The Kenya Revenue Authority (KRA) has proposed new regulations offering employers a 50% tax rebate on salaries paid to graduate apprentices.
According to the KRA, the 50% tax is a government incentive that will encourage employers to hire and train fresh university and Technical and Vocational Education and Training graduates.
Further, the Authority has called for the public to submit their comments for consideration in finalizing the Set Off Tax Rebate for Graduate Apprenticeships Regulation 2026 on or before May 25.
Eligible employers hiring graduates will be able to claim the reduction in the initial taxes that they owe to the tax Authority.
Reductions will be made equivalent to 50% of the total salaries and wages that eligible employers pay to qualifying graduate apprentices.
Under section 12 of the Income Tax, the rebate tax will be an additional reduction on top of the usual business expenses deduction made for salaries by the Authority.
However, to claim the reductions, employers must ensure that the graduate apprentice is bound by a written apprenticeship contract to serve an employer for a period of six to twelve months during any year of income, with permission from the Director General.
“An employer shall, before engaging a graduate apprentice, enter into a contract of apprenticeship with the graduate apprentice for a period of apprenticeship of six to twelve months and register the contract with the Director-General,” KRA outlines.
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Employer Eligibility Requirements
For the employer to enjoy the reduction benefits, KRA requires that they have a legally binding work contract with the graduate apprentice.
In addition, under the Industrial Training Act, the employer must obtain written permission from the Director General before making an initial engagement with the graduate apprentice.
Registration of the apprenticeship contract between the employer and the graduate must be completed, with the apprenticeship lasting for 6 to 12 months.
Further, the Authority requires the employers to submit quarterly reports to the Commissioner with details of apprentices, including PINs, numbers, and work duration.
Upon successful completion of the apprenticeship, the employer must issue a certificate of completion to the graduate and to the Director-General.
According to the tax Authority, employers eligible for the tax reduction benefits should keep records of all the graduate apprentices for 5 years after completion of the employment contract.
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KRA Tax Reduction Restrictions
KRA argues that an employer who has all the requirements but does not have full income exemptions is not eligible for the tax reduction benefit.
Further, there will be no tax rebate for apprenticeships with contracts longer than 12 months.
“No rebate shall be deducted on account of emoluments paid to an apprentice who is engaged for a period of more than twelve months,” Regulation on tax reduction outlines.
Unregistered apprenticeship contracts with the Director General will be invalid, rendering the employer ineligible for tax deductions.
Additionally, the Kenya Revenue Authority has the power to revoke the tax rebate for the apprenticeship under legal circumstances.
