PAYE KENYA

Individual PAYE Rates,GUIDE, NSSF, NHIF, Pension, etc in (Kenya)

A: Individual Tax Bands and Rates

NB

• Personal Relief: Is from one employer only. (PAYE Rules-Par 5)
• Insurance Relief: With maturity of 10 years-shall be 15% of premiums(Capped).  
• Only on 3 policies: Education & Life Ins.(wef 2003), Health Ins.(wef 2007).
• Affordable Housing Relief: Must be under AH scheme and is 15% on savings(Capped).

WEF 01 January,2021 onwards, Amounts in KES(TaxLAA-No2-2020 wef-01Jan2021) 

Band	Annual(Kes)	Monthly(Kes)	Rates
On the First	288,000	24,000	10%
On the Next	100,000	8,333	25%
Income Above	388,000	32,333	30%

Reliefs

• Personal Relief of Kshs. 28,800 pa (Kshs. 2,400 pm).
• Insurance Relief of Ksh 60,000 pa(Ksh 5,000 pm) or 15% of premiums the lesser.
• Affordable Housing relief of Ksh 108,000pa(Ksh 9,000 pm)or 15% of savings the lesser.

Same rates for:The wife’s employment, wife’s professional and wife’s self-employment income rates

WEF April,2020 to December 2020, Amounts in KES-(TaxLAA-No1-2020 wef-25April2020)  

Band	Annual(Kes)	Monthly(Kes)	Rates
On the First	288,000	24,000	10%
On the Next	200,000	16,667	15%
On the Next	200,000	16,667	20%
Income Above	688,000	57,334	25%

Reliefs

• Personal Relief of Kshs. 28,800 pa (Kshs. 2,400 pm).
• Insurance Relief of Ksh 60,000 pa(Ksh 5,000 pm)or 15% of premiums the lesser.
• Affordable Housing relief of Ksh 108,000 pa(Ksh 9,000 pm)or 15% of savings the lesser.

WEF 1st January 2018 up to April, 2020

Band	Annual(Kes)	Monthly(Kes)	Rates
On the First	147,580	12,298	10%
On the Next	139,043	11,587	15%
On the Next	139,043	11,587	20%
On the Next	139,043	11,587	25%
Income Above	564,709	47,059	30%

Personal Relief of Kshs. 16,896 pa (Kshs. 1,408 pm).
Insurance Relief of Ksh 60,000 pa(Ksh 5,000 pm)or 1or 15% of premiums the lesser.

Affordable Housing relief of Ksh 108,000 pa(Ksh 9,000 pm) or 15% of savings the lesser.

For Year 2017

Band	Annual(Kes)	Monthly(Kes)	Rates
On the First	134,164	11,180	10%
On the Next	126,403	10,534	15%
On the Next	126,403	10,534	20%
On the Next	126,403	10,534	25%
Income Above	513,373	42,781	30%

Personal Relief of Kshs. 15,360 pa (Kshs. 1,280 pm).
Insurance Relief of Ksh 60,000 pa(Ksh 5,000 pm)or or 15% of premiums the lesser.*

Affordable Housing relief of Ksh pa(Ksh pm) or 15% of savings the lesser.*

For 2015 and 2016

Band	Annual(Kes)	Monthly(Kes)	Rates
On the First	121,968	10,164	10%
On the Next	114,911	9,576	15%
On the Next	114,911	9,576	20%
On the Next	114,911	9,576	25%
Income Above	466,705	38,892	30%

Personal Relief of Kshs. 13,944 pa (Kshs. 1,162 pm).
Insurance Relief of Ksh 60,000 pa(Ksh pm) or 15% of premiums the lesser.

Mortgage Relief on Interest Ksh 150,000pa

B: WHT PAYE on Pensions Rates in excess of Kes300,000  

These rates apply if the pensioner has: 

• Attained 50years, 
• Has contributed over 15years and 
• Done early retirement on grounds of ill-health.

If the withdrawal does not meet above conditions, then ANNUAL Individual PAYE rates apply.

• WEF 01/01/2021, Amounts in KES (TaxLAA-No2-2020 wef-01Jan2021)  

Here apply rate used prior to April 2020

• WEF April,2020-31/12/2020, Amounts in Kenya Shillings (TaxLAA-No1-2020 wef-25April2020)  

Pension Tax Bands (Kes)	Annual Tax Rates (Kes)
Any amount in excess of tax free amounts:	-
On first 400,000	10%
On next 400,000	15%
On next 400,000	20%
On any amount in excess of Ksh 1,200,000	25%

• Before April,2020, Amounts in Kenya Shillings

Pension Tax Bands(Kes)	Annual Tax Rates(Kes)
Any amount in excess of tax free amounts:	-
On first 400,000	10%
On next 400,000	15%
On next 400,000	20%
On next 400,000	25%
On any amount in excess of Ksh 1,600,000	30%

C-NHIF RATES

Prior to 1st April 2015 for those earning more than 1,000Kes.

