Withholding tax and Withholding VAT in Kenya
How withholding income tax and withholding VAT work for suppliers and payers.
Kenya has two withholding mechanisms. Withholding income tax is deducted by the payer from certain payments, such as professional or management fees, and remitted to KRA. Withholding VAT is deducted by taxpayers KRA has appointed as withholding VAT agents, at 2% of the value of the taxable supply according to KRA. Rates depend on the payment type and on whether the payee is resident. Always confirm current rates and deadlines on kra.go.ke because they have changed in recent Finance Acts.
- Withholding income tax: deducted by the payer on certain payments.
- KRA lists 5% for resident professional and management fees and 20% for non-residents.
- Withholding VAT: 2% of the taxable value, by appointed agents.
- Payers remit to KRA and supply a certificate the supplier can use.
How it works
Check whether the payment type is subject to withholding income tax. KRA publishes the rates by payment type, for residents and non-residents.
Check whether your customer is an appointed withholding VAT agent. If so, they withhold part of your payment and pay it directly to KRA.
Invoice as usual, showing the net amount, VAT and total. Withholding is a deduction from the payment, not a change to the invoice value.
The payer remits the amount to KRA by the deadline KRA sets and issues you a certificate.
Record the certificate and use it when you file your returns.
Legal framework
- Income Tax Act (Cap. 470), withholding provisions and Third Schedule.
- Value Added Tax Act 2013 and Tax Procedures Act 2015 (withholding VAT).
- Finance Act 2023.
- KRA withholding tax guidance (kra.go.ke).
Frequently asked questions
Who is a withholding VAT agent?
A taxpayer appointed by KRA to withhold VAT on payments to suppliers. KRA decides the appointments and you should confirm with your customer or KRA whether they are one.
What withholding tax rates apply to payments to non-residents?
KRA publishes different rates by payment type, for example 20% on management or professional fees and 30% on rent for buildings. Tax treaties may reduce them. Check the KRA page and the treaty text.
Is withholding tax a final tax?
For residents it is generally not final: you declare the income and use the withholding certificate as a credit. For some payments to non-residents it can be final. KRA explains the details.
Is withholding calculated on the amount with or without VAT?
Withholding income tax is generally calculated on the amount excluding VAT, while withholding VAT is calculated on the value of the taxable supply. See the dedicated pages for worked examples and confirm with KRA.
Does 4invoices calculate or report withholding?
No. 4invoices does not compute withholding, issue certificates or file with KRA. You can create invoices with a VAT rate per line, use any currency with an exchange rate and download a PDF. There is a 6-month free trial without a card.