How to comply with PAYE Tax law in Kenya


How to comply with PAYE Tax law in Kenya / PAYE (Pay As You Earn) Guidelines in Kenya.

PAYE is a tax charged on employment income.
Its employer statutory duty to compute, deduct, account and remit the tax to Commissioner of
Domestic Taxes on a monthly basis.
The tax deducted is payable by 9th of the month following the month of deduction

Key Highlights
Income from employment shall constitute income as outlined in section 5(2) (a) of the ITA
The following allowances shall be deemed to be employment income and therefore chargeable
to tax under PAYE;

 Housing allowance
 Entertainment allowance
 Sitting allowance
 Special Duty allowance
 Medical allowance
 Transport allowance
 Mileage allowance
 School fees paid to employee’s dependent by employer

Income from employment paid in the form of bonuses, overtime and retirement benefits
shall be exempt provided that the employment income before the bonuses and overtime
allowance does not exceed KES11,180p.m or KES134,164 p.a
Taxable Benefits
The following allowances are deemed to be employment income and therefore chargeable to
tax under PAYE as indicated;
 Motor Vehicle –higher of commissioner’s prescribed rate or cost of hiring currently at 2%
 Fringe Benefit –paid as the difference between market interest rate and actual interest
 Insurance cover where there is no group insurance policy scheme.
 Domestic Servants Benefit
 Security Services Benefit

Housing –shall be taxed at higher of;

 15% of total employment income.
 Fair market rental value of the premises.
 Rent paid by the employer.

Telephone –30%
 Furniture –higher of amount paid per month/ annum if hired or 1% p.m. (12% p.a.) of
actual cost.
 Electricity–KES 1,500 p.m. Or KES 18,000 p.a.
 Water –KES 500 p.m. or KES 6,000 p.a.

Effective bookkeeping, tax compliance and financial accounting are essential to the success of
every organizations. You will need an experienced team behind you to get the optimum benefit
from this part of your business while you focus your energies on your core activities.
Please contact  PhiloBiz Elite Business Solutions, Email [email protected] or
[email protected] should you require any further advice.

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