Tax Obligations in Kenya

Tax Obligations in Kenya
The Kenya Revenue Authority (KRA) is responsible for enforcing tax obligations in the country. Individuals and companies must comply with various tax obligations, including income tax, value-added tax (VAT), Pay As You Earn (PAYE), and other taxes depending on the source of income. This article will discuss the different types of tax obligations, tax rates, and deadlines for filing taxes in Kenya.

Income Tax




Income tax is a direct tax on income and is charged annually on all income accrued or derived from Kenya. The tax rates applicable to taxable income depend on the individual's income level. The maximum tax rate for individuals is 30%, charged on income in excess of KES 388,000. Lower income levels have different tax rates, and there is a personal relief of 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. Resident individuals are taxed on their worldwide income, while non-resident individuals are taxed only on their Kenyan-sourced income. Tax identification numbers, also known as tax PINs, are required for all taxpayers in Kenya.


Value Added Tax (VAT)




VAT is a tax levied on the supply of taxable goods and services in Kenya. It is an indirect tax, and suppliers of taxable goods and services are required to collect it from their customers and remit it to the KRA. The standard VAT rate is 16%, although some goods and services are zero-rated or exempt.


VAT Registration


Businesses with an annual turnover exceeding KES 5 million must register for VAT. Voluntary registration is also possible for businesses with a lower turnover.


Pay As You Earn (PAYE)




PAYE is a tax on employment income and is deducted by employers from their employees' salaries before payment. Employers are responsible for remitting the withheld tax to the KRA on a monthly basis. PAYE rates are progressive and are based on the employee's income level.


Turnover Tax




Turnover tax is a simplified tax regime for small businesses with an annual turnover not exceeding KES 5 million. It is charged at a rate of 1% of the gross revenue and is payable on a monthly basis.


Excise Tax




Excise tax is levied on the consumption of specific goods and services, such as alcohol, tobacco, and petroleum products. Excise tax rates vary depending on the product or service.


Tax Deadlines in Kenya




The deadline for filing annual tax returns in Kenya is on 30th June of every year. Failure to file tax returns by the deadline attracts penalties, which can be as high as 5% of the tax due or KES 20,000, whichever is higher. Corporations are required to pay their taxes in instalments, with the first instalment due by the 20th of the 4th month in the current year and the second instalment due by the 20th of the 10th month in the current year.


Conclusion




Understanding the tax obligations in KRA is crucial for individuals and businesses operating in Kenya. The KRA enforces various tax obligations, including income tax, VAT, PAYE, turnover tax, and excise tax. It is important to comply with these obligations and file taxes on time to avoid penalties. Consult with a tax consultant or visit the KRA iTax portal for more information on tax obligations and compliance.

Source:

https://www.kra.go.ke/individual/individual-pin-registration/93-tax-obligations
https://cyberdimension.click/tax-obligations-in-kenya/

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