Tax is a financial charge imposed by the national or county governments on individuals or business to fund many public expenditures. The body charged with collecting, assessing, and accounting taxes in Kenya on behalf of the state is the Kenya Revenue Authority (KRA). The taxpayer incurs two types of charges (direct and indirect taxes). Indirect taxes in Kenya you pay when you buy goods and services and include V.A.T, excise duty, and custom taxes. On the other hand, direct taxes are the percentages you remit directly to the government as income tax. Read more: https://www.tuko.co.ke/264555-different-types-taxes-kenya.html#264555

 

Types of Taxes Income Tax The direct tax department of the Kenya Revenue authority deals with income tax. KRA divides income tax into four categories Read more: https://www.tuko.co.ke/264555-different-types-taxes-kenya.html#264555

 

Pay as You Earn (PAYE) PAYE is the amount collected from people with gainful employment in Kenya. Your employer deducts a particular percentage of your salary and remits to KRA each end month/ payday. Below are some of the rates applicable per salary scale. Monthly Taxable Income Kshs. 11,180 and below (10%) Kshs. 11,181 to Kshs 21,714 (15%) Kshs 21715 to Kshs 32,248 (20%) Kshs 32,249 to 42,781 (25%) Kshs. 42,782 and above (30%) PAYE applies to bonuses, directors’ fees, commissions, weekly wages, and monthly and annual salaries. Every employee is eligible for a tax credit often referred to as a personal relief. Also, KRA offers insurance and mortgage relief for qualified individuals. After every year (before 30th June), you should file your returns with KRA. Corporation tax Companies operating in Kenya pay a charge on all their incomes to the KRA. Resident companies’ tax rate is 30% while the non-resident corporations part with 37.5% on all taxable profits. Withholding tax Withholding tax is chargeable on Interests Dividends Pensions/ retirement annuity Appearance or Performance Fees Royalties Commissions Management/ Professional fees (plus consultancy, contractual and agency fees) Rent received by non-resident The rates of the withholding tax vary and depend on the status of the recipient. Read more: https://www.tuko.co.ke/264555-different-types-taxes-kenya.html#264555

 

Tax rates for residents Dividend Income (10%) Quality Divided (5%) Royalties (5%) Consultancy/agency fees (5%) Contractual fees (3%) Interest from bearer instruments (25%) Interest from government bearer bonds (15%) Qualifying interest from housing bonds (10%) Qualifying interest from bearer instruments (20%) Insurance brokers’ commissions (5%) Insurance Agents Commissions (10%) Tax Rates for Non-Resident Rent Premium for Immovable Property (30%) Rent Premium for Movable Property (15%) Royalties (20%) Management and Professional Fees (20%) Dividend Income (15%) Pension/retirement annuity (5%) Appearance or performance fees (20%) Supporting/arranging an appearance (20%) Management or Professional fees (12.5%) Interest on bearer instruments (20%) Advance tax Advance tax caters to the public service vehicles and matatu. The owners pay the tax in advance before they can register their commercial vehicles (PSV). Current rates are For vans/ tracks/ lorries/ pickups Kshs. 1500 or Kshs 2400 per ton of load capacity per annum Station wagon/ saloons/ minibusses/ coaches pay Kshs 60 per passenger capacity each month or Kshs. 720 per passenger per annum Residential Rental Income Tax Residential rental income tax is one of the property taxes in Kenya that falls under the income tax. The Finance Act of 2015 defines the residential rental income tax as the amount payable from accrued incomes from the residential property within Kenya and is not above Kshs 10 million per income year. The rate charged is 10% of the total monthly gross rent. The tax payment is due every month before or on 20th. Value Added Tax (VAT) According to the Value Added Tax Act of Kenya, VAT is a consumption charge levied on local sales as well as importation of taxable goods and services. The consumer of the taxable commodity or service pays the VAT. The tax rate applicable is 16 %: for all taxable products and services 0% for particular groups of goods and services The period for filing VAT returns (VAT agents) is one month and should be on or before 20th each month. Custom duty Customs duty is the export and import taxes in Kenya for goods. KRA uses a harmonized system to quantify the tax rate. As such, the rates differ for goods exported and imported within the East African Community where a common external tariff applies. Customs stations are at the entry points in the country including airports, ports, and borders. When you import goods into the country, you will pay an import declaration fee of 2.25% of the cost, insurance, and freight. Afterwards, the customs department will advise you on duty payable. The goods imported are subject to a standard VAT rate as well as excise duty. On average, customs duty can be 25% though it may be as low as 0% or even as high as 100%. Excise tax The indirect charge administered on the sale of certain goods such as cigarettes or beer is the excise tax. Products and services charged are Excisable goods produced by licensed manufacturers in Kenya Excisable services by authorized service providers in Kenya Excisable goods brought into the country (imports) Each of the 47 county governments administers taxes. Some of the county taxes in Kenya include Property Tax The county governments levy a tax on land or land improvements (buildings). The tax rate depends on the location of the property and its value. An approximate figure would be 1% of the property value. The land tax also depends on the current market value of the land. Out of all the counties, Nairobi has the highest land rate at 8%. Entertainment Tax An Act of parliament can allow the imposition of tax on any matter that relates to entertainment. The fee could be for hosting an event in a theater or studio or charged on concert tickets. By now you are probably wondering how to pay taxes in Kenya. For you to pay any of the income taxes, you will need to have a PIN from KRA. You also have to register with iTax at www.kra.go.ke/portal to submit annual returns. Ensure you have all the required documents you before you start filing returns. The customs and excise duty are paid directly at the customs offices. For county taxes in Kenya, each of the 47 counties has designated areas to pay taxes. You can either go to the county offices or deposit directly to the county government accounts. Uses of Taxes in Kenya Revenue generation By taxing citizens, the government can generate money that can be spent to improve the lives of the citizens or to cater for any other government expenditure. Some areas where the government uses taxes include provision of social welfare, and infrastructure development. Read more: https://www.tuko.co.ke/264555-different-types-taxes-kenya.html#264555

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