Withholding Tax (WHT) is a tax that is deducted at source when certain payments are made. In Kenya, the responsibility of withholding tax lies with the person making the payment (the payer), not the person receiving it. Filing Withholding Tax Returns correctly and on time is crucial to ensure compliance with Kenya Revenue Authority (KRA) regulations.
This blog will help you understand what withholding tax is, when it applies, how to file returns, and the consequences of non-compliance.
1. What Is Withholding Tax?
Withholding Tax is an advance tax that is deducted from specific payments and remitted directly to the Kenya Revenue Authority by the payer. The recipient receives the net amount after tax has been deducted.
Common transactions where WHT applies include:
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Professional and consultancy fees
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Rent (especially commercial)
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Royalties
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Dividends
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Interest
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Management or training fees
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Commission or agency fees
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Contractual payments to non-residents
2. Who Should File Withholding Tax Returns?
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Employers or businesses making payments subject to withholding tax
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Agents appointed by KRA to deduct and remit withholding tax
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Companies and organizations that engage consultants, contractors, or professionals
If you deduct WHT, you are required to file a Withholding Tax Return and pay the amount to KRA.
3. Filing Withholding Tax Returns in Kenya
Here’s how to file your withholding tax returns:
Step 1: Log in to the iTax Portal
Use your KRA PIN and password to access the portal.
Step 2: Navigate to “Returns”
Select the “File Withholding Tax Return” option under the “Returns” tab.
Step 3: Fill in Details
You will be required to provide:
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PIN of the person you paid
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Nature of the payment (e.g., consultancy fees)
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Amount paid
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Withholding tax deducted
Step 4: Submit and Generate Payment Slip
Once you submit, a payment slip will be generated. Use this to pay the withheld amount through bank or mobile money.
Step 5: Issue a Withholding Tax Certificate
After payment, download the Withholding Tax Certificate and share it with the person you paid as proof of tax deducted.
4. Filing Frequency and Deadline
Withholding tax returns are filed monthly, and payment must be made on or before the 20th day of the following month in which the deduction was made. For example, if you deduct WHT in June, you must file and pay by 20th July.
5. Penalties for Non-Compliance
Failure to file or pay withholding tax on time may result in:
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Penalty: 5% of the tax due or KES 10,000 (whichever is higher)
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Interest: 1% per month on the unpaid amount
Late filing also affects your ability to obtain tax compliance certificates or clearance.
6. Importance of Withholding Tax Compliance
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Ensures accurate tax collection at the source
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Helps in tracking income for tax assessment
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Protects businesses from legal and financial penalties
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Allows recipients to claim withholding tax credits on their annual returns
Final Thoughts
Withholding tax is a critical part of Kenya’s tax compliance system. If you make payments that fall under WHT, ensure you deduct, remit, and file returns properly through the iTax system. Staying compliant helps you avoid penalties and demonstrates that your business operates transparently.
Need help with filing Withholding Tax Returns?
Call: +254 702 339 699
Email: sales@faidihr.com