June this the month, most Kenyans are on the rush to file their tax returns before the deadline of 30 June. Failure to do so would land you paying an equivalent of sh 10,000 per month. Before paying these taxes, the taxpayers need to understand some of the measures the government has put in place these uncertain times of COVID -19. The following therefore denotes what a taxpayer needs to be knowledgeable about
Corona Tax Reliefs
The President, early this year around April, signed The Tax Laws Bill into the law. Many changes happened. For one, the Pay As You Earn (PAYE) received the most extraordinary benefits. In the sense that those earning less than 28,000 per month get a 100 percent reduction, meaning they do not pay anything. While those individuals who made above those figures received a reduction of tax by 5 percent from 30 to 25 percent.
Some of the taxes that benefited from these Corona tax reliefs include the Value Added Tax (2013), the income tax the Exercise Duty Act (2015), Tax Procedures Act (2015), Miscellaneous Levies and Fees Act (2016) and the Retirements Benefits Act (1997).
Income Tax and Value Added Tax
Income Tax and the Value Added Tax (VAT) have a distortive difference. In the sense that Income tax covers individuals and companies. In other words, sole entrepreneurship and employees are classified under income tax, unlike before companies have been relived at least 5 percent of what they used to pay before the pandemic came knocking at our doors. They are now paying a clean 25 percent flat rate form the profit they make. This context has also reflected the corresponding PAYE, for those who make more than 24,000 per month get a graduating tax percentage from 10 to 30 percent. It depends on what one is earning. An income tax can be paid in four months, which is in April, June, September, or December.
While as for the Value Added Tax as an individual, you are purposely requested to put a relative charge of about 14 percent of the total money in place. For example, if your client is supposed to pay 20,000 Kenya shillings, you add 2,800 to their invoice so that they are liable to pay 22,800. If you are not part of VAT, it is required to file a nil tax return.
This type of tax applies to those in the area of offering consultation or professional services. Different withholding taxes reflect differently. For example, as for Withholding Income Tax, it is set to about three percent while Withholding on VAT is set to about two percent.
Digital Service Tax (DST)
The current pandemic has equally forced many businesses to do a paradigm shift as they offer various goods and services to their corresponding customers. Although the Kenya Revenue Authority (KRA) did not start recently taxing the Digital Marketplace in recent times, this is qualified to have started in 2109 after the Finance Act paved the way for Digital Service Tax, which is to be treated as an advanced tax.
Under this, they will be taxed 1.5 percent depending on goods and services being offered. Some of this might include eBooks, online advertising, online gaming, TV shows, and music, and any other taxable product being offered in the digital market place.
There are two distinct types of returns done in the tax system. They include the Individual Tax Return and Corporate Tax Return. The Kenya Revenue Authority puts some of the taxes that can be filed through the iTax platform.
One of them if the Pay As You Earn (PAYE), which covers companies together with their employers. Companies that are not registered under PAYE should equivalent denote nil in terms of tax payments. Withholding tax is another one that can be paid from the tax system. As for the corporation tax, it can fall under this category too. This is to say that they are liable to pay about 25 percent for residents while 37.5 percent for non-residents. Lastly, other groups that can fall under this category can include instalment tax, residential income tax and the popular one being commercial rental income tax