• Self Employed Rate was Kes160 Per Month
• Salaried Rates were: Kes30 to Kes320 Per Month

New Rates wef 1st April 2015 are as follows:

Gross Income (Kes)	Rate (Kes)
0 - 5,999	150
6,000 - 7,999	300
8,000 - 11,999	400
12,000 - 14,999	500
15,000 - 19,999	600
20,000 - 24,999	750
25,000 - 29,999	850
30,000 - 34,999	900
35,000 - 39,999	950
40,000 - 44,999	1,000
45,000 - 49,999	1,100
50,000 - 59,999	1,200
60,000 - 69,999	1,300
70,000 - 79,999	1,400
80,000 - 89,999	1,500
90,000 - 99,999	1,600
100,000 - Over	1,700
--------	----
Self Employed	500

D-NSSF RATES

Permanent Employees(Mandatory Contributions are paid to Pension Fund*)

• Employer contributes equivalent amount.

Casual Employees

• Employer contributes x % of casual employee's wages. 

Voluntary Contributions (are paid to Provident fund*.)-Section 23-NSSF Act

• Contributes a minimum of Kes 200pm or Kes 4800pa

NSSF Act 2013**

•  Any employer who fails, neglects or refuses to register under this section commits an offence and shall be liable to a fine not exceeding Kenya shillings fifty thousand; 
• MANDATORY
• (a) the employer's contribution at 6% of the employee's monthly pensionable earnings; and 
• (b) the employee's contribution at 6% of the employee's pensionable earnings deducted from the employee's earnings.  NSSF ACT s-20.(1) 
• VOLUNTARY
• Every voluntary member contributes to the Provident Fund- a minimum of Kes 200;
• Upper Earning Limit (UEL) is KES.18K while the Lower Earnings Limit (LEL) is KES 6K.
• Tier I contributions and Tier II contributions shall be credited accordingly.
• "Tier I Contributions" are contributions in respect of Pensionable Earnings up to the LEL; 
• "Tier II Contributions" are contributions in respect of Pensionable Earnings above the LEL; 
• *The pension contribution will be 12% of the pensionable wages ie 6% from the employee and 6% from the employer subject to an upper limit of KES 2,160 for employees earning above KES 18,000.
• *The contributions relating to the earnings below the LEL of the earnings (a maximum of KES. 720) will be credited to what will be known as a Tier I account while the balance of the contribution for earnings between the LEL and the UEL (up to a maximum of KES 1,440) will be credited to what will be known as a Tier II account.
• If you earn from 2 employers, each individual employer shall be responsible only for his obligations under this Act.

*(Some sections of NSSF 2013 act were suspended by a court)

E-NATIONAL HOUSING DEVELOPMENT FUND (NHDF) RATES

Paid to NHDF before 9th (Penalty 5%).

Contributor must be first time owner.

Based on monthly Basic Salary (BS) at: 

• 1.5% of BS by employee (Exempt from Tax) Plus
• 1.5% of BS by employer

F-Tax allowances 

Deductions/Allowances	Max. allowable PA(Kes)
Gratuity, Pension and provident fund to Registered Scheme	240,000(20k/pm)
Mortgage interest on Owner Occupied House:
Before 01-01-2017	150,000(12.5k/pm)
After    01-01-2017	300,000(25k/pm)
Contributions to HOSP	96,000 (8k/Pm) (REF)
Contributions to NSSF(Approved Pensions):
Lower of: Actual, 30% of pensionable income, 240k	240,000(20k/Pm)
-	-

G-Income from employment(Section 5.ITA):

Is an amount paid to - 

• (a) a person who is, or was at the time of the employment or when the services were rendered, a resident person in respect of any employment or services rendered by him in Kenya or outside Kenya; or
• (b) a non-resident person in respect of any employment with or services rendered to an employer who is resident in Kenya or the permanent establishment in Kenya of an employer who is not so resident.

