THE INCOME TAX (WITHHOLDING TAX) RULES 2001
L.N.100/20011. Citation and commencement.
The Rules may be cited as Income Tax (Withholding Tax) Rules, 2001.2. Interpretation
In these Rules, unless the context otherwise requires:-“Commissioner” includes an officer authorized in writing by the Commissioner to exercise the powers or to perform functions conferred upon the Commissioner under these Rules;
“payee” means a person who receives income from a payer after deduction of withholding tax;
“payer” means a person who deducts withholding tax for the purposes of these Rules;
“withholding tax” means tax subject to deduction as determined in accordance with the provisions of the Act and these Rules;
“withholding tax rate” means the respective rate of tax set out in the Third Schedule as applicable to the specified class of income;
“withholding tax deduction card” means a deduction card, in such form as the Commissioner may provide, or such other document corresponding to a withholding tax deduction card as may be authorized by the Commissioner in any particular case, and on which the information that the Commissioner may direct with respect to tax is recorded.
(2) A person shall, on the tax deduction card or such other document as may be authorized by the Commissioner, record such particulars as the Commissioner may direct in respect of that payment.
(3) Any person who fails to comply with paragraph (1) or (2) commits an offence.
(3) The Commissioner shall notify the payer and the payee in writing of his decision on the objection and thereafter, on the occasion of making payment to the payee the calculation of the tax shall be in accordance with that decision.
(4) Notwithstanding that a valid objection has been made, on the occasion of making a payment to the payee from which tax is to be deducted in accordance with these rules, the amount of tax to be deducted shall be in accordance with the calculation made by the payer until the payer is notified by the Commissioner of his decision on the objection.
(5) Any amount of tax in excess of the amount found to be payable upon calculation by the Commissioner under paragraphs (3) and (4) shall be refunded to the payee.
(2) The tax remitted shall be accompanied by an appropriate return showing the name of the payee, the gross amount of payment, the amount of tax deducted and such other information as the Commissioner may specify.
(3) Where no withholding tax is deducted, a person shall furnish the Commissioner with a certificate, in such form as the Commissioner may prescribe, showing that no tax was deducted in that month.
(4) A person whom the Commissioner has, under paragraph (1), directed to receive withholding tax on his behalf shall keep a record of payment in such form as the Commissioner may direct and shall enter therein particulars of all tax paid to him.
(5) A person who, having deducted tax under these rules, fails to remit tax within the time prescribed under this rule, account for such tax deducted or who fails to comply with paragraph (2), commits an offence.
(3) The production of the return made by the person under paragraph (1), and of the certificate of the Commissioner under paragraph (2), shall be sufficient evidence that the amount shown in the certificate is the amount of tax which the person would have been liable to pay under rule 8 in respect of the period in question had he complied with the provisions of these rules and a document purporting to be such a certificate shall be deemed to be such a certificate until the contrary is proved.
(4) Where a notice given by the Commissioner under paragraph (1) extends to two or more consecutive months, these rules shall have effect as if those consecutive months were one month.
(5) If the Commissioner is not satisfied that the amount of tax paid in respect of a period is the full amount which the person would have been liable to pay under rule 8 had he complied with these rules, he may notwithstanding that an amount of tax has been paid by the person under that rule in respect of that period give a notice under paragraph (1) of this rule and thereupon this rule shall have effect in the subsequent periods.
(2) Where a person ceases to carry on business before the end of any year of income, he shall carry out the requirements of this rule within one month of cessation.
(3) Any person who fails to render a return to the Commissioner within two months after the end of a year as required under paragraph (1), commits an offence.
3. Application of Section 128 of the Act
Section 128 of the Act shall apply to a notice or other document which is authorized or required to be given, served or issued by the Commissioner under these Rules.4.Deduction of withholding Tax.
(1) A person who makes a payment of, or on account of, any income which is subject to withholding tax shall deduct tax therefrom in the amount specified –- (a) under paragraphs 3 and 5 of Head B of the Third Schedule; and
- (b) where the Government of Kenya has double taxation agreement with the Government of another country, in the terms of that agreement;
- Provided that the rates of tax under this paragraph shall not exceed the rates specified under paragraph (a).
5. Maintenance of records.
(1) On the occasion of making a payment, a person shall keep a record in respect of, name of payee, Personal Identification Number (PIN), gross amount paid, nature of payment and amount of tax deducted.(2) A person shall, on the tax deduction card or such other document as may be authorized by the Commissioner, record such particulars as the Commissioner may direct in respect of that payment.
(3) Any person who fails to comply with paragraph (1) or (2) commits an offence.
6. Certificate of tax deduction
Upon making a payment and deducting withholding tax in any month, the person making the payment shall furnish the payee with a certificate showing the gross amount paid, the total tax deducted and such other particulars as the Commissioner may require.7. Dispute in calculation of withholding tax.
(1) If a person to whom payment is made under paragraph 6 is aggrieved by reason of the nature of a payment and the rate of withholding tax applied and is unable to reach an agreement with the payer –- (a)the payer may inform the payee of his rights under this rule and shall, at the request of the payee, furnish him with a written statement showing the manner in which the payer calculated the tax deducted;
- (b)The payee may give a notice of objection in writing to the Commissioner, but that notice shall be valid only if-
- (i) it states precisely the grounds of his objection;
- (ii) there is enclosed therewith the written statement furnished by the payer; and
- (iii) it is received by the Commissioner within thirty days of the date on which the statement from the payer under paragraph (a) was received by the payee.
(3) The Commissioner shall notify the payer and the payee in writing of his decision on the objection and thereafter, on the occasion of making payment to the payee the calculation of the tax shall be in accordance with that decision.
