What is Withholding tax (WHT)?
What is Withholding Tax (WHT)?
WHT is a tax deducted at source of certain incomes, where the person making the payment (withholder) deducts tax at the applicable rate, remits the tax to Kenya Revenue Authority (KRA) on behalf of the recipient of the payment(withholdee) within five (5) working days and pays the withholdee the balance, net of the tax deducted.
Upon remittance of the tax to KRA, a WHT certificate is issued to the withholdee as evidence of tax deducted and remitted to KRA by the withholder.
Why Withholding Tax?
- Government receives revenue on a timely basis through the year
- Taxpayers would avoid huge tax burdens at the end of the year
- Enhances visibility of taxpayers and enhances tax compliance
- Ensures tax is collected from income earned by non-residents in the country
What payments are subject to withholding tax?
Payments in respect of interest, dividends, royalties, pension, winnings from gambling, management and professional fees, training fees, contractual fees, payments for digital content monetization and payments for sales promotion, marketing and advertising services, insurance commission, rent for use or immovable property are subject to WHT
What is the obligation of the Withholder?
A Person making the above payments is required to withhold tax at applicable rate and remit it to the Commissioner within five (5) working days of the date of payment.
Is withholding tax a final tax?
In the case of taxes withheld from non-resident person with no permanent establishment in Kenya, the tax withheld is a final tax and no further declarations required from such persons. For resident persons, WHT is final in the case of qualifying dividends and qualifying interest. For the other incomes listed under 2 above, the withholdee is required to declare the income in their income tax return, claim a credit of the tax withheld and pay the balance of tax.
What is the Withholdee’s Responsibility?
Where the withholding tax is not a final tax, the withholdee is required to declare the income in their tax return and pay the balance of tax.
What are the withholding tax rates?
| Payment Type | Resident | Non-Resident | Final Tax Treatment |
|---|---|---|---|
| Dividends – Qualifying dividend | 10% | 15% | Advance / Final for individuals |
| Qualifying interest / Interest | 15% | 15% | Final for individuals (from financial institutions listed in the Income Tax Act) |
| Royalties | 5% | 20% | Advance (resident) / Final (non-resident) |
| Management, Professional, Training Fees | 5% | 20% | Advance (resident) / Final (non-resident) |
| Contractual Payments (construction, supplies) | 3% | 20% | Advance (resident) / Final (non-resident) |
| Commission | 5% / 10% | 20% | Advance (resident) / Final (non-resident) |
| Commercial Rent | 10% | 30% | Advance (resident) / Final (non-resident) |
| Residential Rent (Monthly Rental Income regime) | 7.5% | 30% | Advance (resident) / Final (non-resident) |
| Appearance / Performance Fees | N/A | 20% | Advance (resident) / Final (non-resident) |
| Winnings | 5% | 5% | Advance (resident) / Final (non-resident) |
| Supply of goods to a public entity | 0.5% | 5% | Advance (resident) / Final (non-resident) |
KRA's Commitment
KRA is committed to assisting taxpayers meet these obligations. The established initiatives in taxpayer education, alongside technological advancements facilitating online declarations and payments through iTax, demonstrate a proactive approach to simplifying tax compliance processes.
