KEY CHANGES IN KRA RETURNS 2021

KEY CHANGES IN KRA RETURNS 2021

DENNYKINS & ASSOCIATES TAX AGENTS informs the public on changes to Corporation Tax rates through the Tax Laws (Amendment) Act published on 25th April, 2020 and the Tax Laws (Amendment) Act No. 2 of 2020 published on 24th December, 2020 which provided for resident corporation tax rates of 25% and 30% respectively. In light of the above, corporation tax rates shall apply as follows:

  1. 30% on income of a person whose accounting period ended on or before 30th March, 2020.
  2. 25% on income of a person whose accounting period ended between 1st April, 2020 and 31st December, 2020.
  3. For persons whose accounting period ends after 1st January, 2021, the Corporation Tax rate shall be applied as follows;
  • 25% for income earned in the period prior to 1st January, 2021.
  • 30% for income earned in the period on or after 1st January, 2021.

Provided that a person to whom (3) applies shall determine the income for the accounting period and apportion the same between the two periods and charge the applicable rates.

In the intervening period, taxpayers are advised to prepare their accounts and submit returns through the current iTax system and pay the correct amount of tax. Any erroneous penalties or interest once validated shall be corrected when the system is fully deployed.

The individual Tax Payee relief remains kshs 2400

Kenya Revenue Authority informs the public on changes of tax rates introduced through the Tax Laws (Amendment) No. 2 Act of 2020 which was published on 24th December, 2020 with respect to employment income, Corporation Tax, and Legal Notice No. 206 of 2020 on Value Added Tax. The new tax rates replace those introduced in April 2020.

Individual Income Tax Rates

The following tax rates shall apply to individual income with effect from 1st January, 2021. The first monthly PAYE return under the new rate shall be due by 9th February, 2021.

Individual Income Tax Bands and applicable rates

Tax Band Rate of Tax
On the First KShs 24,000 per month or KShs 288,000 per annum 10%
On the next KShs 8,333 per month or KShs 100,000 per annum 25%
On all income amounts in excess of KShs 32,333 per month or KShs 388,000 per annum 30%

 

The applicable monthly personal relief is KShs 2,400 per month or KShs 28,800 annually.

Pension Tax Bands

Pension Bands Annual Tax Rates
Any amount in excess of tax free amounts:
On first KShs 400,000 10%
On next KShs 400,000 15%
On next KShs 400,000 20%
On next KShs 400,000 25%
On any amount in excess of KShs 1,600,000 30%

For pension income withdrawn before expiry of 15 years of pensionable service, the new individual tax bands and rates are applicable on any amount withdrawn in excess of tax-free amount.

Corporation Tax

The rate of Corporation Tax is 30% of taxable income with effect from 1st January, 2021.

Value Added Tax

The rate of Value Added Tax is 16% with effect from 1st January, 2021. The first return under the new rate is due by 20th February, 2021.

Minimum Tax

The rate of Minimum Tax is 1% of the gross turnover effective 1st January, 2021. The tax shall be payable by the 20th day of the 4th, 6th, 9th and 12th month of the accounting period. However, the Tax Laws (Amendment) No.2 Act, 2020, introduced the following additional exemptions from Minimum Tax:

  • Persons engaged in business whose retail price is controlled by government
  • Persons engaged in insurance business
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