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Section 35

B- Deduction of Tax: 

Certain income, annuities, emoluments,

Deduction of tax from certain income

(1)
A person shall, upon payment of an amount to a non-resident person not having a permanent establishment in Kenya in respect of -
which is chargeable to tax, deduct therefrom tax at the appropriate nonresident rate.

(1A*)
Subsection (1) shall not apply to payments made by filming agents and filming producers approved by the Kenya Film Commission to actors and crew members approved for purposes of paragraphs (g) and (h).    Finance Act, 2015 effective 1st Jan 2016*

(2)
(Deleted by 8 of 1978, s.9)

Subject to subsection (3A) a person shall, upon payment of an amount to a person resident or having a permanent establishment in Kenya in respect of -
  • (a) a dividend; or
  • (b) interest, other than interest paid to a financial institution specified in the Fourth Schedule which is resident or which has a permanent establishment in Kenya including interest arising from a discount upon final satisfaction or redemption of a debt, bond, loan, claim, obligation or other evidence of indebtedness measured as the original issue discount, other than interest or discounts paid to a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule:
    • Provided that –
    • (i) where the bond, loan, claim, obligation or other evidence of indebtedness is acquired by a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule from the resident person, such an exempt person or financial institution shall deduct tax from the difference between the acquisition price and the original issue price; and
    • (ii) where the resident person disposes of a bond, loan, claim, obligation or other evidence of indebtedness acquired from a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule, tax shall be deducted upon final redemption from the difference between the final redemption price and the acquisition price, if the exempt person or financial institution certifies the acquisition price to the satisfaction of the Commissioner.
  • (c) an annuity payment excluding that portion of the payment which represents the capital element; or
  • (d) a commission or fee paid or credited by an insurance company to any person for the provision, whether directly or indirectly, of an insurance cover to any person or group of persons except a commission or fee paid or credited to another insurance company; or
  • (e) a pension or a lump sum commuted or withdrawn from a registered pension fund or a lump sum out of a registered provident fund in excess of the tax exempt amounts specified in section 8(4) and (5), or any amount paid out of a registered individual retirement fund, or a benefit paid out of the National Social Security Fund in excess of the tax exempt amount specified in section 8(5); or
  • (ee) surplus funds withdrawn from or paid out of registered pension or provident funds;
  • (f) Management or professional fee or training fee the aggregate value of which is twenty-four thousand shillings or more in a month. Finance Act 2006 Effective 16 June 06 Finance Act 2008 Effective 13 June 08
    • Provided that for the purposes of this paragraph, contractual fee within the meaning of “management or professional fee” shall mean payment for work done in respect of building, civil or engineering works.
  • (g) a royalty or natural resource income.  Finance Act, 2014 effective 01 January 2015 
  • (h) winnings. Tax Laws (Amendment) Act 2018 Effective 1st July 2018  Withdrawals Deleted by (FA 2025-wef 1st July-2025 S18).
  • (i)winnings from betting and gaming.  winnings payable by bookmakers to punters (players). Finance Act, 2015 effective 1st Jan 2016 , FA2016
  • (j) rent, premium or similar consideration for the use or occupation of immovable property; which is chargeable to tax, deduct therefrom tax at the appropriate resident withholding tax.  Finance Act, 2015 effective 1st Jan 2016    Finance Act, 2016 Effective 9th June 2016
  • (k) sales promotion, marketing and advertising services; (Finance Act 2023 wef 1st-July-2023 s21) 
  • (l) digital content monetisation. (Finance Act 2023 wef 1st-July-2023 s21) 
  • (m)supply of goods to a public entity;  (TLAA 2024 wef 27th December, 2024 S13)
  • (n) making or facilitating payment on a digital marketplace;  (TLAA 2024 wef 27th December, 2024 S13)
  • (o) the sale of scrap.  (TLAA 2024 wef 27th December, 2024 S13)  Deleted by (FA 2025-wef 1st July-2025 S18).

which is chargeable to tax, deduct therefrom tax at the appropriate resident withholding tax.

(3A)
Notwithstanding the provisions of subsection (3), only a person appointed for that purpose by the Commissioner, in writing, shall deduct tax under paragraph (j) of that subsection. Finance Act, 2016 Effective 9th June 2016 

(3A) DELETED by Finance Act, 2014 effective 01 January 2015  
A person shall upon payment - 
(a) to an individual or a non-resident body of persons in respect of the gross amount or aggregate consideration of a transaction the income or proceeds from which is subject to, tax pursuant to section 3 (2) (f); or 
(b) to a resident body of persons in respect of the gross amount or aggregate consideration of a land transaction the income or proceeds from which is subject to tax pursuant to section 3 (2) (f), deduct tax therefrom at the appropriate rate:

(3AA) A person who receives rental income on behalf of the owner of the premises shall deduct tax therefrom: Provided that only a person appointed by the Commissioner in writing for that purpose may deduct tax under this section. (Finance Act 2023 wef 1st-July-2023 s21) 

