INCOME TAX DEPARTMENT


Frequently Asked Questions (FAQs)

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Our Vision

TO BE THE LEADING REVENUE AUTHORITY IN THE WORLD RESPECTED FOR OUR
PROFESSIONALISM, INTEGRITY AND FAIRNESS

Our Mission Statement

To promote compliance with Kenya's tax, trade and border legislation and regulation by promoting the standards set out in the Taxpayer's Charter and responsible enforcement by highly motivated
And professional staff thereby maximizing Revenue collection at the least possible Cost for the socio-economic well Being of Kenyans.
  
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FAQ Sections

A.
Employees guide to Pay As you Earn (PAYE)
B.
Personal Identification Number
C.
Assessment
D.
Capital Gains Tax
E.
Objection
F.
Appeal
G.
Penalties
H.
Double Taxation
I.
Exemptions
J.
Partnerships

Employee Guide to Pay As You Earn (PAYE).

Q1.   What is PAYE?
A1.  It is a system of taxing employment income.

Q2.  What are the employees' income tax rates?

A2.  The annual rates are as follows:
          First KShs. 121,968 @ 10%
          Next KShs.114, 912 @ 15%
          Next KShs.114, 912 @ 20%
          Next KShs.114, 9120 @ 25%
          Above KShs. 466,704 @ 30%.
These rates also apply to individual and wife's employment, wife's self-employment income and wife's professional income. Personal relief w.e.f 1-1-2005 is Kshs. 13,944 p.a or KShs 1,162 p.m

Q3.  Are there any allowances, which are not subject to PAYE?

A3.  In principle, all allowances paid to employees are subject to tax except the valued medical services provided by an employer Expenses reimbursed by an employer are also exempt where they were incurred to earn employment income.

Q4.   How can I compute PAYE?


A4.  Compute tax on Basic salary + Benefits using the prevailing rates and give appropriate personal reliefs.

Q5. Are employees entitled to relief?

A5  Yes. Current personal relief is Kshs.1, 162 per month or Kssh.13, 944 p.a. Insurance relief on education policy for children, life of self or spouse, allow 15% of premiums paid subject to a maximum of Ksh.3, 000 per month or kshs.36, 000 p.a

Q6.   Is an employee obliged to file a tax return?

A6  Yes it is a statutory requirement w.e.f 2002 year of income

Q7.   What happens when you have other incomes along with employment income?


A7.   Declare all the income in the relevant columns of the tax return; giving supporting evidence e.g. rent schedules, dividend certificates, business accounts e.t.c.

Q8.   How do you check if you have paid the right amount of tax?

A8.  Obtain the relevant tax rates from any KRA office nearest to you and compute your tax liability to cross check for accuracy.

9.   What do you do if you think you have the wrong amount of tax?


A9.   If you have underpaid, please pay the balance. In case of overpayment, you may apply for a refund or advice the Commissioner to utilize it for future tax liability.

Q10.   What are the consequences of not paying the right amount of tax?


A10.   If you underpay, penalties and interest will be imposed on the difference. Overpayment on the other hand, will deprive your business of the much needed operating income.

Q11.   What do you do to ensure you always pay the right amount of tax each year?


A11.   Use the relevant tax rates to compute your tax liability and claim all expenses and reliefs you are entitled to. Incase of difficulty please consult your tax agent or any KRA office nearest to you.

Q12.   Do you have to keep records?


A12.   Record keeping will help you to accurately determine your correct tax liability i.e to avoid overpayment or under declaration of income and tax.

Q13.   What are your rights?


A13
  • To only pay the equitable tax.
  • To obtain a refund in case of overpayment.
  • Access to full information regarding your tax matters, including PAYE matters.

Personal Identification Number (PIN).

Q1.  What is PIN?


A1.  PIN is a unique, computer generated number used to identify a person for purposes of transacting business with KRA.

Q2.  Who is required to register for PIN?


A2.   Any person with income or who anticipates earning some as well as a person who intends to carry out certain transactions e.g registration for VAT ,government contracts etc.

Q3.   What are the requirements for PIN registration for?

a.   Sole Proprietorship.
Complete PIN application form, ITQ1 and attach a copy of National ID, Driving License or Passport. A sole proprietorship uses the owners PIN.

b.   Limited Company
Complete PIN application form ITQ2 and attach copies of Registration certificate, Memorandum & Articles of Association and Directors. PIN certificates.

c.   Partnership
Complete form ITQ2, attach copies of Partners. PIN certificates, Registration certificate and Partnership deed.

d.   NGO's
ITQ2, copies of registration certificate and PIN Cards for authorized signatories.

e.   Non Resident Companies

As in (b) Above, INCLUDING: Name, address and PIN of local Agent: Local Bank Account(s)

Q4.   Are there special forms for PIN registration?

A4.   Yes. ITQ1 for Individuals (and Sole Proprietorship) and ITQ2 for Companies, clubs and partnerships.

Q5.   Is there anything else a taxpayer needs to take note of with regard to PIN?

A5.   PIN related offences . Failure to quote PIN on any document forwarded to KRA and failure to apply for any obtain PIN constitute offences. PIN is obtained free of charge.



Assessment

Q1.   What is an assessment?

A1.  An assessment is Computation of tax liability upon income earned.

Q2.   Do I need to pay my taxes even where I dispute the amount in the assessment?

