Republic of Kenya
Navigating international regulations with confidence
Currency
Kenyan Shilling – KES/Ksh
Official Language
Swahili
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Fiscal Year
1 Jan - 31 Dec
Payroll Frequency
Weekly, Bi-weekly & Monthly
Tax System and Regulations
Income Tax Structure
Kenya’s income tax structure is based on a progressive system where individuals are taxed according to their income levels. Governed by the Income Tax Act (Cap. 470) and administered by the Kenya Revenue Authority (KRA), it applies to residents and non-residents on income earned or accrued within Kenya. Taxable income includes wages, salaries, bonuses, commissions and other employment benefits. The tax is collected through Pay As You Earn (PAYE) for salaried employees. Employers must also account for statutory deductions such as contributions to the National Social Security Fund (NSSF) and the Social Health Insurance Fund (SHIF). While the country offers various tax reliefs and exemptions aimed at reducing the overall tax burden for eligible individuals, non-residents are not eligible for personal reliefs.
Payroll Taxes
Payroll taxes apply to all forms of employment income, including wages, bonuses, allowances and certain non-cash benefits like housing and company vehicles. The main components of payroll taxes include PAYE which is an income tax deducted at source from employees’ monthly earnings, NSSF contributions for retirement benefits, and SHIF contributions for healthcare coverage. Employers are required to deduct PAYE from employees’ salaries and remit it to the KRA. Under the NSSF Act No. 45 of 2013, both employers and employees must contribute 6% of the employee’s pensionable earnings subject to a maximum earnings limit of KES72,000 per month to the NSSF, and 1.5% to the Affordable Housing Levy (AHL), introduced to support the government’s affordable housing initiative. Under the Social Health Insurance Act, 2023, employees contribute 2.75% of their gross salary to the SHIF, with a minimum monthly contribution of KES 300.
Tax Reporting and Payment Deadlines
The Kenyan income tax year aligns with the calendar year, running from 1 January to 31 December. Employers must report and remit PAYE deductions, alongside contributions for the NSSF, SHIF and the AHL by the 9th working day of the month following payroll via the iTax portal. Additionally, employers must file a consolidated P10 return summarising total earnings and PAYE withheld across all employees by 28 February of the year following the tax year. Employers must also provide each employee with a P9A form detailing their earnings and PAYE deductions for the year.
Compliance and Record-keeping
Employers and payroll providers are required to maintain accurate payroll records, including payslips, tax deduction certificates (P9 forms), payment receipts and statutory return submissions, for a minimum of five years. These records must be available for inspection by the KRA or relevant regulatory bodies. Compliance includes timely remittance of PAYE, NSSF, SHIF and AHL contributions, as well as accurate filing of monthly and annual returns. Failure to comply may result in penalties such as fines, interest on late payments and legal action. For example, late PAYE filing attracts a penalty of 25% of the tax due or KES 10,000 (whichever is higher), and late payment incurs an additional 5% penalty plus 1% interest per month. Proper record-keeping not only supports regulatory compliance but also promotes transparency, reduces errors in payroll processing, and protects both the employer and employees in the event of disputes.
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