Withholding Tax Rate in KRA

Withholding Tax Rate in KRA
Understanding the withholding tax rate in the Kenya Revenue Authority (KRA) is essential for both residents and non-residents conducting business in Kenya. In this article, we will discuss the withholding tax rates, the process for filing withholding tax returns, and how to obtain a withholding tax certificate in Kenya.


Withholding Tax in Kenya




Withholding tax is a tax deducted at the source, where a person making certain payments, such as dividends, interest, and royalties, deducts tax at the applicable rate and remits the tax to the Commissioner on behalf of the recipient. The tax rates for these payments range from 5% to 20%, depending on the type of payment being made. However, the standard withholding tax rate in Kenya is 25%.


Withholding Tax Rate for Non-Residents


The withholding tax rate for non-residents in Kenya is 20%, but it is important to note that the standard withholding tax rate in Kenya is 25%.


East Africa Community Partner States


There are specific regulations in place for East Africa Community Partner States, which include tax exemptions and reduced withholding tax rates for certain types of payments made between the partner states.


Filing Withholding Tax Returns in Kenya




Process for Residents and Non-Residents


Both residents and non-residents in Kenya are required to file withholding tax returns by following the same process. The Kenyan Income Tax Act requires every income payer to deduct regular tax from income due for collection by the receivers. All the tax collected is then remitted to the Kenya Revenue Authority (KRA) in accordance with the impending state jurisdictions.

The KRA expects to receive all the withheld income taxes before the end of the 20th day of the consequent month. The annual withholding tax return should be filed with KRA, in which all the payments made in the prior year are summarized. The process for filing withholding tax returns in Kenya is the same for both residents and non-residents.


Requirements for Filing Withholding Tax Returns


The requirements for filing withholding tax returns in Kenya are the same for both residents and non-residents. Every income payer must deduct regular tax from income due for collection by the receivers and remit the tax to KRA.


Obtaining a Withholding Tax Certificate in Kenya




How to Obtain a Withholding Tax Certificate


To obtain a withholding tax certificate in Kenya, the payer is required to generate the certificate on iTax, which is automatically sent to the payee once the payer remits the withholding tax to the Kenya Revenue Authority (KRA). The withholding tax certificate is a document that shows the amount of tax withheld and remitted to KRA on behalf of the payee. The certificate is issued to the payee as proof of the tax paid and can be used to offset the payee's tax liability.


Calculating Withholding Tax in Kenya


To calculate withholding tax in Kenya, you can use the iTax system provided by the Kenya Revenue Authority (KRA). The amount withheld should be remitted to KRA on or before the 20th day of the following month. The withholding tax rate varies depending on the type of income and the recipient.

To file withholding tax returns, you can access the KRA iTax portal and use a withholding tax return form. It is important to note that there are penalties for failure to comply with withholding tax regulations.

In conclusion, understanding the withholding tax rate in KRA is essential for conducting business in Kenya. Both residents and non-residents must comply with the same regulations for filing withholding tax returns and obtaining a withholding tax certificate. By adhering to these rules, taxpayers can avoid penalties and ensure their business activities remain in compliance with Kenyan tax laws.

Sources:

https://www.kra.go.ke/individual/filing-paying/types-of-taxes/individual-withholding-tax

https://taxsummaries.pwc.com/kenya/corporate/withholding-taxes
https://cyberdimension.click/withholding-tax-rate-in-kra/

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