The Kenya Revenue Authority (KRA) has explained that the Withholding Tax (WHT) deducted by clients is only an advance and maintained that taxpayers must still calculate and pay the full tax at the applicable tax rates.
In a statement on March 5, KRA explained that for individuals earning income subject to Withholding Tax (WHT), such as consultants, lawyers, accountants, engineers, and business advisors, any tax already deducted by clients counts as an advance, not the full tax owed.
For example, if a consultancy invoice totals Ksh100,000 and the client deducts 5% WHT (Ksh5,000), the taxpayer is still required to pay the remaining tax at the applicable rate, for instance, 30% (Ksh30,000), leaving Ksh25,000 still payable.
Taxpayers should declare the full income (Ksh100,000), settle any outstanding tax, and file their returns via iTax or eCitizen.
The explanation follows the authority’s message reminding taxpayers with income subject to Withholding Tax (WHT) to make payments and file their returns.
“Dear X, your 2025 income tax return is ready for filing. Our records indicate that you earned income subject to Withholding Tax (WHT). Please settle any tax due and file your returns as provided by the law. To make a payment, generate a Payment Reference Number (PRN) on iTax and complete the payment accordingly. For assistance, call 0711 099 999,” read the message.
What is KRA’s Withholding Tax
Withholding Tax is a tax category where the payer of certain types of income deducts tax at the time of payment and remits it to the Commissioner of Domestic Taxes within five working days of the deduction.
The rate of deduction depends on the type of income being paid and the residency status of the recipient.
The table below shows Withholding Tax rates for different types of income:
| Type of Income | Resident | Non-Resident |
|---|---|---|
| Artists and entertainers | – | 20% |
| Management fees | 5% | 20% |
| Professional fees | 5% | 20% |
| Training fees (inclusive of incidental costs) | 5% | 20% |
| Winnings from betting, gaming, prize competitions, gambling | 20% | 20% |
| Royalties or natural resource income | 5% | 20% |
| Dividends (nil for resident companies with shareholding >12.5%; 5% for resident qualifying dividend and EAC citizens) | 10% | 15% |
| Equipment (movable) leasing | N/A | 5% |
| Interest (Bank) | 15% | 15% |
| Interest (Housing Bond HBI) | 10% | 15% |
| Interest on ≥2-year government bearer bonds (issued outside KE – 7.5%) | 15% | 15% |
| Other bearer bonds interest | 25% | 25% |
| Bearer bonds with maturity ≥10 years | 10% | – |
| Rent – buildings (immovable) | 10% | 30% |
| Rent – others (except aircraft) | N/A | 15% |
| Pensions/provident schemes (withdrawal) | 10–30% | 5% |
| Insurance commissions – brokers | 5% | 20% |
| Insurance commissions – others | 10% | – |
| Consultancy and agency (from 1 July 2003; consultancy fees to EAC citizens – 15%) | 5% | 20% |
| Contractual (from 1 July 2003) | 3% | 20% |
| Telecommunication services/message transmission | – | 5% |
| Natural resource income (from 1 Jan 2015) | 5% | 20% |
| Digital content monetization (from 1 July 2023) | 5% | 20% |
| Sales promotion, marketing and advertising services | 5% | 20% |
| Withholding on rental income by tax agents (from 1 Jan 2024) | 7.5% | N/A |
| Gains from financial derivatives | N/A | 15% |
Also Read: KRA Intensifies Crackdown on Tax Cheats Filing Nil Returns
Is Withholding Tax a Final Tax?
It is final when deducted from payments made to a non-resident who has no permanent establishment in Kenya. For resident taxpayers, withholding tax is considered final on winnings, qualifying interest, qualifying dividends, and pensions.
In all other cases, withholding tax is not final. The taxpayer must declare the full income and the withholding tax already deducted when filing their annual return and pay any remaining tax owed.
Also Read: KRA Sets New Conditions for All Petrol Stations in Kenya
Withholding Tax Exemptions
The following payments are exempt from withholding tax:
-
Dividends received by a Kenyan-resident company from a local subsidiary or associated company in which it directly or indirectly holds 12.5% or more of the voting power.
-
Royalties, interest, management fees, professional fees, training fees, consultancy fees, agency fees, or contractual fees paid by a Special Economic Zone (SEZ) developer, operator, or enterprise to a non-resident within the first ten years of its establishment, effective 1st July 2023.
-
Marketing commissions and residual audit fees paid to non-resident agents for the export of flowers, fruits, and vegetables.
-
Interest payments are made to financial institutions listed in the Fourth Schedule of the Income Tax Act.
-
Payments to tax-exempt organizations.
-
Resident management, professional, training, and contractual fees whose total value does not exceed Ksh 24,000 per month.
-
Air travel commissions paid by local airlines to non-resident agents.
Follow our WhatsApp Channel and X Account for real-time news updates.
