The government of Kenya requires every individual and institution to disclose and remit their taxes. Kenya Revenue Authority (KRA) is mandated to collect taxes on behalf of all individuals and institutions. Whether you are employed or not, running a business, running a company or an organization, KRA requires that you disclose your taxes and pay applicable taxes promptly.
With changing times and diverse ways of doing business emerging, KRA may introduce or exempt taxes on various businesses or individuals, and when it is done, citizens are required to comply. The latest tax to be introduced by KRA is Digital Service Tax (DST) that took effect from January 2021.
Current applicable taxes in Kenya.
Value Added Tax (VAT)
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 and partnerships can voluntarily register for VAT, KRA demands that they must register if their annual revenue exceeds Kshs. 5,000, 000.
This is another type of tax payable by individuals and institutions. Income tax is a tax charged for each year of income, upon all the income of a person whether resident or non-resident, which is accrued in or was derived from Kenya.
Income Tax is imposed on;
- Business income from any trade or profession
- Employment income
- Rent income
- Dividend and Interests
- Pension income
- Income from a Digital Marketplace
- Natural resource income among others
There are different ways KRA collects income tax from companies and partnerships. This methods include;
- Corporation Tax
- Pay As You Earn (PAYE)
- Withholding Tax (WHT)
- Advance Tax
- Installment Tax
All these taxes fall under the income tax
Rental Income Tax
This is another type of taxes payable by individuals or companies and partnerships. 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.
All individuals, partnerships and companies 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.
Next on the list is the Excise Duty. This is a duty of excise imposed on;
- Goods manufactured in Kenya
- Goods imported to Kenya and specified in the 1st schedule to Excise Duty Act, 2015.
Companies and Partnerships dealing in excisable good and services are required by law to pay excise duty.
Capital Gain Tax
Capital gain tax is another form of tax imposed by KRA. This is a tax chargeable on the whole of a gain which accrues to a company or an individual upon transfer of property situated in this country,the tax is applicable whether or not the property was acquired before 1st January, 2015.
This tax took effect on 1st January 2015.
The other type every individual should know is Agency revenue Tax, 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
Digital Service Tax (DST)
Latest on the list is Digital service Tax (DST). The tax was introduced as a result of the Finance act 2020 as a tax that is payable on income derived or accrued in Kenya from services offered through a digital market place.
Digital Service Tax is payable at 1.5% of the gross transaction value and is due at the time of transfer of the payment for the service to the service provider. For residents and companies with businesses in Kenya, the DST will be an advance tax to be offset against the income taxes due in the course of the financial year. In the case of non-residents (out of the country) and companies without a Permanent Establishment in the country, the Digital Services Tax will be a final tax.
How to file your tax returns
KRA has introduced a centralized system that Kenyans and institutions can use to file their tax returns. The itax platform is all in one portal that helps you file tax returns and access other KRA cervices such as KRA PIN application, Tax Compliance certificate among others.
No matter the type of tax you need to file, the process is more or less the same. By following the given procedure one can be able to file taxes using the itax online platform.
Also read:Guide to Filing KRA ITAX Returns