Types of Taxes for Companies in Kenya

Taxation for Companies in Kenya

Pay as You Earn (PAYE)

An employer is required to deduct PAYE from the employees’ salaries at the current rates and remit them to the Tax Authority on or before 9^th of the following month.

How to Calculate PAYE

Tax Bands	Annual	Monthly	Rates
First	Kshs. 288,000	Kshs. 24,000	10%
Next	Kshs. 100,000	Kshs. 8,333	25%
On all income in excess of;	Kshs. 388,100	Kshs. 32,333	30%

Personal Relief of Kshs. 28,800 per annum (Kshs. 2,400 per month)

How to file for late filing and paying of PAYE

Date: File returns on or before the 9^th of the following month

Penalty for late filing of PAYE: Whichever is higher, 25% of the tax due or Kshs. 10,000

Penalty on late payment of PAYE: 5% of the tax due and a late payment of 1% per month on the unpaid tax until the tax is paid in full.

Withholding Tax

This is tax deducted at the source.

Some Payments subjected to Withholding Tax include, among others;

• Dividends
• Royalties
• Management, professional, and training fees
• Contractual fees
• Consultancy fees, Legal fees, Audit fees
• Appearance at or performance to entertain
• Interest and deemed interest

The percentage deducted varies between incomes and depends on whether you are a resident or non-resident.

Payments	Residents Rate(%)	Non-Resident Rate(%)
Royalty, natural resource income	5	20
Winnings from betting and winnings	20	20
Management fees, professional, training fees	5	20
Contractual fees	3	20

Date: Withholding tax deducted should be remitted to the Tax Authority by the 20^th day of the month following the month in which the tax was deducted.

Penalty on late payment of Withholding tax: 5% of the tax due and a late payment interest of 1% per month for the period tax remains unpaid.

Value-added Tax (VAT)

This is a consumer tax that is charged on the supply and importation of taxable goods or services made in Kenya.

VAT Rates

There are 3 (three) types of tax rates;

1. 0% – Zero rates supplies. Goods listed in the 2^nd Schedule to the VAT Act. E.g. Exportation of goods/services, goods supplied to EPZ, privileged persons and public bodies e.t.c.
2. 8% – Petroleum oils
3. 16% – General rates for other goods and services

Date of filing: On or before 20^th of the following month.

Penalty on late filing of VAT: Whichever is higher between, Kshs. 10,000 and 5% of the tax due.

Penalty on late Payment of VAT: 5% of the tax due and a late payment interest of 1% per month on the unpaid tax until the tax is paid in full.

Instalment Tax

This is an estimated Instalment Tax paid periodically at 4(four) equal installments before the year of income ends and before the preparation of the business accounts to establish actual tax payable.

How to file Instalment Tax:

Installments are spread evenly at 25% and payable on the 20^th day of the 4^th, 6^th, 9^th and 12^th months of the year of income for all taxpayers except those in the Agricultural Sector.

While taxpayers in the Agricultural Sector pay in installments of 75% in the 9^th month and 25% in the 12^th month.

NB: Return balances are to be paid at the end of the 4^th month after the year-end i.e. by 30^th April of the following year for the prior period cases.

Penalty for late payment of Installment Tax:

Penalty for underpaying Instalment tax is 20% of the difference between the amount of Instalment tax payable in respect of a year of income and Instalment tax actually paid.

How to Calculate Income Tax for Companies

Income tax rate for Resident companies is 30% of the taxable income while non-residents are taxed at 37.5% of their taxable income after adjusting for allowable and disallowable expenses for both.

Also Read:

Kenya Tax Guide -types of statutory taxes