NAIROBI, Kenya — The Kenya Revenue Authority (KRA) has cautioned taxpayers that withholding tax (WHT) deducted at source does not automatically mean their tax obligations are fully settled.
Many Kenyans, particularly freelancers, consultants and service providers, assume that once tax has been deducted before payment, nothing more is owed. However, the authority says that for most professional income, withholding tax is only a partial payment and must be reconciled through annual returns.
Under Kenya’s tax framework, withholding tax is deducted at source by a client or employer and remitted to KRA within five days. The taxpayer then receives a withholding tax certificate, which specifies the gross amount paid, the tax rate applied, and the amount remitted.
KRA explains that WHT is considered final tax for certain categories of income. These include qualifying dividends, interest income, betting and gaming winnings, rental income for non-residents, and payments to non-residents without a permanent establishment in Kenya.
However, for most professional and contractual services, the standard withholding rate, typically five per cent, is lower than the applicable income tax rate. This means the deducted amount is credited against the taxpayer’s final liability rather than extinguishing it.
Affected categories include professional fees, consultancy fees, management fees, commissions, contractual services, marketing and advertising services, and digital content income.
“Many professionals receive payments with withholding tax deducted and believe their tax obligations are fully settled. We completely understand why this makes sense. The tax was deducted before you even received payment, right?,” KRA stated on Monday, February 16.
The authority’s clarification comes as Kenya enters its annual tax return filing period, during which individual taxpayers are required to declare their income for the preceding year.
KRA has urged taxpayers to collect all withholding tax certificates issued throughout the year, declare their full gross income, including amounts where WHT was deducted, claim the applicable tax credits, and pay any outstanding balance to avoid penalties and interest.
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Earlier this month, on February 11, the authority reminded individuals and businesses to carefully review statutory deductions and validate income declarations before submission.
KRA advised taxpayers to ensure that returns accurately reflect mandatory deductions, including the Housing Levy introduced under recent reforms, and contributions to the Social Health Authority (SHA). It warned that discrepancies between declared figures and institutional records may trigger system validation flags.
“KRA validates declared income and expenses against available records, including electronic tax invoices where applicable and withholding tax data,” KRA stated.
Tax experts note that failure to file accurate returns, even where WHT has been deducted, can attract penalties under the Income Tax Act and the Tax Procedures Act, including late filing fines and interest on unpaid balances.
As Kenya continues to expand its digital tax administration systems, including electronic invoicing and integrated data verification, compliance scrutiny has intensified.
Taxpayers are therefore being encouraged to reconcile all income streams and documentation before filing.
