Employers directed to extend tax cuts for pensioners

By Steve Umidha

The Kenya Revenue Authority (KRA) has announced amendments to the Income Tax Act by reducing rates of tax applicable on personal emoluments and pension receipts deductible by employers and backdated from April 25.

“To this effect, KRA advises all the affected persons that following the enactment into law of reduced rates of tax, all employers paying employees for the month of April 2020 shall apply the new individual monthly and annual tax rates in deducting and remitting Pay As You Earn (PAYE) taxes on emoluments/pensions to their employees,” said the tax agency in a gazette notice.

Personal emoluments are wages, benefits or other benefit received as compensation for holding some office or employment. In some instances, this refers to all wages, benefits or other benefits received as compensation for holding some office or employment, otherwise called pension.

The new measures which follows President Uhuru Kenyatta’s directive a month ago to cushion salaried employees during this Covid-19 period, will apply to all the four PAYE tax cadres as well as pension tax bands.

Those earning below Sh24, 000 monthly pay or Sh288, 000 yearly will see a new 10 per cent rate tax relief, while PAYE tax bands on all income amounts exceeding Sh 57,334 monthly or Sh 688,000 annually will see a monthly personal relief of Sh2, 400 and Sh28, 800 when annualized or 25 per cent tax cut.

On the other hand, annual tax rates for pension tax bands for amounts in excess of Sh1.2million will attract a tax cut of 25 per cent.

“Please note that the due date for remittance of PAYE taxes and taxes on pension remains on or before 9^th of the following month,” said KRA.

PAYE is the mandatory tax levied on all employees’ income which include wages, salaries, commissions, allowances, fees, bonuses and any other income for which the employer is chargeable by the employee for services provided.