSVs before registering their vehicles.

Corporate Tax

Companies that operate in Kenya pay a charge on all their incomes to the KRA. The companies are categorized into two; resident companies and non-resident companies.

The tax rate for resident companies is 35 percent while that of non-resident companies is 37.5 percent.

Residential Rental Income Tax

This is the amount payable from accrued incomes from the residential property within Kenya.

Custom Duty

This is the export and import tax in Kenya for goods. KRA uses custom tax to harmonize the system to quantify the tax rate.

Is there a reward for paying Income Tax?

There’s no reward as such but normally, one is supposed to be issued with a tax compliance certificate to show that he/she is in compliance with the law as much as paying of taxes is concerned.

For example, the Kenya Revenue Authority has been om the spot following its recent feud with city lawyer Professor Tom Ojienda on tax compliance, a matter that has ended in court.

KRA is accusing Prof. Ojiendo for failing to file his returns between 2009 and 2015, a matter that KRA is only bringing up just days before the Judiciary Service elections where Prof. Ojiendo is also vying.

What is not clear is why the KRA is taking too long to issue the lawyer with a tax compliance certificate and why KRA hasd to take that long to bring up such allegations.



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Simiyu Wakajuaness

Blogger Simiyu Wakajuaness is a scriptwriter, actor and stage director with ardent passion in the media and public relations in this digital world. Follow him on Twitter and Facebook on the icons below...

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