All expats who live and work in Kenya for more than 183 days during the previous financial year will be considered residents for tax purposes, and will be required to pay income tax. Generally, the process is very simple, as employers withhold required taxes and social security each month, making the yearly tax filing process straightforward. Heres an introduction to income tax in Kenya, as well as other taxes that may impact expats living in the country.
Income tax
Tax in Kenya is governed by the Kenya Revenue Authority, and all Kenyan residents are required to pay tax on all income earned, including bonuses, overtime, commissions, etc. You are considered a resident for tax purposes if you have resided in the country for 183 days or more out of the past fiscal year.
Income tax is calculated based total income from all employment or business, and ranges from 10-30% of your income amount, depending on which tax bracket you fall into. It is important to check if your home country has a double taxation agreement with Kenya, as otherwise, you may be eligible to pay tax to both Kenya and your home country.
Most employers use the PAYE, or Pay as you Earn, a method of filing tax, in which taxes and social security payments are automatically withdrawn from your salary. If your employer does not offer this, you will need to file tax yearly or quarterly. Whether your employer uses PAYE or not, it is still recommended to use a Kenyan accountant to file tax returns each year, especially if you are eligible for any tax treaties with your home country.
If you earn under a certain amount (varies yearly), you may be exempt from paying income tax.
If you own property and earn income from renting it out, your income earned will also count towards the total amount you pay in income tax. This is known as a residential rental income tax.
Good to know: The Kenyan financial year runs from 1 July- 30 June.
Value Added Tax (VAT)
Most goods, services, and purchases are subject to sales tax, known as value-added tax (VAT). Both imported and domestic goods are currently taxed at a rate of 16%. Both expats and locals will be subject to this tax, which is levied on to the purchase price what payment is made.
Other taxes
Kenya does not have an estate tax, wealth tax, or inheritance tax. However, it does have a capital gains tax, which was cancelled for many years and then brought back in 2015. Capital gains of land, buildings/property, or shares are currently taxed at a rate of 5%. Capital gains in relation to the mining and petroleum industry are taxed at a higher rate of 30%, or 37.5% for non-residents with an established base in Kenya.
Other specific taxes or duties may be applicable to your situation, so consult an accountant for more information.
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