Tax Obligations in Kenya

Tax Obligations

The Kenya Revenue Authority (KRA) enforces tax obligations for individuals and companies, including income tax, value-added tax (VAT), Pay As You Earn (PAYE), and other taxes based on income sources. This article explores the various types of tax obligations, applicable tax rates, and deadlines for filing taxes in Kenya.

Income Tax

A direct tax on income, income tax is charged annually on all income accrued or derived from Kenya. Tax rates depend on an individual's income level, with a maximum tax rate of 30% for incomes exceeding KES 388,000. Lower income levels have different tax rates, and personal relief is available at KES 2,400 per month or KES 28,800 per annum.

Resident and Non-Resident Individuals

Both resident and non-resident individuals are subject to income tax in Kenya. Residents are taxed on worldwide income, while non-residents are taxed only on Kenyan-sourced income. All taxpayers require a tax identification number (tax PIN).

Value Added Tax (VAT)

An indirect tax, VAT is levied on the supply of taxable goods and services in Kenya. Suppliers must collect VAT from customers and remit it to the KRA. The standard VAT rate is 16%, with some goods and services being zero-rated or exempt.

VAT Registration

Businesses with an annual turnover exceeding KES 5 million must register for VAT, while those with lower turnovers may register voluntarily.

Turnover Tax

For small businesses with annual turnovers not exceeding KES 5 million, turnover tax is charged at 1% of gross revenue and payable monthly.

Excise Tax

For small businesses with annual turnovers not exceeding KES 5 million, turnover tax is charged at 1% of gross revenue and payable monthly.

Tax Deadlines in Kenya

Annual tax returns are due on 30th June each year. Penalties for late filing can be as high as 5% of the tax due or KES 20,000, whichever is higher. Corporations must pay taxes in instalments, with the first due by the 20th of the 4th month and the second due by the 20th of the 10th month in the current year.

Conclusion

Comprehending KRA tax obligations is crucial for individuals and businesses in Kenya. To avoid penalties, it's essential to comply with tax obligations and file taxes on time. Consult a tax consultant or visit the KRA iTax portal for more information on tax compliance.