(3AB) A person who deducts rental income tax under this section shall, within five working days after the deduction was made, remit the amount so deducted to the Commissioner together with a return in writing of the tax deducted and such other information as the Commissioner may require.  (Finance Act 2023 wef 1st-July-2023 s21) 

(3AC) The Commissioner shall, upon receipt of the amount remitted under subsection (3AB), furnish the person from whom the rental income tax was withheld with a certificate stating the amount of the rent and tax deducted therefrom. (Finance Act 2023 wef 1st-July-2023 s21) 

(3B)
DELETED by Finance Act, 2014 effective 01 January 2015  
 The provisions of subsection (3A) shall not apply where a person entitled to chargeable property by way of security or to the benefit of a charge or encumbrance on that property deals with the property for the purpose of enforcing or giving effect to the security, charge or encumbrance.

(3C) 
For the purpose of paragraph (3)(f), the expression “ contractual fees” means payment for work done in respect of building, civil or engineering works; DELETED by Finance Act 2007 Effective 15 June 07 (3C) 

(4)
No deduction shall be made under subsection (1) or (3) from a payment which is income exempt from tax under this Act, or to which an order made under subsection (7) or (8) applies

(5)
Where a person deducts tax under this section he shall, on or before the twentieth day of the month  following the month in which  within five working days after* the deduction was made of making the deduction -(Finance Act 2023 wef 1st-July-2023 s21*) 
  • (a) remit the amount so deducted to the Commissioner together with a return in writing of the amount of the payment, the amount of tax deducted, and such other information as the Commissioner may specify; and
  • (b) furnish the person to whom the payment is made with a certificate stating the amount of the payment and the amount of the tax deducted.
(5A)
The Commissioner shall pay the tax deducted from winnings* withdraws* under subsection (1) (i) and (3) (h) into the Sports, Arts and Social Development Fund established under section 24 of the Public Finance Management Act, 2012. Finance Act 2018, effective date 1st July2018  Amended by (FA 2025-wef 1st July-2025 S18*).

(6) 
Deleted by FA2016,   Finance Act, 2016 Effective 9th June 2016
Where a person who is required under this section and in accordance with the rules made under Section 130 to deduct tax -
(a) fails to make the deduction or fails to deduct the whole amount of the tax which he should have deducted; or
 (b) fails to remit the amount of a deduction to the Commissioner within thirty days of the date on which the deduction was made or ought to have been made the provisions of this Act relating to the collection and recovery of tax, and the payment of interest thereon, shall apply to the collection and recovery of that amount as if it were tax due and payable by that person the due date for the payment of which was the date on which the amount should have been remitted to the Commissioner.

(6A)
Where a person who is required under subsection (3A) to deduct tax -
(a) fails to make the deduction or fails to deduct the whole amount of the tax which he should have deducted; or
(b) fails to remit the amount of a deduction to the Commissioner on or before the twentieth day of the month following the month in which the deduction was made or ought to have been made, no Collector of Stamp Duties appointed under section 4 of the Stamp Duty Act shall stamp the instrument of which the property is the subject matter under the Stamp Duty Act, and no Registrar of Titles or Land Registrar appointed under any written law shall register the property under any written law, until the tax has been duly accounted for; but the transferee of chargeable property may pay the tax and recover the amount of the tax from any consideration for the transfer in his possession, by action in a court or by any other lawful means at his disposal.   Deleted by (FA 2025-wef 1st July-2025 S18).
(6B)    Deleted by TPA 2nd Sch Para 2
A person aggrieved by the imposition by the Commissioner of a penalty under this section may appeal against such imposition to the local committee within thirty days after the date of service of the notice of imposition.
Provided that-
(i) the person shall, prior to making the appeal, pay all the tax due and the penalty imposed under this section; and
(ii) the appeal shall be limited to the determination of the question as to whether the person has complied with the provisions of this Act and any regulations made thereunder relating to the deduction or remitting of tax under this section.
(6C)
Subject to subsection (6B), the provisions of this Act relating to appeals to local committees against assessments shall apply mutatis mutandis to appeals under this section.  Finance Act 2005 Effective 9 June 2005 Finance Act 2005 24 Nov. 05 Deleted by (FA 2025-wef 1st July-2025 S18).

(6D)
A person aggrieved by the imposition, by the Commissioner, of a penalty under this section may, by notice in writing to the Commissioner, object to the imposition within thirty days of the date of service of the notice of the imposition. Finance Act 2010 Effective 11 June 2010 

(6E)
The provisions of this Act in respect of objections shall, mutatis mutandis, apply to objections under this section.  Finance Act 2010 Effective 11 June 2010 Deleted by (FA 2025-wef 1st July-2025 S18).

(7)
The Minister may, by notice in the Gazette, exempt from the provisions of subsection (3) any payment or class of payments made by any person or class of persons resident or having a permanent establishment in Kenya. (*REF*)

(8)
The Minister may, by notice in the Gazette, amend or add to the Fourth Schedule in respect of financial institutions resident or having a permanent establishment in Kenya.

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