Below we discuss types of taxes in Kenya, which include PAYE, Corporation tax, withholding tax, and advanced tax.
Income Tax Department administers various direct taxes, which have different rates:
- a) Pay As You Earn (PAYE)
PAYE is a method of collecting tax at source from individuals in gainful employment. The employer deducts a certain amount of tax from his / her employee’s salary or wages on each payday then remit the tax to the Authority. This relieves the employee from paying taxes at the end of the year and shifts the responsibility to the employers.
Every individual who receives income is granted a tax credit or a tax relief from the Authority, this is known as Personal Relief. Insurance relief and mortgage relief are also available for eligible persons. The total tax credit is spread evenly during the charge year. At the end of the year, an individual will submit his self-assessment on total income received from various sources. Should the tax credit be lower than actual tax charged during the year, the balance of tax due will be payable.
- b) Corporation Tax
Corporation tax is a form of income tax that is levied on companies. Resident companies are taxable at a rate of 30% w.e.f year of income 2000 while non – resident companies are taxable at a rate of 37.5%.w.e.f year of income 2000.
- c) Withholding Tax
Withholding taxes are deducted at source from the following sources of income: Interest, dividends, royalties, management or professional fees, commissions, pension or retirement annuity, rent, appearance or performance fees for entertaining, sporting or diverting an audience.
|Withholding tax rates||2000||2001||2002||2003|
|a)||Resident withholding tax rates in respect of: –|
|ii)||Qualify Divided which is also the final tax||5%||5%||5%||5%|
|iii)||Interest, discount, or original issue discount arising from:|
|–||(W.e.f 11th June, 1998)||25%||25%||25%||25%|
|–||Government Bearer Bond||15%||15%||15%||15%|
|iv)||Qualifying interest arising from: –|
|–||Bearer Instruments (w.e.f 1st July, 1996)||20%||20%||20%||20%|
|–||In any other case (w.e.f 1st July 1996)||–||15%||15%||15%|
|v)||Commission payable by Insurance Companies to:|
|Presumptive Income Tax in respect of gross proceeds from certain specified Agricultural produce. W.e.f 1.1.2000 – 15.6.2000||2%||–||–||–|
|viii)||Consultancy, Agency fees||2%||2%||10%||5%|
|b)||Non-resident withhold tax rates in respect of|
|i)||Management and Professional Fees||20%||20%||20%||20% except commission to overseas agents for flower exports|
|iii)||Rent, premium or similar considerations for the use or occupation:|
|–||Of immovable property:||30%||30%||30%||30%|
|–||Of movable property||15%||15%||15%||15% except aircraft leasing|
|v)||Interest other than ix) below:||121/2%||121/2%||15%||15%|
|vi)||Pension or Retirement annuity||5%||5%||5%||5%|
|viii)||An appearance or performance for purposes of diverting an audience||20%||20%||20%||20%|
|ix)||Supporting, assisting or arranging an appearance||20%||20%||20%||20%|
|x)||Management and Professional fee(see Para 5(2)(g) 9th schedule)||121/2%||121/2%||121/2%||121/2%|
|xi)||Interest (see Para 5 (2)(h) 9th schedule):||10%||10%||10%||10%|
|xii)||Interest on bearer instruments||20%||20%||20%|
- d) Advance Tax
Advance tax is applicable to Matatus and other Public Service Vehicles. It is not a final tax, but a tax partly paid in advance before a public service vehicle or a commercial vehicle is registered or licensed.
The current rates are:
- For vans, pickups, trucks and lorries Kshs.1, 500 per ton of load capacity per year or Kshs.2, 400 whichever is higher.
- For saloons, station