What is installment tax?

What is installment tax?

This is a form of tax that is paid by an individual or non-individual tax payer that is not fully covered under PAYE and is remitted periodically. It is paid by a tax payer whose annual tax liability is estimated to exceed Kes. 40,000.

I agree to have my personal information transfered to MailChimp ( more information )
Join over 3.000 visitors who are receiving our newsletter and learn how to optimize your blog for search engines, find free traffic, and monetize your website.
We hate spam. Your email address will not be sold or shared with anyone else.

Exceptions to instalment tax declaration; –

  • Income derived from employment income which is taxed under Section 37 of the Income Tax Act.
  • Minimum tax payable is higher than the instalment tax
  • Total tax payable in any year of income is less than Kes. 40,000/=

Subject to turnover tax

Basis for computation of Instalment tax; –

Prior year basis – the income tax paid in the preceding year multiplied by one hundred and ten per cent (110%); or

Current year basis – especially for new businesses or those that were in losses and turned profitable, installment tax is determined by projecting the current year’s profit and tax payable thereon.

The Income Tax for the current year is paid on instalment basis as below;

1st Instalment – by 20th of the fourth month

2nd Instalment – by 20th of the sixth month

3rd Instalment – by 20th of the ninth month

4th Instalment – by 20th of the twelfth month

Balance of Tax (return balance) to be paid by end of the 4th month after the year-end. i.e. by 30th April for December year-end cases.

However, taxpayers in the Agricultural Sector pay in instalments as follows;

1st Instalment – 75% in the 9th month

2nd Instalment – 25% in the 12th month.

In projecting these amounts, the expected withholding tax and PAYE for the year is netted off in arriving at the net estimated tax liability for the year.

Penalty on late payment: 5% of the tax due.

Penalty on underpaying instalment tax: 20% of the difference between the amount of instalment tax payable in respect of a year of income and the instalment tax actually paid.

We will assist you in determining tax optimization for your business, while adhering to the compliance requirements of tax laws and regulations in Kenya. Access our Tax Advisory Services here

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe Our Newslater

Get The Latest Update



Click one of our contacts below to chat on WhatsApp

× How can I help you?