Every employer is legally required to deduct and remit PAYE on behalf of employees. Returns and payments are due by the 9th day of the following month via KRA iTax.
Annual PAYE Tax Bands (Effective 1 July 2023)
| Annual Taxable Income (KES) | Monthly Equivalent (KES) | Tax Rate |
|---|---|---|
| First 288,000 | First 24,000 | 10% |
| Next 100,000 | Next 8,333 | 25% |
| Next 5,612,000 | Next 467,667 | 30% |
| Next 3,600,000 | Next 300,000 | 32.5% |
| Above 9,600,000 | Above 800,000 | 35% |
Key Reliefs & Deductions
- Personal Relief: KES 2,400 per month (KES 28,800 per year) — applicable to all resident employees
- Insurance Relief: 15% of insurance premiums paid, up to KES 5,000 per month
- Mortgage Interest Relief: Up to KES 25,000 per month on owner-occupied residential property
- Pension/Provident Fund Contributions: Deductible up to KES 20,000 per month
⚠ Employer Obligation: Failure to deduct, account for, or remit PAYE by the 9th of the following month attracts a penalty of 25% of the tax due, plus interest at 1% per month on the outstanding amount.
| Category | Details |
|---|---|
| Standard Rate | 16% on all standard-rated taxable supplies |
| Zero Rate | 0% — exports, certain food items, medical supplies (VAT Act Second Schedule) |
| Exempt Supplies | Financial services, residential rental, educational services (VAT Act Third Schedule) |
| Registration Threshold | KES 5,000,000 in taxable supplies per 12 months (voluntary registration available below this) |
| Filing Deadline | 20th day of the following month via KRA iTax |
| Input Tax Claim Period | Within 6 months after the tax period the supplies were acquired |
| eTIMS Requirement | All VAT-registered traders must issue tax invoices via eTIMS (etims.kra.go.ke) |
💡 Tip: Non-resident digital marketplace suppliers (e.g. online platforms) must register for VAT regardless of turnover threshold. VAT withheld by appointed agents is creditable at 2% of the contract value.
| Company Type / Sector | Tax Rate | Notes |
|---|---|---|
| Resident Companies (Standard) | 30% | All resident companies not qualifying for special rates |
| Non-Resident Companies | 30% | On Kenya-sourced income |
| Export Processing Zone (EPZ) | 0% → 25% | 0% first 10 years; 25% next 10 years; 30% thereafter |
| Special Economic Zone (SEZ) | 10% → 15% | 10% first 10 years; 15% succeeding 10 years |
| Local Motor Vehicle Assembly | 15% | Both periods |
| Residential Rental Income | 7.5% | Flat rate for gross rental income ≤ KES 15M/year (effective 1 Jan 2024) |
| Capital Gains Tax (CGT) | 15% | On transfer of property/shares; 5% for NIFCA-certified transactions |
| SEP Tax (Digital Services / Non-Residents) | 3% | Replaced Digital Service Tax (1.5%) from Finance Act 2024. Applies to non-residents earning from internet-based services in Kenya. |
Corporate Tax Filing Deadlines
- Instalment Tax (Advance Tax): 4 equal instalments due on the 20th of the 4th, 6th, 9th, and 12th months of the accounting year
- Final Return & Balance of Tax: Within 6 months after the end of the accounting year
- Pillar Two Minimum Top-Up Tax (MNEs with EUR 750M+ revenue): Within 4 months after year end
📌 Important: All companies must file Annual Returns with the Registrar of Companies (BRS) in addition to tax returns with KRA. Late filing attracts a penalty of KES 2,000 per month.
| Payment Type | Resident Rate | Non-Resident Rate |
|---|---|---|
| Dividends (<12.5% voting power) | 5% | 15% |
| Dividends (>12.5% voting power) | Exempt | 15% |
| Interest (general) | 15% | 15% |
| Interest (bearer instruments) | 25% | 25% |
| Government Bonds (≥2 years) | 15% | 15% |
| Royalties | 5% | 20% |
| Management & Professional Fees | 5% | 20% |
| Consultancy Fees (EAC citizens/resident) | 5% | 20% |
| Contractual Fees | 3% | 20% |
| Training Fees | 5% | 20% |
| Rent — Immovable Property | — | 30% |
| Rent — Other Property | — | 15% |
| Digital Content Creators | 5% | 20% |
| Gaming / Betting Winnings | 20% | 20% |
* Lower treaty rates may apply where Kenya has a Double Taxation Agreement (DTA) with countries including India, South Africa, Seychelles, France, Germany, Norway, Sweden, Denmark, Zambia, and Canada.
| Levy / Contribution | Employee Rate | Employer Rate | Filing Deadline |
|---|---|---|---|
| PAYE Pay As You Earn — Income Tax | Per tax bands | N/A | 9th of following month |
| NSSF National Social Security Fund | 6% | 6% | 9th of following month |
| SHIF Social Health Insurance Fund (replaced NHIF) | 2.75% | — | 9th of following month |
| Affordable Housing Levy AHL — Housing fund contribution | 1.5% | 1.5% | 9 working days after month-end |
| NITA Levy National Industrial Training Authority | — | KES 50/employee/month | 9th of following month |
Note: NSSF contributions follow the NSSF Act 2013 tiered structure. Confirm current applicable tiers with a qualified payroll specialist as court rulings have impacted implementation.
⚠ Late Filing Penalties:
• PAYE / WHT: 25% of tax due + 1% interest per month on the outstanding balance
• VAT: 5% of tax due or KES 10,000 (whichever is higher) + 1% interest per month
• Corporate Tax: 20% penalty on unpaid instalment tax + 1% interest per month
• Annual Returns (BRS): KES 2,000 per month of default
• eTIMS Non-compliance: KES 1 million or imprisonment for failure to issue electronic tax invoices