HRM and Payroll Software

Everything About New PAYE Rates 2020 in Kenya

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You might have heard the craze with the New PAYE rates 2020 in Kenya. In fact, it was a trending topic on Twitter on the 22nd April 2020 in Kenyan trends.

Following the outbreak of COVID- 19 around the world and the virus being declared a global pandemic, there has been a significant negative impact on economies around the world. To shield this, countries have been forced to come up with economic measures to contain the health crisis as well as to economically support their citizens and businesses.

The Kenyan government, in particular, has instituted tax reliefs to its citizens with effect from the 1st of April 2020. This tax measure will be tabled to parliament through a bill to amend the respective tax law.

Here are several tax measures as outlined by the President to cushion Kenyans against the economic effects of COVID-19;

Income tax ( New PAYE Rates 2020 in Kenya)

  • The Kenyan government has proposed a 100% tax relief for individuals earning a gross monthly income of up to KES 24,000. Many Kenyans will benefit from this and increase disposable income to the individuals in this income band.
  • Reduction of PAYE rate from 30 per cent to 25 per cent. This is to allow the government to channel additional resources to cushion the affected individuals in case of salary reduction.
  • Personal Relief: KES 1,408.00 to KES. 2,400 per month
  • Minimum Taxable Income: KES 24,001 per month

New Pay as You Earn (PAYE) COVID-19 tax bands

  • On the firsts KES. 24,000 (KES.288,000 p.a) …….. 10%
  • On the next KES. 16,667 (KES. 200,000 p.a) ……… 15%
  • On the next KES. 16,667 (KES. 200,000 p.a) …….. 20%
  • On all income over KES. 57,334 (KES. 688,000 p.a) …. 25%

Personal relief KES 2,400 (KES. 28,800 p.a)

Old PAYE tax bands (Annual)

  • On the first KES. 147,580 …… 10%
  • On the next KES. 139,043 ……15%
  • On the next KES. 139,043 …….20%
  • On the next KES. 139,043 …….25%
  • On all income over KES. 564,709…… 30%

Personal relief KES 16,896 per year/ KES 1,408 per month

New pension tax bands (COVID-19)

  • 10% on the first KES. 400,000
  • 15% on the first KES. 400,000
  • 20% on the first KES. 400,000
  • 25% on any amount over KES. 1,200,000

Old Pension tax bands

  • 10% on the first KES. 400,000
  • 15% on the first KES. 400,000
  • 20% on the first KES. 400,000
  • 25% on the first KES. 400,000
  • 30% on any amount over KES. 1,600,000

Other Tax Relief Measures to Help Taxpayer’s Cope with COVID-19 in Kenya

Turnover Tax Rate

  •  Reduction of turnover rate from 3% to 1% for sole proprietors. This will affect traders whose businesses will be hit hard by the measures put in place to contain the virus i.e. traders who will be forced to close down their businesses.

Value Added Tax

  •  Reduction of value-added standard rate tax from 16% to 14%. When the VAT rate is reduced, taxable goods and services will be more affordable and this will reduce the cost of living. The cash flow of businesses will also improve due to reduced outflow.
  • VAT refunds: KRA to approve and release verified VAT refund claims and allow for offsetting VAT. Payment of VAT refunds will help businesses that need cash for their survival during the impacts of COVID 19.

Corporation Tax

  • Standard rate reduced from 30% to 25%. The new rate will boost cash flow for businesses on payment of instalment taxes. This will help the resident’s corporate who will be in a profitable position to reduce its profitable corporate tax and increase its retained earnings for re-investment.

If you want to know the amount you need to pay as PAYE, use our PAYE Income Tax Calculator . Alternatively, sign up for 3-month free payroll software that has the new PAYE Rates 2020.

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