• Dividends received by a company resident in Kenya from a local subsidiary or associated company in which it controls (directly or indirectly) 12.5% or more of the voting power.
• Marketing commissions and residue audit fees paid to foreign agents in respect of export of flowers, fruits and vegetables.
• Interest payments to banks and insurance companies.
• Payments made to tax exempt bodies.
• Local management and professional fees whose aggregate is below Ksh 24,000 in a month.
• Air travel commissions paid by local air operators to overseas agents.

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
• Winnings
• Appearance at or performance to entertain
• Royalties
• Interest and deemed interest
• Dividends

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

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.

There are a few instances where withholding tax is a final tax.

1. When deducted in relation to a payment made to a non-resident person with no permanent establishment in Kenya
2. When it relates to winnings, qualifying interest, qualifying dividend and pensions paid to resident persons

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.

Employees are subject to PAYE taxes. The rates applicable are the individual tax (graduated scale) rates and the employer may take into account allowable deductions (such as mortgage interest) and reliefs (such as personal relief and insurance relief) when computing the PAYE.