2021 Kenya Tax Update

Minimum tax
This is charged at 1% of gross sales, and is paid when the installment tax is less than the minimum tax payable.
Minimum tax is due on the 20th day of the 4th 6th 9th and 12th month of the year after the year end period.
The following incomes are exempted from Minimum Tax: -
 Income exempted by the Act
 Employment income
 Income that is subjected to Residential Rental Income Tax
 Income that is subjected to Turnover Tax
 Income that is subjected to Capital Gains Tax
 Income of extractives sector
 Persons engaged in business whose retail price is controlled by government
 Persons engaged in insurance business.
Corporate income tax rate
Corporate income tax rate has increased from 25% since 25th April 2020 to 30% from 1st January 2021.
For year 2020 companies are required to apportion profits earned from January – 25th April 2020 and apply the tax rate of 30% and for the period 25th April 2020 – 31st December 2020 to enjoy the tax relief at a tax rate of 25% due to the pandemic.

Employment tax
The following tax rates shall apply to individual income with effect from 1st January, 2021. The first monthly PAYE return under the new rate shall be due by 9th February, 2021.
Individual Income Tax Bands and applicable rates
Tax Band Rate of Tax
On the First KShs 24,000 per month or KShs 288,000 per annum 10%
On the next KShs 8,333 per month or KShs 100,000 per annum 25%
On all income amounts in excess of KShs 32,333 per month or KShs 388,000 per annum 30%
The applicable monthly personal relief is KShs 2,400 per month or KShs 28,800 annually.
Pension Tax Bands
Pension Bands Annual Tax Rates
Any amount in excess of tax free amounts:
On first KShs 400,000 10%
On next KShs 400,000 15%
On next KShs 400,000 20%
On next KShs 400,000 25%
On any amount in excess of KShs 1,600,000 30%
For pension income withdrawn before expiry of 15 years of pensionable service, the new individual tax bands and rates are applicable on any amount withdrawn in excess of tax-free amount.

Monthly rental income
This is tax payable by resident persons (individual or company) at a rate of 10% per month on rental income earned for the use or occupation of a residential property where the rent income is between Kshs. 288,000 (Kshs. 24,000 per month) and Kshs. 15 million per annum. The monthly rental income tax (MRI) is due on 20th of very month.
Landlords with rental income below Kshs. 288,000 or above Kshs. 15 million per year shall be required to file annual income tax returns and declare this rental income together with income from other sources.

Value Added Tax (VAT)
During the Covid-19 period, we saw the VAT rate amended to cushion the economy during the pandemic. The Cabinet Secretary has now through Legal Notice 206 (The Value Added Tax Amendment of Rate order 2020) published in the Kenya Gazette, amended the standard rate of VAT from 14% to 16%. The new rate shall take effect from 1st January 2021.
The first VAT return is due by 20th February 2021.

For more information get in touch through admin@narge.co.ke

Narge Limited Financial Consultants
P.O. Box 15873 - 00100 Nairobi
Tel: 0734 822 738 | 0720 544 389
Website www.narge.co.ke