Pay-As-You-Earn (PAYE) is a method of collecting tax from individuals in gainful employment, in Kenya. Gains or Profits includes wages, casual wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission, bonus, gratuity, or subsistence, traveling, entertainment or other allowance received in respect of employment or services rendered.
If you are an employer, you are required to register for this obligation by initiating an amendment in your KRA PIN to add it. All employees are also required to apply for a PIN too from KRA to allow the employer to remit these taxes.
As an employer, you are required to deduct PAYE from your employees’ salaries and wages at the prevailing rates and remit the same to KRA on or before the 9th of the following month.
Effective 1st April 2020, as a way of the government mitigating Covid-19 implications on employees, the rates for PAYE were adjusted as shown in the table below.
|Monthly income (Kshs)||Tax rate||Cumulative tax per month|
|1 – 24000||10%||On the first Kshs. 24,000.00|
|24,001– 40,667||15%||On the next Kshs. 16,666.00|
|40,668– 57,334||20%||On the next Kshs. 16,666.00|
|57,335||25%||On all income above Kshs. 57,335|
|Monthly tax relief||Kshs. 2,400|
Salary payment amounting to Ksh. 24,000 and below will yield no tax to pay. Note however these rates were put in place to mitigate the pandemic effects and may be reversed to old rates once the adverse effects have stabilized.
Kreston KM, Certified Public Accountants, is an accounting firm registered and operating under the Accountants Act Chap 15 of 2008 – laws of Kenya. The firm, a member of Kreston Global, a global network of independent accounting firms, provides professional services that include, audit, tax, and consulting.