Kenyans will pay more taxes in 2021 following tax amendments signed at the end of 2020 and the expiry of tax relief measures set during the start of the pandemic.
As from January 1, low salary earners expect more deductions, following changes in tax rates that removed lower tax bands, specifically eliminating 15% and 20% rates as Kenya Revenue Authority seeks to improve revenues from salaries.
Kenyans who earn more than 24,000 monthly will now pay tax at 25% for the next Ksh8,333 up from 15% and 30% for amounts over Ksh 32,333 monthly. This is opposed to the previous tax bands before the pandemic, where individuals paid 15% in income taxes for Ksh 16,667 above Ksh24,000 monthly, and 20% for Ksh 16,667 above a Ksh 40,000 salary.
Personal relief will rise to Ksh 2400 monthly, from Ksh 1408 before the pandemic.
KRA collected Ksh 399.2 billion in PAYE in the year ended June 30, recording a Ksh 210 million shortfall against the Ksh 399.4 billion target.
Other Changes in Taxes in the New Year
The taxman has a bag of new year tax changes in an attempt to increase the tax base.
VAT and Corporate tax will resume their pre-pandemic levels at 16% and 30% respectively. In the case of VAT, returns under the new rates will be due on February 20 2021.
The Digital Service Tax will kick in on January 2 2021, charging 1.5% on downloadable digital content, subscription-based media, digital services like file sharing. The tax exempts online services that facilitate payments, lending, or trading of financial instruments, commodities, or foreign exchange, carried out by a licensed financial institution or financial services provider.
The minimum tax also kicked in on January 1, requiring businesses to pay 1% on gross turnover. Firms whose prices are regulated by the government and those in the insurance sector are exempt from the tax.
KRA raised the ceiling for residential Rental Income tax from Ksh 10 million a year to Ksh 15m and raised the floor from Ksh 144,000 to Ksh 288,000 annually.
