Types of KRA Taxes - Kenya Revenue Authority.

1. Income Tax: Types of KRA Taxes

Income tax is a direct tax charged upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya. Read more on KRA website here Kenya Revenue Authority. Types of KRA Taxes

Income Tax is imposed on;

Business income from any trade or profession
Employment income
Rent income
Investment income
Income from services rendered among others
Pensions among others

There are different methods of collecting income tax from companies & partnerships, based on their sources of income. Types of KRA Taxes

These methods include:

a. Corporation Tax

This is a form of Income Tax that is levied on corporate bodies such as Limited companies, Trusts, and Co ? operatives, on their annual income.

Companies that are based outside Kenya but operate in Kenya or have a branch in Kenya pay Corporation Tax on income accrued within Kenya only.

Do partnerships pay corporation tax?

b. Pay As You Earn (PAYE) – Types of KRA Taxes

This is a method of collecting tax at source from individuals in gainful employment.

Companies and Partnerships with employees are required to deduct tax according to the prevailing tax rates from their employees? salaries or wages on each payday for a month and remit the same to KRA on or before the 9th of the following month. Types of KRA Taxes

c. Withholding Tax (WHT)

This is a tax that is deductible from certain classes of income at the point of making a payment, to non-employees.

WHT is deducted at source from the following sources of income:

Interest
Dividends
Royalties
Management or professional fees (including consultancy, agency or contractual fees)
Commissions
Pensions
Rent received by non-residents
Other payments specified

Companies and partnerships making the payment, are responsible for deducting and remitting the tax to the Commissioner of Domestic Taxes.

d. Advance Tax

This is a tax paid in advance before a public service vehicle or a commercial vehicle goes for the annual inspection.

e. Installment Tax – Types of KRA Taxes

Installment tax is paid by persons who have tax payable for any year that amounts to Kshs. 40,000 and above.

2. Rental Income Tax

This is a tax charged on rental income received from renting out property. Taxation of rental income depends on how the rented property was used for residential or commercial purposes.

Companies and Partnerships that rent out property to other persons for either residential or commercial use are required to pay income tax on rent received

To facilitate compliance, KRA appoints agents to withhold and pay, a percentage of the gross rent as tax. These agents can be verified via the agent checker on iTax.

3. Value Added Tax (VAT)

Value Added Tax is charged on supply of taxable goods or services made or provided in Kenya and on importation of taxable goods or services into Kenya.

While companies & partnerships can voluntarily register for VAT they MUST register if their annual revenue exceeds Kshs. 5,000, 000.

To facilitate compliance, KRA appoints agents to withhold and pay, VAT on supplies made. These agents can be verified via the agent checker on iTax.

4. Excise Duty – Types of KRA Taxes

This is a duty of excise imposed on;

Goods manufactured in Kenya, or;
Imported into Kenya and specified in the 1st schedule to Excise Duty Act, 2015.

Companies and Partnerships dealing in excisable good and services are required to pay excise duty.

The List and types of Excisable goods and services are listed in the 5th Schedule as read together with Section 117 (1) (d) of the Customs and Excise Act, CAP 472 Laws of Kenya.

They includes;

Mineral water
Juices, soft drinks
Cosmetics and Preparations for use on hair
Other beer made from malt
Opaque beer
Mobile cellular phone services
Fees charged for money transfer among others

Kenya Revenue Authority: Types of KRA Taxes

5. Capital Gains Tax (CGT)

This is a form of income tax which is charged on a net gain that a business makes after sale of land or building.

6. Agency Revenue – Types of KRA Taxes

This is a type of payment that KRA collects on behalf of various revenue collection agencies in Kenya.

The two types of Agency Revenue include;

Stamp Duty
Betting and Pool Tax

a. Stamp Duty

Stamp duty is a tax charged on transfer of properties, shares and stock.

It is collected by the Ministry of Lands, which has seconded the function to Kenya Revenue Authority (KRA).

b. Betting and Pool Tax

This is a tax charged on winnings from betting, gaming and lottery activities.

Betting, gaming and lottery businesses are required to withhold as tax, and pay to KRA, a percentage of the winnings being paid out to winners. Types of KRA Taxes. Excise Duty on Betting is chargeable at the rate of 20% of the amount wagered or staked, commencing 7th November, 2019.

