WHAT A KENYAN TAXPAYER MUST REMEMBER

THINGS TO REMEMBER

100%    -   I.A 2004/5/6/7/8/manufacturing under bond

100%    -   Installment tax

200%    -   Penalty for tax evasion

Days/Dates

Any period   -   Resident with permanent home

122 days       -   Resident without permanent home (average) 3 years

183 days       -   Resident without permanent home (aggregate)

  30 days       -   Days to lodge on objection

  30  days      -   Days to lodge a notice for an appeal

  14 days       -   Days to lodge appeal document, change of VAT notification particulars

  91 days       -   Market rate – through T/bills

9^th of the month   -   Date of payment of PAYE

30^th April      -   Pay self assessment tax and installment tax

20^th June              -   2^nd installmen

20^th  September     -   3^rd installment

 20^th December     -    4^th installment

28^th February       -   Submit PAYE return

Amounts

Sh.     1,162                 Personal relief/per month

Sh. 121,968                 1^st taxation bracket

Sh.   36,000                 Benefit in kind exempted

Sh  . 48,000                 Set limit for Hosp p.a.

Sh. 150,000                 Set limit on interest on mortgage

Sh. 300,000                 Exempt pension paid periodically (p.a.)

Sh.   25,000                 exempt pension paid monthly

Sh. 240,000                 Pension contribution allowed as a deduction

Sh. 600,000                 Exempt amount of pension/provident fund – paid lump sum

Sh.   13,994                 Personal relief

Sh.     4,800                 Benefit – furniture or 1% per month on cost

Sh. Engine rating –     car benefit or 2% per month on cost

Sh.   60,000                 Insurance relief – maximum allowed

Sh. 2,000,000              Restricted amount for saloon vehicles – 2006 to date

Sh. 5,000,000              Turnover limit for VAT registration

Sh. 1,400,000              Tax exempt lump sum payment to an estate

Sh   . 300,000              Tax exempt qualified interest earned on housing development

                                    bonds account with HFCK, Savings and Loan, EABS, Home loans

                                    and savings.

Percentages:

1%                   Furniture benefit per month

2%                   Interest for late payment of tax, car benefit per month

5%                   Director other than whole time service director/

                        Withholding tax for non resident/

                        Withholding tax for resident royalties/

                        IBD for residential building in a planned developed area/

10%                 Mining allowance   -   2^nd year – 7^th year  2007 – IBD on Hotels,                  Housing benefit   -   Agricultural employees

                        Withholding tax on dividends for non resident

12.5%              W.T.A – Class IV

                        Wives income when deemed husband’s

                        Dividend exempt from taxation for a company

15%                 Withholding tax on interest

                        Non qualifying dividend

                        Housing benefit, ordinary employees/directors insurance relief.

20%                 Penalty for non payment of tax by due date

                        Withholding tax for non resident on royalties

25%                 W.T.A  -  Class III

                        Hobby firming

                        Installment tax for non-agricultural bodies

                        2^nd installment tax for agricultural enterprises

30%                 Corporation tax

                        Withholding tax for non resident on rent

                        W.T.A – Class II

                        Pensionable pay

                        Telephone (landlines and mobiles)

33⅓%              Diminution in value allowance/loose tools deductions

                        Formerly 1985 to 2006 farmworks deductions

37.5%              Non-resident corporation tax rate

                        W.T.A class I

40%                 Shipping investment deduction allowance

                        Mining allowance – 1 year.

3%                   Turnover tax payable whose turnover is below sh. 5 million W.e.f.

                        01.01.08

50%                 Farmworks deductions – 2007/ Taxable gross investment income for Saccos/IBD Hostels, Institution buildings – 2006

100%               Farmworks deduction-2011 to date/ Taxable rent income for Saccos

70%                 2003 – Investment deduction rate

                       

85%                 2002 – Investment deduction rate

                       

2.5%                I.B.A (industrial blds)

4%                   ,

75%                 1^st Installment for agricultural enterprise

                        Tax exempt income of trade association, clubs.

Motor vehicle advance tax

Commercial vehicles

-          Vans, pick-ups, lorries etc.

       Ksh. 1500 per ton/p.a or ksh. 2400 p.a whichever is higher

-          Saloons, Station wagos, Minibuses etc

Ksh. 60 per passenger capacity or Ksh. 2400 p.a. whichever is higher

-          For vehicles used for carriage of members of public for hire or reward;

Ksh. 3600 p.a. for drivers

Ksh. 1200 p.a. for conductors

Returns/Remittance                                      Deadlines dates

NSSF monthly contributions                          15^th day of the following month

NHIF monthly contributions                          9^th Day of the following month

Annual NHIF stamped cards                          31^st July

Monthly catering levy dues                            20^th day of the following month

Monthly VAT collections                               On or before 20^th of the following month

Monthly withholding tax remittances             On or before 20^th of the following month

Annual withholding tax returns                      28^th February of the following year

Submission of self assessment                        At the end of 6^th month after the year of

return and accounts                                         income.

Restricted amount of a saloon vehicle for wear and tear

Year                                        Restricted amount

01.01.97                                  Ksh. 500,000

01.01.98                                  Ksh. 1,000,000

01.01.06 onwards                   Ksh. 2,000,000

-          Time limit for all estimated assessment – 7 years

-          Double taxation relief – time limit for claims is 6 years

-          Records and accounts must be kept for 5 years

-          Gifts and rewards are taxable if:

• Paid by employer in recognition of service rendered
• Paid by the customer in recognition of service rendered
• Frequently paid in particular type of employmesnt

N/B  gifts are not taxable if it is windfall i.e when not expected.

METHODS OF SPREADING COMPENSATION

(i)   Where the contract is for specified term, income assessable is to be spread evenly over the unexpired period of the contract e.g. a contract for 5 years is terminated on 31.12.04 after it has run for 3 years. Compensation of sh. 1,300,00 is paid and the employee’s rate of earning at the date of termination was sh. 600,000 p.a. . The compensation will be spread evenly as follows:

                 2005   -   sh. 650,000

                 2006   -   sh. 650,000

(ii)   Where the contract is for unspecified term and provides for a terminal payment. The compensation is to be spread forward and assessed at the rate of employees remuneraton p.a. immediately before termination e.g. A contract for unspecified term provides for payment of sh. 70,000 as compensation in the e vent of termination. It is terminated on 31.12.o4 and the employees trate of earning was sh. 300,000  p.a. the compensation is spread as follows:

Sh. 300,000 (2005), sh. 300,000 (2006), sh. 100,000 (2007)

(iii)   Where the contract is for an unspecified term and does not for a terminal paymesnt, the compensation is to be spread evenly forward over three years. This means all monies received as compensation for termination will now be taxed in full e.g. A contract for unspecified term provides for payment of compensation. The contract is terminated on 31.12.04 and sh. 1,500,000 compensation is paid. Immediately before sthe termination, the employees rate of earning per annum was sh. 480,000. The compensation is to be spread over three years regardless of rate of annual income of the employee. Accordingly, the compensatin is to assessed as follows:

                  2005   -   sh. 500,000

                  2006   -   sh. 500,000

                  2007   -   sh. 500,000