H-Gains or profits that are subject to PAYE: 

For the purposes of section 3(2)(a)(ii) i.e employment or services rendered, these include:

• Wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission, bonus, gratuity, or subsistence, travelling, entertainment or other allowance received in respect of employment. Subject to:
• If the income is accrued for 5 or more years, all the income for 5th and prior years shall be taxed on fifth year.
• Allowances -if subsistence, traveling, entertainment is wholly and exclusively in the production of employer income these reimbursements are excluded from taxable gains.
• Allowances -if the above is in respect of a period spent outside his usual place of work while on official duties, the first 2K shillings per day shall be excluded from taxable gains. s.5(2)(a)

• Non-Cash Benefit, advantage, or facility the aggregate value where of is not less than 36K shillings granted in respect of employment or services rendered; s.5(2)(b)  or P7-Page 10 

• Compensation for the termination of a contract of employment or service-whether or not provision compensation is made. s.5(2)(c) depends on TERM specified.
• Specified Term:(Compensation provided or Not)
•  Accrue evenly over unexpired years.
• Un-Specified Term:
• Compensation provided: Accrue immediately per year at a previous salary rate pa.
• No Compensation provided: Accrue evenly for next 3years wef from termination.
•  Severance pay is often granted to employees upon termination of employment. It is usually based on length of employment for which an employee is eligible upon termination. Sever=Break up Ref-PAYE guide for more.

• Gratuity.  S.5(2)(a)(i)
• Severance is spread forward while Gratuity is spread backwards at the rate of Total Gratuity/No.of years of service.
• Gratuity is spread to 4 years and balance on 5th year prior to the year of receipt.
• Pay in lieu of Notice  is assessable in the period immediately after date of leaving employment.
• Pay in lieu of Leave is taxed in the year to which the leave days relate.

• Balancing charge set out in 2^nd Schedule Part(II) ITA.      s.5(2)(d)

• Value of premises provided by an employer for occupation by his employee for residential purposes; s.5(2)(e)
• Director (Except WTSD): Higher of 15% of his pay, Market rental value, Rent paid.
• Whole-time service director: Higher of 15% of his pay, Market rental value, Rent paid.
• Agricultural employee:10% of gains or profits from his employment.
• Any other employee: Higher of 15% of his pay and rent paid by the employer. (Benefit is different if premises are owned by third party or by employer. Refer ITA please).
• Amount paid by an employer as a premium for an insurance on the life of his employee and for the benefit of that employee or any of his dependants. Except that paid to: 

1. Registered or Unregistered pension scheme, pension fund or 
2. for group life policy cover.       s.5(2)(f)

• Fringe benefit Loan received by employee or a director: (Higher of interest difference of Zero)
• Motor vehicle provided to employee, s.5(2B). Taxable benefit equal to the higher of –  

1.  Prescribed rate of benefit(2%) pm of the initial expenditure on the vehicle by the employer or 
2.  Such value as the Commissioner may, from time to time, determine; and

• If hired  or leased; the benefit is the cost of leasing.
• If restricted use, Commissioner shall determine a lower rate of benefit depending on the usage.
• Employee Share Ownership Plan (ESOP), the value of the benefit shall be the difference between the market value per share, and the offer price per share, at the date of the option is granted by the employer and shall be deemed to have accrued to the employee at the end of the vesting period. Plan has to be registered as a Collective Investment Scheme(CIS) as per CMA Act.
• Electricity provided by employer Kes18,000 pa.(For agricultural employees Kes10,800 pa). P7-Page 11
• Water (Communal/borehole)provided by employer Kes6,000 pa.(For agricultural employees Kes2,400 pa).P7-Page 11
• Furniture provided by employer: 1% cost incurred by employer or cost of hire. P7-Page 11
• Telephone (Landline/Mobile) provided by employer: 30% of bills. P7-Page 11

I-Exempt Incomes/Benefits: 

Gains or profits do not include:

• Expenditure on passages to and from Kenya for a non-citizen  employee engaged outside Kenya and who is in Kenya borne by the employer.  s.5(4)(a)
• Expenditure on vacation trips for period not exceeding 7days to destinations in Kenya paid by the employer for employee & immediate family members . (Ending 1st July, 2015). s.5(4)(aa)
• The value of any medical services provided by the employer or medical insurance provided by an insurance provider paid for by the employer on behalf of a full-time employee or his beneficiaries and (directors to max Kes 1m pa*).  s.5(4)(b)
• Amount paid by the employer 'chargeable to tax' as a contribution to a registered or unregistered pension fund, provident fund, individual retirement fund or scheme*.    s.5(4)(c)
• Educational fees of employee's dependents or relatives disallowed under section 16(2)(a)(iv)    Ref:s.5(4)(d)
• Fringe benefits subject to tax  under Section 12B.  Ref:s.5(4)(e)
• Value of meals served to employees in a canteen operated or established by the employer or provided by a third party who is a registered taxpayer. (Max.Kes48k pa per employee).   Ref:s.5(4)(f)
• Gratuity paid into a registered pension scheme by an employer. (maximum KES240K pa). Ref:s.5(4)(g)

