Kenyan employees will feel the the pinch as from January 2021, following the implementation of Tax Laws (Amendment) No. 2 Act of 2020 published on December 24, 2020.
The laws will see the Value Added Tax (VAT), employment income tax and Corporation tax go up.
For Individual income tax, Kenyan employees will pay 10 percent of the first Ksh24,000 per month, translating to Ksh288,000 per year. Those earning Ksh24,000 and below will now be eligible for taxation, after being pardoned since April 2020.
On the next Ksh8,333, Kenyans will be taxed Ksh25 percent.
On all income excess of Ksh32,333, employees will be deducted a PAYE of 30 percent.
The applicable monthly personal relief is Ksh2,400, or Ksh28,800 annually.
For pension, the first Ksh400,000 will be taxed 10 percent (Ksh40,000) while the second Ksh400,000 will be taxed 15 percent.
The third Ksh400,000 will be taxed 20 percent while the fourth Ksh400,000 will be taxed 25 percent.
Any amount in excess of Ksh1.6 million (pension) will be taxed 30 percent.
For pension income withdrawn before expiry of 15 years of pensionable service, the new individual tax rates are applicable on any amount withdrawn in excess of tax-free amount.
The rate of Corporation Tax will be 30 percent of taxable income as from January 1, 2021.
VAT has also gone to the original 16 percent from 14 percent which was effected in April 2020 due to the effects of Covid-19.
The rate of Minimum Tax is 1 percent of the gross turnovereffective January 1, 2021. The tax shall be payable by 20th of every April, June, September and December.
Persons engaged in business whose retail price is controlled by the government will not however pay Minimum Tax, as well as persons engaged in Insurance business.