Related Post: Residential Rental Income Tax

How do I File and Pay my Taxes?

1. Pay As You Earn (PAYE) Types of KRA Taxes

PAYE is deducted monthly at the prevailing individual income tax rates, on or before 9th of the following month.

How do I file for PAYE?

PAYE returns are filed online via itax
Companies and Partnerships without PAYE to remit should file a NIL return via iTax.

How do I pay for PAYE?

After filing the PAYE return, generate a payment slip online via iTax and make payment at any of the KRA appointed banks.

Does PAYE include earnings from casual employment?

Are employee benefits taxable?

How are loans to employees taxed?

Use our calculator to work out PAYE.

2. Corporation Tax: Types of KRA Taxes

What is the Corporation Tax rate?

Resident Companies are taxed at a rate of 30%.
Non-resident companies are taxed at a rate of 37.5%.

Do Partnerships pay Corporation Tax?
Do self-employed people pay Corporation Tax?

Some companies enjoy corporation tax incentives and exemptions.

What Corporation Tax incentives do newly listed companies enjoy?
How long are EPZ exempt from corporation tax?

Check How to account for investment deductions.

How do I file for Corporation Tax?

Corporation Tax is filed online via iTax by filing an Income Tax Company Return (IT2C Form), on or before the sixth month after the end of an accounting period.

For instance: a company whose accounting period runs from 1 Jan – 31st Dec is allowed up to 30th June of the following year to file their Income Tax – Company Return. Filing after 6 months attracts a penalty.

The Return covers one fiscal year which is a period of 12 months within which the corporation chooses to make its financial statements.

Do I need an auditor for Corporation Tax filing?

What is the penalty for late filing Corporation Tax?

Making claims on company expenses.

How do I pay for Corporation Tax?

Generate a payment slip via iTax and make payment at any of the KRA appointed banks.

If the annual tax liability is projected to exceed Kshs. 40,000, then you should pay in installments via iTax. This is called Installment Tax.

Read about filing & paying Installment Tax below.

3. Installment Tax: Types of KRA Taxes

Installment Tax is paid in advance at four equal installments. It is paid before the year of income is over and before the accounts of the business are prepared to establish the actual tax payable.

What is the rate of taxation for Installment Tax?

Schedule of Installment Tax payments:

25% by the 20th day of the 4th month.
25% by the 20th day of 6th month.
Then 25% by the 20th day of 9th month.
25% by the 20th day of 12th month.

Installment Tax for companies in the Agricultural Sector

75% which is the first 3 installments, combined and paid by the 20th day of 9th month.
25% is paid by the 20th day of 12th month.

After the accounts of the business are prepared to establish the actual tax payable, any balance of tax payable should be paid on, or before, the last day of the 4th month following the end of year of income or the accounting period.

4. Withholding Tax: Types of KRA Taxes

What is the rate of taxation for Withholding Tax?

Withholding Tax rates vary depending on the income, and whether the recipient of the income is resident or non?resident.

What are the prevailing Withholding Tax rates?

How do I pay withholding Tax?

Payment is done via iTax.

Generate a payment slip and present it, with the tax due, at any of the KRA appointed banks.

After successful payment of Withholding Tax, both the Withholder and Withholdee will receive a withholding certificate via email.

What is the penalty for late payment?

What is exempt from Withholding Tax?

5. Advance Tax: Types of KRA Taxes

Advance tax is paid before a public service vehicle or a commercial vehicle goes for annual inspection.

What is the rate of taxation for Advance Tax?

For vans, pickups, trucks and lorries – whichever is higher between Kshs. 2, 400 and Kshs. 1, 500 per ton of load capacity per year.
For saloons, station wagons, mini-buses, buses and coaches – whichever is higher between Kshs. 60 per passenger capacity per month and, Kshs. 2, 400 per year.

NOTE: Advance Tax is not a final tax. You are thus required to file the annual Income Tax return and pay any additional tax due.

6. Rental Income Tax : Types of KRA Taxes

What is the rate of tax for Rental Income Tax?

Taxation of Rental Income depends on whether the property is residential or commercial purposes.

