Withholding Income Tax is tax withheld at source. A person making certain payments deducts tax, at the applicable rate, and remits the tax to the Commissioner on behalf of the recipient. Examples of payments subject to withholding tax include, among others: –
- Management, professional or training fees
- Consultancy fees, Legal fees, Audit fees
- Contractual fees
- Appearance at or performance to entertain
- Interest and deemed interest
The percentage deducted varies between incomes and is dependent on whether you are a resident or non- resident.
How does withholding income tax regime work?
The person making the payment deducts tax prior to paying the amount due. The tax withheld/deducted is then remitted to the KRA.
The payer is required to generate a withholding tax certificate on iTax which is automatically sent to the payee once the payer remits the withholding tax to KRA.
Withholding tax deducted should be remitted to KRA by the 20th day of the month following the month in which the tax was deducted.
Withholding tax is claimable by the payee when filing their annual tax returns and is not an additional tax
Is withholding tax a final tax?
There are a few instances where withholding tax is a final tax.
Withholding tax of is final when deducted in relation to a payment made to a non-resident person with no permanent establishment in Kenya
With regard to payments to resident persons, withholding tax is a final tax when it relates to winnings, qualifying interest, qualifying dividend and pensions.
In every other case, withholding tax is NOT a final tax. The taxpayer (payee) is required to declare their income(s) and the withholding tax details when filing their annual tax returns and to pay any balance of tax due.
Here is a tutorial on how to file your income tax return if you have a withholding tax certificate.
What are the withholding tax rates?
The rates that are currently applicable for payments to residents and nonresidents as indicated in the table below: –
|Payments||Resident WHT rate (%)||Non-resident WHT rate (%)*|
|Interest on Bearer instruments of at least 2 years||25||25|
|Interest on Government bearer bonds with maturity ≥ 2 years||15||15|
|Interest on bearer bonds with maturity ≥ 10 years||10||25|
|Interest paid by SEZ to non-resident||5|
|Fees payable to insurance brokers||5|
|Qualifying interest on housing bonds||10|
|Qualifying interest on other bearer instruments||20||–|
|Royalty, natural resource income||5||20|
|Royalties paid by SEZ to non-resident||5|
|Winnings from gaming and betting||20||20|
|Management fees, professional fees, training fees||5||20****|
|Management Fees paid by SEZ to non-resident||5|
|Rent/leasing of Immovable property||10||30|
|Rent/leasing of property other than immovable property||N/A||15|
|Pension/retirement annuity||Graduated scale||5|
|Sales promotion, marketing, advertising services, and transportation of goods (excluding air and shipping transport services)||N/A||20|
|Insurance or reinsurance premiums||N/A||5|
|Payments to sportsmen and entertainers||5||20|
|Supporting, assisting or arranging an appearance or performance||N/A||20|
|Gains from business of non-resident ship-owner taxed under Section 9(1) of Income Tax Act||2.5|
|Gains & Profits from the business of transmitting messages chargeable under Section 9(2) of Income Tax Act||5|
* The rates of WHT applicable for non-residents may vary if the payee is a resident of a country which has a double tax agreement with Kenya that provides a different rate.
**Dividend paid to a resident corporate shareholder with more than 12.5% voting power is exempt from withholding tax
*** Rate applicable to citizens of the East African Community Partner States in respect of dividends shall be 5%
****Rate applicable on payment in respect of consultancy fees to citizens of the East Africa Community Partner states shall be 15%.
How do I pay Withholding Tax?
Any amount withheld, should be remitted to KRA on or before the 20th day of the following month.
Payment of withholding tax is done online via iTax, generate a payment slip and present it at any of the appointed KRA banks to pay the tax due.
You can also pay via Mpesa.
Use the KRA Pay bill Number 572572.
The Account Number is the Payment Registration number quoted at the top right corner of the generated payment slip.
When you successfully remit the deducted amount to KRA, we shall send a Withholding Certificate to the email you registered with on iTax.
What is the penalty for late filing?
Where a payer fails to withhold tax, the tax shall be deemed to be due and payable by him as though he was the person who earned the income and the due date for the payment shall be the date on which the amount of tax should have been remitted to KRA.
A late payment penalty of 5% shall also apply on the tax due together with a late payment interest of 1% per month for the period that the tax remains unpaid.