So some of us applied for a KRA pin when we were applying to qualify for a helb loan .It was a requirement that you get this pin so anything goes for you to get that loan.No one mentioned that when you register for a KRA pin you have to file tax returns every year whether you earn any sort of income or not .
All hell breaks loose when your new employer or the client you’ve striked an export deal with asks you for a compliance certificate and KRA let’s you know they can’t give you one before you pay your penalties which since the year 2010 have accumulated to thousands.So now you understand what it sounds like being between a hard rock.Or you find yourself in a situation where since the fellow at the cyber who applied the pin for you gave you a wrong obligation maybe PAYE and you’re not employed .So one day you realise the mess you’re in.
So beware, aside from your helb loan “KRA imekumulika”
Previously we could ignore filing taxes thinking the penalty was ksh 1000 but now you will be charged ksh 20000 from this year if you fail to click on NIL.
So if you don’t know which direction the itax site is at or you just want to understand your taxes,this is for you.
Income tax is tax imposed on any sort of income from business, employment, rent etc.It includes a number of taxes.Every KRA pinholder must file tax returns .It could be Nil,Credit or Debit return
FOR BUSINESS PEOPLE
Business income tax- This is tax that arises when a business is operating in Kenya, partly outside or derived from Kenya.
Sole proprietors pay individually charged tax.
Partners pay tax against their ratios
Company tax is 30% while non resident company tax is 37%
A new business should divide the whole years figure by four.
Turn over tax-This is tax for business income that exceeds ksh500,000 but does not exceed five million per annum.
Turnover refers to the sales you make.
So you add all your sales for three months and multiply by tax percentage which in this case is 3%
FOR THE EMPLOYED
PAYE -This is employment income tax charged on both residents and non residents.The tax is accounted by the employer and it is applicable to employment income above ksh 11,180.Fringe benefits such as a car,a house ,a driver and any other you’re given is taxed.Non cash benefits above ksh 3000 such as air time is taxed. What is exempted from tax includes meals that do not exceed ksh 4,800 per annum,medical cover,pension cover contribution of up to ksh 20000 per month,if your given padiem that will include you spending a night or several during work the first ksh 2000 isn’t taxed.
For people who work for insurance companies on commission Insurance Brokers are taxed 5% while Insurance Agents are taxed 10%
Witholding Tax- This is tax deducted from sources of certain income and sent directly to the government eg , training fee,pension or retirement annuity,winning in betting ,management, entertaining either by perfomance or appearance.This tax is applicable when you are paid anything above ksh 24000 per month.though there are different rates for different situations eg, management fee for residents is 5% while for non residents is 15%
FOR VEHICLE OWNERS
Advance Tax- This is tax applicable to Matatus and other Public Service Vehicles..The current rates For vans, pickups, trucks and lorries is Kshs.1, 500 per ton of load capacity per year or Kshs.2, 400 whichever is higher.
For saloons, station wagons, mini-buses, buses and coaches, Kshs.60 per passenger capacity per month or Kshs.2, 400 whichever is higher
This tax only exempts tractors,trailers used in agriculture and vehicles owned by public institutions, government or other exempted bodies.
FOR PROPERTY OWNERS
Capital gain tax- This is tax gained on sale of property. The rate of 5% is charged on net gain only so any expense such as ads,legal fees,brokerage etc is subtracted and tax charged on the total sum minus expenses as long as you can support the expense with evidence.
This kind of tax is exempted when it involves disposal of property to administer deceased estate, transfer of machinery,transer of property between divorced spouses,sale of land at less than ksh3 million,agricultural land sale by individuals outside gazetted townships where land is less than 50 acres.
Tax on rental income- This is tax payable at a rate of 10% of gross rent received monthly,quarterly or annually.
This is applicable only on residential property.Its not applicable to commercial property.
This tax is only applicable on monthly rent of more than ksh 12000 per month.
Land lords who get more than ksh10 million per annum are taxed differently on graduated rates.Penalty for noncompliance is 10% per month