Kenya

Individual - Income determination

Last reviewed - 26 February 2020

Employment income

Taxable employment income in Kenya includes all payments made by an employer to an employee. This will include salaries, wages, bonuses, and fringe benefits received or enjoyed by virtue of employment. Fringe benefits will typically have a specific tax treatment (as in the case of housing, vehicles, and other benefits indicated below). Where no specific tax treatment is prescribed, the taxable value will be the higher of the cost to the employer or the fair market value of providing the benefit.

Generally speaking, a housing benefit is taxed at the higher of 15% of gross remuneration (excluding housing) and the rent paid by the employer. Where the property is owned by the employer or the rental agreement is not at arm's length, reference is made to the fair market value rent of the property. There are special rules for directors and a few other categories of staff.

Motor vehicles supplied by the employer are taxed on a monthly basis at the higher of 2% of the initial cost of the vehicle (where the employer owns the car) or prescribed standard rates.

For interest-free or low-interest loans granted to employees, the tax burden has been shifted to the employer under the fringe benefit tax (FBT). See the Other taxes section in the Corporate tax summary for more information.

Education fees of employees’ dependants or relatives borne by the employer are taxed on the employee unless the employer disallows the related costs for corporate tax purposes.

Where a contract of employment states that remuneration should be paid free or net of all taxes, the amount received by the employee is deemed to be net income, and the figure is grossed up to determine the tax liability. All benefits should be taxed under the pay-as-you-earn (PAYE) system.