A2.   Yes, pay the disputed taxes to avoid accumulation of penalties and interest, even as you follow the laid down procedure for dispute resolution.

Q3.   What is self-assessment?

A3. &nbs; Self-Assessment refers to a system of determining tax liability where the taxpayer takes responsibility for declaring all his income and computing and making payment of the taxes that arise .

Q4.   What is a due date under the tax law?

A4.    It is the date by which returns are submitted or all the tax due is e payable.

Q5.   I plan to come back home permanently. Do you tax personal property?

A5.   We do not tax personal property BUT you will be expected to pay tax on any income generated by the property e.g rent, interest, dividends.



Capital Gains Tax

Q1.    When is capital gains tax chargeable and payable?

A1.    Capital gains tax was suspended in Kenya in 1985.

Q2.   Who is a resident?

A2.  
(A)   When applied to an individual;
  • (i)   That a person has a permanent home in Kenya and was present for any period in the particular year of income under consideration; Or
  • (ii)   That he has no permanent home in Kenya but :-
    • (a)  Was present in Kenya for a period or periods amounting in aggregate to 183 days or more in that year of income Or
    • (b)  Was present in Kenya in that year of income and each of the two preceding years of income for periods averaging more than 122 days in each year of income.

(B)   When applied to a body of persons;

  • (iii)   That the body is a company incorporated under the laws of Kenya: Or
  • (iv)   That the management and control of the affairs of the body was exercised in Kenya in the particular year of income under consideration: Or
  • (v)   That the body has been declared by the Minister by Notice in the Gazette to be resident in Kenya for any year of income.



Objection

Q1.   What is an objection and when may I object?

A1.   A valid objection must be lodged within 60 days after the date the assessment is raised.

Q2.   How do I lodge an objection to an assessment?

A2.    An objection must be lodged in writing specifying the grounds on which it is based.

Q3.    What happens if I don.t object?

A3.    If no objection is raised, the assessment is final and conclusive and tax remains payable.

Q4. &nbs; Can the time limit for objecting be extended?

A4.    A taxpayer may apply for extension of time in which to object specifying the reasons for lateness.

Q5.   What happens if my request for the time limit of an objection to be extended is denied?

A5.    If a late objection is rejected the taxpayer is informed in writing. The taxpayer may however appeal against the refusal to the local committee.

Q6.   Can I withdraw an objection?

A6.    A taxpayer can withdraw an objection if he is satisfied with the Commissioners decision. There after the outstanding tax must be paid in full.



Appeal

Q1.   What is an appeal?

A1.   An appeal to the local Committee is a dispute against the Commissioner's decision.

Q2.   How do I appeal and is there a time limit for appealing?

A2.  A taxpayer must lodge a valid appeal within 30 days from the date the assessment is confirmed or a non-agreed amended assessment is issued or a late objection is rejected.

Q3.   Can I add to the grounds of objection when I file the appeal?

A3.  You may incorporate the grounds for appeal in the "statement of fact" of the case.

Q4.   Can I withdraw my appeal and what is the effect thereof?

A4.  You may withdraw an appeal. If this happens the previously disputed tax must be paid in total.



Penalties

Q1. &nbs;What are the penalties and interest that apply for?

A1.
  1. Late payment of tax?
    20% penalty . charged once.
    2% per month on any amount that remains unpaid at any one.
     
  2. Underpayment/under declaration?
    Underpayment - 20% penalty and 2% interest per month ; under declaration . could attract up to 200% penalty on the under declared amount . 20% penalty and 2% interest apply.
     
  3. Non-payment?
    Non-payment where no deduction is made could attract penalty of up to 200% and or a fine or imprisonment. Non-payment where declaration is made attracts 20% penalty and 2% interest per month until the amount is paid in full.
     
  4. Late /Non return - submission?
    5% default penalty or ksh.10, 000 (Companies) and ksh.1, 000 (individual) whichever is greater.
  5. Failure to deduct, account and pay?
    25% of tax or minimum Sh.10, 000.



Double Taxation

Q1.   What is a double tax agreement?

An agreement to take care of situations where same person is taxed on the same source of income in different tax jurisdictions.

Q2.   Who qualifies for double tax relief?

A2.   One qualifies for this relief if the tax jurisdictions, which have taxed his income, have a Double Taxation Agreement (DTA) with Kenya.



Exemptions

Q1.  What is tax exemption and who qualifies?

A1.  Exemption is an authority granted to a person not to pay tax on an otherwise, taxable income.

Q2.   What are the requirements to obtain tax exemption?

A2.  Be of public character and established solely for:
  • Advancement of education or religion.
  • Alleviation of distress or relief of poverty to the public.
  • Be of benefit to Kenya residents.



Partnerships

Q1.   What is the current rate of taxation for (straight) business partnerships?

A1  Partnership income is not taxable for Income Tax purposes. However, share of partnership income is taxable in the hands of the partner at the prevailing individual income tax rates.

Q2.  Does taxation start from the date of registration of the partnership? If not, when?

A2.  Taxation should ideally start when the business starts to earn income. However the law allows the taxpayer to file a return by the end of the fourth month after the end of the accounting period and pay the tax. Partnerships are required to file returns separately.



Kenya Revenue Authority
Times Tower, 19th Floor, Haile Selassie Avenue
P.O. Box 30742 Tel. 310900, Fax 315987 Nairobi, Kenya.
Web site: www.kra.go.ke

 

 
 
 
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