Resident employees are taxed on worldwide earned income, in respect of any employment or services rendered in Kenya or outside Kenya. Residents are also taxed on any other income that has accrued in or is derived from Kenya.
Non-resident employees are taxable only on their income earned from within Kenya or derived from Kenya.
Personal income tax rates
The tax rates applied to taxable income are tabulated below.
|Annual taxable income (KES)||Tax rate (%)|
|On the first 147,580||10|
|On the next 139,043||15|
|On the next 139,043||20|
|On the next 139,043||25|
|On all income over 564,709||30|
As shown above, the maximum rate of 30% will be charged on income in excess of KES 564,709.
Bonuses, overtime allowances, and retirement benefits paid to employees earning less than KES 147,580 per annum are now exempt from tax. The tax-free amount is based on the employment income before the bonus, overtime allowances, and retirement benefits.
Residential rental income tax
Residential income tax is payable by any resident person who accrues or derives income from the use or occupation of residential property in Kenya.
Effective 1 January 2016, a simplified tax on residential rental income for landlords was introduced whose annual gross rental income is KES 10 million or less. The landlords falling under this category are required to pay residential rental income tax at a flat rate of 10% on the gross rental income such that no tax deductible expenses are allowed. Eligible persons are required to file monthly tax returns via the i-Tax system and pay the tax due on or before the 20th day of the month following the rent receipt. In the context of this tax, a month means a calendar month.
Landlords who wish to continue being taxed under the old tax regime can elect in writing to the Commissioner to be taxed under the normal tax rates. Once approved by the Commissioner, such landlords shall be required to pay instalment taxes and file returns in the normal way.