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Filing Tax Returns

Filing tax returns in Kenya is a mandatory obligation for every registered taxpayer. Section 52B of the Income Tax Act stipulates that income tax accrued in or was derived from Kenya shall be subjected to income tax, regardless of whether an individual is resident or non-resident.

Taxes in Kenya can be broadly categorized as Direct Taxes (Income Tax for individuals and Corporate Tax for businesses) and Indirect Taxes (Value Added Tax (VAT), Excise Duty and Customs Duty). Based on the type of tax you are obligated to remit, KRA requires both individuals and businesses to file tax returns either annually or monthly using their online iTax platform.

The following are the different types of taxes to be filed on the iTax platform:

Income Tax for Resident Individuals

Resident individuals file a tax return on income from employment or services rendered, both in Kenya or outside Kenya, and which has been taxed in Kenya. This also applies to any other income that has accrued in or been derived from Kenya.

Income Tax for Non-Resident Individuals

Non-resident individuals are required to file tax returns for taxable income earned or derived from Kenya.

Corporate Tax

Corporate tax is applied to limited companies, trusts, and co-operatives. Resident companies are taxed at the rate of 30% while non-resident companies are taxed at the rate of 37.5% on their taxable profits. Corporation Tax is filed by filing an Income Tax Company Return (IT2C Form), on or before the 6th month after the end of an accounting period.

Income Tax for Partnerships

Partnership income is not taxed at entity level, but in the hands of the individual partners at the prevailing individual income tax rates. However, the partnership firm is required to file a partnership return.

Pay As You Earn (PAYE)

PAYE is deducted by the employer from an employee’s wages, salary, bonuses, or commission and remitted to KRA on a monthly basis. The employer is required to file a return disclosing details of the tax deducted.

Turnover Tax

Turnover Tax is applicable for businesses whose income is above KES 500,000 but does not exceed KES5,000,000. The businesses opting turnover tax need to pay tax at a fixed rate on gross income earned by them. Turnover Tax is charged at the rate of 1% on gross sales. The due date for filing and paying TOT is on the 20th day of the following month.

Value Added Tax

Businesses with an annual turnover of KES 5,000,000 or more, or those anticipating to attain KES 5,000,000 annual turnover are required to register for VAT. Once registered, the business should declare details such as VAT charged on sales, VAT paid on purchased etc. by filing monthly VAT return by 20th of the subsequent month.

Excise Duty

Excise duty is imposed on goods manufactured or imported into Kenya. Excise duty rates charged vary depending on the product imported or manufactured. Excise duty levied should be filed through a monthly excise return on before 20th of the subsequent month.