Filing taxes in Kenya is a mandatory process for individuals and businesses. The Kenya Revenue Authority (KRA) is responsible for tax collection, and compliance with tax regulations is essential to avoid penalties. This guide explains how tax filing works, who needs to file, payment methods, and key tax considerations in Kenya.

Summary of Income Tax in Kenya

Definition:

Income tax is a direct tax imposed on income from business, employment, rent, dividends, interests, pensions, and more.

Collection Methods:

  • Pay As You Earn (PAYE)
  • Withholding Tax
  • Installment Tax
  • Advance Tax
  • Turnover Tax
  • Capital Gains Tax

Individual Income Tax:

Income tax applies to all income earned or derived in Kenya, for both residents and non-residents.

Tax Bands & Rates (Effective 1st July 2023):

  • First KES 288,000 (KES 24,000/month) – 10%
  • Next KES 100,000 (KES 8,333/month) – 25%
  • Next KES 5,612,000 (KES 467,667/month) – 30%
  • Next KES 3,600,000 (KES 300,000/month) – 32.5%
  • Income over KES 9,600,000 (KES 32,333/month) – 35%

Personal Relief:

  • KES 28,800 per year (KES 2,400/month)

Taxation for Non-Residents:

  • Taxed on income earned from Kenya
  • Not eligible for personal relief

Filing & Payment of Taxes

Filing Individual Income Tax Returns:

  • Mandatory for all KRA PIN holders
  • Done online via iTax
  • Due between 1st January – 30th June annually
  • NIL returns required if no income earned

Payment of Tax:

  • Pay via KRA-appointed banks or Mpesa (GoK Pay Bill 222222)
  • Use the payment registration number from iTax

Penalties for Late Filing & Payment:

  • Late filing: 5% of tax due or KES 2,000 (whichever is higher)
  • Late payment: 5% of tax due + 1% monthly interest on unpaid tax

Tax Reliefs:

  • Personal Relief: KES 28,800 per year
  • Insurance Relief: 15% of premiums paid (max KES 60,000/year) for life, education (min. 10-year maturity), and health insurance

Rental Income Tax:

  • 7.5% on gross rental income (for income up to KES 15M)
  • Paid monthly via iTax by the 20th of the following month
  • Landlords can opt for normal tax rates by notifying KRA

iTax Filing System:

  • Simplifies tax return submission for individuals and businesses
  • Supports income tax, VAT, excise, and other tax obligations

Additional Tax Considerations

Learn About KRA PIN

A KRA PIN is required for tax compliance in Kenya. It is used for tax filing, land transactions, and government services.

Get the Right Figure

Ensure accurate reporting of income, expenses, and allowable deductions to avoid penalties and audits.

Learn About Importation & Exportation

Customs duties and Value-Added Tax (VAT) apply to imports and exports. Compliance with KRA regulations is essential.

Learn About Tax Exemption

Certain organizations, including charities and NGOs, may qualify for tax exemptions. Applications must be made to KRA.

Learn About ADR (Alternative Dispute Resolution)

ADR helps resolve tax disputes between taxpayers and KRA outside of court, saving time and legal costs.

Learn About Kenyans Living Abroad

Kenyans abroad must declare their income if it originates from Kenya. Double taxation agreements may apply.

Migrated Ledger Balances

Taxpayers with outstanding tax liabilities or credits should verify their migrated balances in KRA records.

Taxation for Companies & Partnerships

  • Corporation Tax: 30% for resident companies, 37.5% for non-resident companies
  • Turnover Tax: 3% for businesses with annual sales below KES 5M

Learn About Compliance

Maintaining compliance with tax regulations ensures businesses avoid fines and maintain good standing with KRA.

Taxation for Not-For-Profit Organisations

Not-for-profits may be eligible for exemptions but must still file returns and comply with regulatory requirements.

Taxation for Societies

Registered societies may have tax obligations, including payroll taxes for employees and VAT on goods/services.

Learn About AEO (Authorized Economic Operator)

AEO status provides benefits such as expedited customs clearance for businesses involved in international trade.

Learn About eTIMS

The Electronic Tax Invoice Management System (eTIMS) helps businesses comply with VAT invoicing requirements.

Investing in Kenya

Investors must understand corporate tax, VAT, and incentives such as Export Processing Zones (EPZs) and Special Economic Zones (SEZs).

About Customs Agents

Licensed customs agents assist with import/export declarations, duties, and tax compliance.

About Tax Agents

Tax agents provide advisory services and assist with tax returns, audits, and dispute resolution.

Tax Compliance & Business Efficiency

Maintaining compliance requires proper documentation and efficient records management. Tax audits, financial reports, and proof of expenses all depend on well-organized records.

At The Filing Room, we help businesses store, organize, and retrieve documents effortlessly. Our professional records management ensures you have everything in place for tax filing, audits, and compliance. Contact us today for a free consultation—because managing your records should be as simple as filing your taxes.

FAQs About Filing Taxes in Kenya

1. Who needs to file tax returns in Kenya?

All individuals and businesses with a KRA PIN must file returns, including those with no income (NIL returns).

2. What happens if I do not file my tax returns?

Failure to file attracts a penalty of 5% of tax due or KES 2,000 (whichever is higher).

3. How do I register for a KRA PIN?

You can register for a KRA PIN online through the iTax portal.

4. Can I pay my taxes in installments?

Yes, taxpayers can arrange installment payments through KRA to manage their obligations.

5. How do I claim tax reliefs?

Eligible tax reliefs must be declared in your annual tax returns to reduce taxable income.

6. What is the deadline for filing tax returns?

The deadline for filing is 30th June each year.

7. How do I check my tax compliance status?

You can check your compliance status and generate a Tax Compliance Certificate (TCC) through the iTax portal.

Filing and paying taxes on time ensures compliance and avoids penalties. By using the iTax system and seeking professional advice when necessary, individuals and businesses can fulfill their tax obligations efficiently.