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Employer Withholding Tax Guide

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✂️ Employer Withholding Tax Obligations

As a business, you are required to deduct withholding tax (WHT) from certain payments to suppliers, contractors, and service providers, and remit it to KRA. This is separate from PAYE on employee salaries.

📅 Deadline: WHT must be remitted to KRA by the 20th of the month following the month of deduction.

📊 Withholding Tax Rates

Payment Type Resident Rate Non-Resident Rate Final Tax?
Dividends 5% 15% Yes (Resident)
Interest 15% 15% Yes
Royalties 5% 20% No
Management/Professional Fees 5% 20% No
Consultancy Fees 5% 20% No
Contractual Fees 3% 20% No
Rent (to agent) 10% 30% No
Insurance Commission 10% 20% No
Winnings (Betting/Gaming) 20% 20% Yes

📋 When to Deduct WHT

You Must Deduct WHT When Paying For:

  • Professional Services: Legal, accounting, audit, medical, engineering
  • Consultancy: Business, IT, management consulting
  • Contractors: Construction, maintenance, repairs
  • Commissions: Sales, insurance, agency
  • Rent: When paying through an agent
  • Dividends: To shareholders
  • Interest: On loans, deposits
⚠️ Important: WHT applies to payments above KES 24,000 per month to a single payee. Below this threshold, no WHT is required.

📋 Step-by-Step WHT Filing Guide

1

Identify WHT Payments

Review all payments made during the month and identify those subject to WHT.

2

Calculate WHT

Apply the appropriate rate to the gross payment:

Example: Consultancy fee of KES 100,000

WHT = 100,000 × 5% = KES 5,000

Net payment to consultant = KES 95,000

3

Deduct and Pay Net Amount

Pay the supplier/contractor the net amount (gross less WHT).

4

Issue WHT Certificate

Provide the payee with a withholding tax certificate showing:

  • Your company name and PIN
  • Payee's name and PIN
  • Gross amount paid
  • WHT deducted
  • Net amount paid
  • Date of payment
5

Log in to iTax

Visit itax.kra.go.ke and log in.

6

File WHT Return

Go to "Returns" → "File Returns" → "Withholding Tax".

7

Enter Payment Details

For each payment, enter:

  • Payee's PIN
  • Payment type
  • Gross amount
  • WHT rate
  • WHT amount
8

Submit and Pay

Submit the return and pay total WHT via M-Pesa Paybill 572572 by the 20th.

📄 WHT Certificate Requirements

You must issue a WHT certificate to every payee. The certificate should contain:

  • Certificate number (sequential)
  • Date of issue
  • Payer's name, address, and PIN
  • Payee's name, address, and PIN
  • Nature of payment
  • Gross amount
  • WHT rate applied
  • WHT amount deducted
  • Period covered
💡 Tip: The payee needs this certificate to claim credit for WHT when filing their annual return.

📊 Common WHT Scenarios

Scenario 1: Paying a Lawyer

  • Legal fees: KES 200,000
  • WHT rate: 5%
  • WHT deducted: KES 10,000
  • Net payment: KES 190,000

Scenario 2: Paying a Contractor

  • Construction work: KES 500,000
  • WHT rate: 3%
  • WHT deducted: KES 15,000
  • Net payment: KES 485,000

Scenario 3: Paying Dividends

  • Dividend declared: KES 1,000,000
  • WHT rate: 5%
  • WHT deducted: KES 50,000
  • Net to shareholder: KES 950,000

⚠️ Penalties

Failure to Deduct WHT

You become liable for the tax + 10% penalty

Late Remittance

5% of tax due + 1% interest per month

Failure to Issue Certificate

Up to KES 100,000 fine

⚠️ Important: If you fail to deduct WHT, you cannot claim the expense as a tax deduction!

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