One of the most consistently challenging aspects of contracting in Kenya is complying with the country’s tax system. As well as paying tax in Kenya, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
If you’re working in Kenya under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Kenya for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Kenya, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Kenya through PAYE is left with the prospect doing everything themselves.
Do you know much about Kenyan Tax Law? Does Kenya have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Kenya can range from 10 to 30 percent, and you need to be sure you are placed in the correct tax brackets.
If you are a contractor and want a calculation on your tax and net retention in Kenya, we can supply it to you free of charge.
Contractors in Kenya are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Kenyan umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Kenyan taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Kenyan tax office or tax department directly including processing your tax refund if you are eligible.
We work with numerous umbrella companies in Kenya, many of whom are experts in tax and immigration laws. If you have any questions about tax in Kenya, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Kenyan work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Kenya but without the overhead of directly dealing with the Kenyan tax authorities. Get in touch with us today for some reliable advice on tax in Kenya!
Step 1: Apply for a PIN
Apply for a PIN online here, to use iTax. iTax allows individuals to file taxes online.
Step 2: Login to iTax
Enter your PIN, password, and answer to security question on the iTax online portal website here.
Step 3: File Returns
Click on ‘File Returns’ under ‘Returns’ on the navigation bar.
If you are only reporting employment income, click on ‘ITR For Employment Income Only’. See steps 4 to 7 on how to file employment income taxes only.
Enter your PIN and select the tax obligations that apply to you. The following page will walk you through the filing process. In general, click on the links provided to download the Tax Return forms in Excel of ODS format.
Fill out all the applicable field in the downloaded tax return forms and save the documents. Zip your file.
Return to the page and select the period for which you are filing the returns, upload your zipped file, agree to the terms and select ‘Submit’.
Step 4: Fill in Fields
Fill in all the fields marked with a red asterisk. Under ‘Section T: Tax Computation’, only 2 items are necessary if your employer has correctly submitted their tax returns.
The 2 items you need to fill are:
Item 1.1: ‘Defined/Pension Contribution’. Fill in the actual amount you have contributed.
Item 2.5: ‘Personal Relief’. Fill in the annual relief up to a maximum of 13,944.
Step 5: Fill Section F, ‘Details of employment income’
Scroll to the bottom of section F and confirm gross pay, as per the P9 form. This information has been pulled from the monthly returns filed by your employer. This can be modified by clicking modify if your employer has submitted less than 12 returns for the income year.
Step 6: Fill Section M, ‘Details of PAYE: Deducted at Source from Salary’
Confirm that the taxable salary, tax payable and tax deducted, match the information on the P9 form and modify if necessary.
Step 7: Fill out Section Q, ‘Details of Income Tax Paid in Advance’
Fill in the details of any taxes paid prior to filing current returns, if applicable.
Once complete, click ‘submit’.
Tax Exemptions: Bonuses, overtime allowances and retirement benefits paid to employees earning less than KES147,580 per year are exempt from tax. Taxable income is based on income before bonuses, overtime allowances, and retirement benefits.
Withholding Taxes: Employment income taxes are paid by withholding under the PAYE system.
Payment Deadlines: An individual whose tax liability exceeds KES40,000 per annum (not including taxes withheld at source), is required to pay 4 instalments by 20 April, 20 June, 20 September, and 20 December. The instalment tax payable is 25% of (i) 110% of tax assessed in the prior year or (ii) the taxpayer’s estimate, whichever is the lower amount.
You become a tax resident in Kenya when:
- You have a permanent home in Kenya and were present in Kenya for any period of time in the income year;
- You do not have a permanent home in Kenya but were present in Kenya for 183 days or more in the income year; or
You do not have a permanent home in Kenya but were present in the income year and in the 2 preceding years for a average of more than 122 days in each year of income.
Residents are taxed on their global income.
Non-residents are taxed on their Kenya-sourced income only.