Understanding the Kenyan Tax System..

Filing taxes in Kenya is managed by the Kenya Revenue Authority (KRA) and involves several key steps for individuals, foreigners, and businesses. To begin, all taxpayers must obtain a Personal Identification Number (PIN) through the KRA’s iTax portal. This PIN is essential for accessing the iTax system, where all tax-related activities are conducted.

The main types of taxes include:

• Income Tax: Applies to individuals and businesses.
• Value Added Tax (VAT): Levied on goods and services.
• Excise Duty: Charged on specific goods like alcohol and tobacco.
• Customs Duty: Imposed on imported goods.
• Pay As You Earn (PAYE): Withholding tax on employees’ salaries.

Given the complexities of tax filing in Kenya, especially for businesses and foreigners, seeking professional assistance by downloading Fedha trac can be highly beneficial. Our App can help navigate the intricate tax landscape by automatically recording and analysing the income taxes. Fedha Trac offers visibility and guidance that will provide you with peace of mind by automatically ensuring you avoid costly mistakes.

Filing Taxes as an Individual

Step 1: Obtain a Personal Identification Number (PIN)

To file taxes in Kenya, you must first obtain a KRA PIN. This can be done online via the KRA’s iTax portal. 

1. 1. Visit the iTax portal (https://itax.kra.go.ke/KRA-Portal/)
   2. Click on “New PIN Registration”.
   3. Follow the instructions to complete the registration process.

Step 2: Filing Income Tax Returns

1. 1. Log in to the iTax portal using your PIN and password.
   2. Select ‘Returns’ from the main menu and choose ‘File Return’.
   3. Download the appropriate Income Tax Return form (IT1 for residents, IT2 for non-residents).
   4. Fill in the details required, including income, allowances, and reliefs.
   5. Upload the completed form and submit it.
   6. Pay any taxes due via the various payment options provided, including mobile money, bank transfer, or cash at designated banks.

Step 3: Claiming Tax Reliefs

• • Personal Relief: Available to all residents.
  • Insurance Relief: For life insurance premiums.
  • Mortgage Relief: For mortgage interest payments.

Filing Taxes as a Foreigner living in Kenya.

Foreigners working or doing business in Kenya also need a KRA PIN and must determine their tax residency status, which affects their tax obligations. Residents, who stay in Kenya for more than 183 days in a tax year, and non-residents, who stay less, use different forms (IT1 for residents and IT2 for non-residents). 

Foreigners must declare any foreign income and can benefit from tax treaties to avoid double taxation. The tax filing process for foreigners is similar to that for residents, with forms submitted via the iTax portal and taxes paid through various methods.

Filing Taxes as a Business

Businesses in Kenya, whether local or foreign, must comply with additional tax requirements. They need a business KRA PIN and must register for VAT if their annual turnover exceeds Ksh 5 million. Businesses file their Corporate Income Tax returns by logging into the iTax portal, completing the IT2C form, and submitting it along with payment. Additionally, they must file VAT returns monthly and Pay As You Earn (PAYE) returns for their employees. Other specific taxes, like excise duty and customs duty, may also apply.

KRA Deadlines and Penalties

• Income Tax Returns: Due by June 30th for individuals and businesses.
• VAT Returns: Due by the 20th of the following month.
• PAYE: Due by the 9th of the following month.

Failure to file or pay taxes on time can result in penalties and interest charges. Ensure you adhere to the deadlines to avoid these additional costs.