Other exempt incomes are:

• Premiums on Group life policy cover, unless such a cover confers a benefit to the employee or any of his dependents. (s.5(2)(f)(ii))
• One-third of employment income of a non citizen. Provided; employer is a non-resident company, in Kenya solely in relation to his employer's regional office, is absent from Kenya for aggregate of 120 day or more that year. {S.15(2)(r)}:Club subscription paid by an employer on behalf of an employee; {S.15(2)(v)}: Deleted wef 01/01/2021
• Interest on a savings account held with the Kenya Post Office Savings Bank.(35)
• Interest on deposits to HOSP(House Ownership Savings Plan) up to Kes 3m.()
• Pensions or gratuities granted in respect of wounds or disabilities caused in war and suffered by the recipients of those pensions or gratuities.(17)
• The emoluments of an officer of the Desert Locust Survey who is not resident in Kenya. (25), DELETED TLAA2020, wef25April2020
• Income from employment paid in the form of bonuses, overtime and retirement benefits. (Only for employees below lowest tax band).(53). Deleted FA2020, wef 30June20
• Monthly pension granted to a person who is 65 years of age or more(53) FA2020, wef 30June20
• Income earned by an individual who is registered under the Ajira Digital Program for three years beginning 1st January, 2020. (58)
• The first 300k shillings of the total pensions and retirement annuities received by a resident individual from a registered fund or the NSSF in a year of income. (s.8(4))
• Reimbursement of expenses wholly and exclusively for business. s.5(2)(a)(ii)
• First 2K shillings per day paid as allowances while on official duties. s.5(2)(a)(iii)
• First Kshs 1.8 million p.a (Kshs. 150,000 p.m) income of a person with disability(PWD)-(LN no.36,of 2010)
• First 50K shillings per month of Expenses in Treatment, Drugs, home care or personal care, assisting devices by PWD-(LN no.36,of 2010)

Deductible Items:

• Interest paid on money borrowed which is wholly and exclusively employed in the production of investment income (dividends and interest)which is chargeable to tax. s.15(3)(a)
• Interest paid (Max Kes300K)on money borrowed for purchase or improvement of premises occupied by person for residential purposes.(OWNER OCCUPIED INTEREST). s.15(3)(b)
• If a partner, his share of any loss incurred by the partnership. s.15(3)(d)
• Loss realized in computing gains from property. s.15(3)(f)
• Medical expenses or medical insurance cover incurred for the benefit of the proprietor(to max of Ksh 1m/pa). s.15(3)(g)

Incapacitated person :  Section 46

• Shall be assessed on, and the tax thereon charged on, that person in the name of his trustee, guardian, curator, committee or receiver appointed by a court.

Income non-resident person: Section 47

• Shall be assessed on, and the tax thereon charged on, that person either in his name or in the name of his trustee, guardian, curator or committee, or of any attorney, factor, agent, receiver or manager.

Income of deceased person etc: Section 48

• This is subject to section 79(1)(d), and shall be assessed on, and the tax charged on, his executors or administrators for that year of income.

NITA - National Industrial Training Authority-(Industrial Training Act)

“employee” means a person employed for wages or salary and includes an apprentice, indentured learner, other trainee, temporary, seasonal and casual worker;

• Penalties: See penalties page
• Due date & Rate: Ksh50 per employee payable by employer on or before the last working day of each month.( ORDER [L.N. 113/2007.])
• Due Date effective : 30th March, 2021 is not later than the ninth day of the month following end of the financial year
• Hotel & Restaurant industry (registered under Hotels and Restaurants Act Cap 494 of Kenya) pay Hotel & Catering levy at 2% of gross receipts hence exempt from NITA.

DUE DATES: 

Due dates for PAYE, NSSF*, NHIF* is 9th of the following month and for NITA* ninth day of the month following end of the financial year (Effective 30/03/2021)*

Employment Act

19. Deduction of wages:

(3) Without prejudice to any right of recovery of any debt due, and notwithstanding the provisions of any other written law, the total amount of all deductions which under the provisions of subsection (1), may be made by an employer from the wages of his employee at any one time shall not exceed two-thirds of such wages or such additional or other amount as may be prescribed by the Minister either generally or in relation to a specified employer or employee or class of employers or employees or any trade or industry.

****

For PAYE  (PAYE Rules-Par 10)

Employees: Before the tenth day following the end of every month or before any other day which may be notified to him by the Commissioner, 

Director: The earlier of the above or before the last day of the fourth month after the accounting date.