Income tax stands as a direct levy imposed on various sources of income, including business profits, employment wages, rental earnings, dividends, interests, and pensions, among others.
Collection Methods:
The mechanisms for gathering income are:
- •Pay As You Earn (PAYE)
- •Withholding Tax
- •Installment Tax
- •Advance Tax
- •Turnover Tax
- •Capital Gains Tax
Individual Income Tax:
Individual income tax applies annually to all income earned by a person, irrespective of residency status, arising from or within Kenya.
Tax Bands and Rates:
Effective from July 1st, 2023, the tax bands and associated rates are structured as follows:
| Tax Bands | Annual | Monthly | Rates |
| On the first | Shs. 288,000 | Shs. 24,000 | 10% |
| On the next | Shs. 100,000 | Shs. 8,333 | 25% |
| On the next | Shs. 5,612,000 | Shs. 467,667 | 30% |
| On the next | Shs. 3,600,000 | Shs. 300,000 | 32.5% |
| On all income over | Shs. 9,600,000 | Shs. 32,333 | 35% |
Additionally, individuals are entitled to a personal relief of Kshs. 28,800 per annum (Kshs. 2,400 per month).
Taxation for Non-Resident Employment:
Non-residents receiving employment income from a Kenyan employer or permanent establishment are subject to prevailing individual income tax rates, without eligibility for personal relief.
Filing Individual Income Tax Returns:
Individuals holding a KRA PIN must submit income tax returns annually, regardless of income earned. The process is conducted online through the iTax portal, with submissions accepted between January 1st and June 30th of the subsequent year.
Penalties for Late Filing and Payment:
Late filing incurs a penalty of the higher of 5% of the tax due or Kshs. 2,000. Late payment attracts a penalty of 5% of the tax due and a monthly interest of 1% on the outstanding tax until fully settled.
Tax Relief:
Tax relief mechanisms aim to reduce an individual’s tax liability. Personal relief grants a resident individual Kshs. 28,800 annually, effective from April 25th, 2020. Additionally, insurance relief allows for a 15% deduction on premiums paid for specified policies, capped at Kshs. 60,000 per annum.
Exemption from Individual Income Tax:
Even if exempt from income tax, individuals must still file returns and provide a valid Exemption Certificate Number.
Disclaimer: This guide is for information purposes only. For accurate and up to date tax policies and procedures, please refer to the KRA website or your tax consultant.
