In this second part of our KRA Tax Obligations posts, we are to look into the KRA Tax Obligations For Non Individuals In Kenya.
I will not focus much on explaining what Tax Obligation is because I already did that in Part 1 of this blog post series under “KRA Tax Obligations For Individuals in Kenya.” Tax Obligation in relation to Non Individuals in Kenya simply means “the liability of tax that an entity has.”
In this last part of our two part blog series on Tax Obligations in Kenya, I am going to highlight the three key areas that includes:
- What is a Non Individual
- The Non Individual Tax Obligations in Kenya
- The Due Dates of Returns Filings of Non Individuals in Kenya
Now, let us begin and find out the KRA Tax Obligations For Non Individuals In Kenya. The core purpose of this blog post is to let you understand the 4 tax obligations for Non Individuals in Kenya i.e Income Tax Company, Income Tax Partnership, Income Tax PAYE (for Employer only) and Value Added Tax.
What is a Non Individual?According to many definitions out there, Non Individual simply refers to an entity. An entity is something that exists separately from other things and has a clear identity of its own. This can be either a Company (both private and public), Partnerships, Societies, Organizations, Groups (Youth, Women and People with Disabilities), Churches and even Trusts.
The above forms part of what is referred to as Non Individuals and here in Kenya each one has a KRA PIN with the right set of Tax Obligation accompanying it i.e. Income Tax Company, Income Tax Partnership, Income Tax PAYE (for Employer only) and Value Added Tax (VAT).
Non Individual Tax Obligations in Kenya
Now, let us look at each of the four Non Individual Tax Obligations in Kenya in full context i.e what each means and what it entails.
Tax Obligation 1: Income Tax Company
This is the default tax obligation for all registered Limited Companies in Kenya. Under this Tax Obligation, a Company is supposed to file what is called the Corporate Income Tax. Corporate Income tax rate is a tax collected from companies in Kenya.
Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year. Revenues from the Corporate Tax Rate are an important source of income for the Government of Kenya.
Tax Obligation 2: Income Tax Partnership
This is the Tax Obligation for Partnership companies in Kenya. A partnership is a business structure where ownership and management responsibility of a company is split between two or more individuals. A partnership is not a legal entity that is separate from the owners and therefore the partnership itself does not pay taxes.
We have the General Partnership (GP), Limited Partnership (LP) and the Limited Liability Partnership (LLP). In both the 3 Partnerships, the business profit is divided to the partners, then taxes are paid by partners. Partnership doesn’t pay Income Tax Partnership. The profits a partnership business earns flow directly to the personal income tax returns of the owners.
For example, if a partnership with two owners makes Kshs. 500,000 in profit and the owners split profits equally, each would have to declare Kshs. 250,000 in income on their personal KRA Tax Returns. The Partners are responsible for paying Self Employment taxes on business income.
Tax Obligation 3: Income Tax PAYE (for Employer only)This is the Tax Obligation for Companies that have Employees and deduct Pay As You Earn (PAYE) that is remitted to Kenya Revenue Authority on a monthly basis.
Companies and Partnerships with employees are required to deduct tax according to the prevailing tax rates from their employees’ salaries or wages on each payday for a month and remit the same to KRA on or before the 9th of the following month.
Tax Obligation 4: Value Added Tax (VAT)Value Added Tax (VAT) is charged on supply of taxable goods or services made or provided in Kenya and on importation of taxable goods or services into Kenya. Companies that charge VAT on goods and services in Kenya have this Tax Obligation selected.
While companies an partnerships can voluntarily register for VAT they must register if their annual revenue exceeds Kshs. 5,000,000. The VAT is submitted on a monthly basis.
The Due Dates of Returns Filings of Non Individuals
Below are the due dates for the above Tax Obligations in Kenya.
Value Added Tax (VAT) – Submitted Monthly
Due date is on or before 20th day of each new month
Pay As You Earn (PAYE) – Submitted Monthly
Due date is on or before the 9th day of each new month.
Income Tax Company (Corporate Tax)
This depends solely on the end month of the Companies’ Accounting Period (most companies in Kenya end month is 31st December of each year). Therefore, the payment due date is 4 months after accounting end month and filing is 6 months after your accounting end month. If December is the end month (end of financial year) of the Company, then the final tax deadline is April 30th and filing is June 30th.
Income Tax Partnership
In Partnership Companies, the above same case applies. It all depends on the end of the Financial Accounting Period of the Partnership Company. Refer to the above explanation.
To sum everything up, the above are the four categories of Tax Obligations for Non Individuals in Kenya.
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Matthews Ohotto is a holder of Second Class Honours Upper Division Degree in Business Information Technology (Bachelor of Business Information Technology – BBIT) from Jomo Kenyatta University of Agriculture and Technology (JKUAT). He is the Founder of both Cyber.co.ke Portal (an online portal that focuses on offering better KRA Services to Kenyans both locally and globally) and Cyber.co.ke Blog.