Residential Rental Income Tax.

It is taxed at 10% on the gross rent received and no expenses are allowed.

The tax should be filed monthly via iTax, on or before the 20th of the following month.

NOTE: Residential Rental Income Tax is a final tax. Therefore, you do not have to declare it on your annual Income Tax return.

Commercial Rental Income Tax

It is taxed at the respective annual income tax rates and filed through the annual Income Tax Returns, on or before the last day of the 6th month after the end of the accounting period (irrespective of the amount).

Making claims on Commercial Rental Income Tax

7. Value Added Tax (VAT) Types of KRA Taxes

What is the rate of taxation for VAT?

The two tax rates for VAT are:

16% – general rate of tax and is applicable to taxable goods and taxable services.
8% – On petroleum products except for Liquefied petroleum Gas
0% – applies to supplies or importation of goods and services that are of the description for the time being specified in the Second Schedule of the VAT Act, 2013.

Use our calculator to work out VAT.

How do I file for VAT?

VAT returns are filed online via iTax, on or before the 20th of the following month, by filling a VAT3 Return form.

How do I account for VAT on imported services?

When is VAT on Imported Services due?

How do I pay for VAT?

After filing your VAT returns online, generate a payment slip for any tax due and make payment to any of the KRA appointed banks or through any mobile money transfer platform.

8. Excise Duty: Types of KRA Taxes

What is the rate of taxation for Excise Duty?

The rate varies depending on the goods and services as specified in the 1^st Schedule of the Excise Act, 2015.

Types of Excise Duty

Specific Duty Rate: This is where a specific amount of tax is charged per unit of measure on an excisable product e.g. Kshs. 120 per litre of spirit.
Advalorem Duty Rate: This is where a percentage rate of duty charged on the value of an excisable product.Excise duty on imports is charged on the sum of total Cost, Insurance and Freight (CIF) and amount of customs duty (if any) and;For locally manufactured goods, it is charged on a specific unit of measure or advalorem rate is charged on the Ex-factory selling price excluding VAT (if any), cost of excise stamps (if any) and cost of returnable containers (if any).

How do I pay for Excise duty?

Excise Duty on import is paid at the port of entry.

Domestic Excise Duty should be paid by 20th day of the following month.

Generate a payment slip via iTax and present to any of the KRA appointed banks to make the payment.

9. Capital Gains Tax (CGT) Types of KRA Taxes

What is the rate of tax for Capital Gains Tax?

5% of the net gain (Net Gain is Sales Proceeds, less the Acquisition and Incidental cost) after sale of a land or building.
0% on marketable securities.

CGT is a final tax. Thus it is not subject to further taxation after payment of the 5% rate of tax.

When is Capital Gains Tax due?

CGT is due and payable on or before the date of lodgement of application documents for transfer of property at the lands office.

What is exempt from CGT?

10. Agency Revenue

This is a type of payment that we collect on behalf of various revenue collection agencies in Kenya. There are;

Stamp Duty
Land Rent
Widows & Children?s Pensions Fund
Sugar Development Levy
Betting and Gaming taxes

a) Stamp Duty: Types of KRA Taxes

What is the rate of taxation for Stamp Duty?

Stamp Duty are payable to the government in different rates, depending of the nature of the instrument.

What instruments are assessed for Stamp Duty?

What instruments are not assessed for Stamp Duty?

Non-payment of Stamp Duty results in;

Invalidity of the relevant transaction.
Agreement signed between the parties become null and void.
Transaction becomes inadmissible evidence in a Court of Law.

When is Stamp Duty due?

The due date depends on where transaction documents were prepared.

If prepared in Kenya – payment should within 30 days.
If prepared abroad, and send for registration locally – payment should be within 30 days of receiving the documents.

Can I get an exemption from Stamp Duty?

How do I pay Stamp Duty?

Present the legal instrument for assessment.
Go to the KRA Website, itax and print the Payment slip.
Make payment at a KRA appointed bank.
Present the copies of Payment slip and banking slip for confirmation of payment.
After confirmation present the legal instruments for franking.
Collection of the franked documents ready to be presented for registration.

What is the penalty for late payment of Stamp Duty?