(4) Notwithstanding that a valid objection has been made, on the occasion of making a payment to the payee from which tax is to be deducted in accordance with these rules, the amount of tax to be deducted shall be in accordance with the calculation made by the payer until the payer is notified by the Commissioner of his decision on the objection.
(5) Any amount of tax in excess of the amount found to be payable upon calculation by the Commissioner under paragraphs (3) and (4) shall be refunded to the payee.
8. Payment of withholding tax.
(1) On or before the twentieth day of the month following the month in which the deduction is made or before such other day as may be notified to him by the Commissioner, a person shall, subject to subparagraph (3), pay to the Commissioner or to such other person as the Commissioner may direct, all amounts of tax deducted in accordance with the Act and these rules.(2) The tax remitted shall be accompanied by an appropriate return showing the name of the payee, the gross amount of payment, the amount of tax deducted and such other information as the Commissioner may specify.
(3) Where no withholding tax is deducted, a person shall furnish the Commissioner with a certificate, in such form as the Commissioner may prescribe, showing that no tax was deducted in that month.
(4) A person whom the Commissioner has, under paragraph (1), directed to receive withholding tax on his behalf shall keep a record of payment in such form as the Commissioner may direct and shall enter therein particulars of all tax paid to him.
(5) A person who, having deducted tax under these rules, fails to remit tax within the time prescribed under this rule, account for such tax deducted or who fails to comply with paragraph (2), commits an offence.
9.Person failing to pay tax or provide required certificate.
(1) If, on the twentieth day following the month in which the deduction is made or before such later day as may have been notified to him by the Commissioner, a person has paid no tax under rule 8(1) for that month and the Commissioner is unaware of the amount, if any, which the person is liable to pay, or the person has failed to provide the certificate mentioned in paragraph (3) of that rule, the Commissioner may give notice to the person requiring him to render within the time specified in the notice, a return showing the name of every person to whom he made any payment which is subject to withholding tax in the period stated in the notice, together with particulars with regard to each person that notice may require, being particulars of –- (a) a calculation of tax under rule 4 appropriate to each person’s case;
- (b) the payment of amounts subject to withholding tax made to that other person during that period; and
- (c) any other matter affecting the calculation of the tax which the person was liable under these rules to deduct from the payments subject to withholding tax during that period.
(3) The production of the return made by the person under paragraph (1), and of the certificate of the Commissioner under paragraph (2), shall be sufficient evidence that the amount shown in the certificate is the amount of tax which the person would have been liable to pay under rule 8 in respect of the period in question had he complied with the provisions of these rules and a document purporting to be such a certificate shall be deemed to be such a certificate until the contrary is proved.
(4) Where a notice given by the Commissioner under paragraph (1) extends to two or more consecutive months, these rules shall have effect as if those consecutive months were one month.
(5) If the Commissioner is not satisfied that the amount of tax paid in respect of a period is the full amount which the person would have been liable to pay under rule 8 had he complied with these rules, he may notwithstanding that an amount of tax has been paid by the person under that rule in respect of that period give a notice under paragraph (1) of this rule and thereupon this rule shall have effect in the subsequent periods.
10. Recovery of tax.
For the purpose of the recovery of tax which a person would have been liable to pay under rule 8 had he complied with the provisions of these rules, that person shall be deemed to have been appointed an agent of his payee under Section 96 of the Act.11. Withholding tax return at end of each year.
(1) Not later than two months after the end of each year, a person shall render to the Commissioner a statement and declaration in the form that the Commissioner may provide or authorize in respect of each person to whom payment is made at any time during the year, showing such particulars as the Commissioner may require.(2) Where a person ceases to carry on business before the end of any year of income, he shall carry out the requirements of this rule within one month of cessation.
(3) Any person who fails to render a return to the Commissioner within two months after the end of a year as required under paragraph (1), commits an offence.
12.Inspection of a person’s records.
(1) A person liable to pay withholding tax shall, when called upon to do so by the Commissioner, produce for inspection, at his premises or at any place the Commissioner may require –- (a) all accounts, books of accounts, documents and other records relating to the calculation of, and on account of payments which are subject to withholding tax in respect of the period which may be specified by the Commissioner; and
- (b) any other books, documents and records which may be specified by the Commissioner, which shall be written in English or such other language which the Commissioner may allow.
- (a) the tax which appears from the documents and records produced that the person would have been liable to pay under rule 8 for the period covered by the inspection had he complied with the provisions of these rules;
- (b) the tax which, to the best of his knowledge and belief, has not been paid as the Commissioner had directed.
(3) The production of the certificate referred to in paragraph (2) shall be sufficient evidence that the person is liable to pay, in respect of the period mentioned in the certificate, the amount shown therein pursuant to paragraph (2)(b), and a document purporting to be such certificate shall be deemed to be such certificate until the contrary is proved
13. Death of an individual
If an individual dies, anything, which he would have been liable to do under these rules, shall be done by his personal representatives, or, in the case of an individual who made payments on behalf of another person, by the person succeeding him, or if no person succeeds him, by the person on whose behalf he made those payments.
14.Change in circumstances of a person.
Where there has been change in the payer, the payer after the change shall in relation to a matter arising after such change, be liable to do anything which the payer before the change would have been liable to do under these rules if the change had not taken place.14A.Penalty for failure to deduct or remit withholding tax. L.N.54/2004
For the purposes of section 35(6) of the Act, where a person, when under obligation to do so, fails-
- (a) to make a deduction described in section 35(6)(a) of the Act, in accordance with Rule 4; or
- (b) to remit an amount of tax deducted, as described in section 35(6)(b) of the Act, in accordance with Rule 8,
the Commissioner may impose a penalty equal to ten percent of the amount of the tax involved, subject to a maximum penalty of one million shillings.