Non cash benefits and taxation provisions
Non-cash benefits include housing, cars, utilities, school fees, domestic servants, club subscriptions, telephone expenses, provision of furniture, shares options and other benefits paid for by an employer on behalf of employees. Also included are life insurance premiums and interest free/low interest loans.
Non-cash benefits are required to be taxed at their cost value or at the fair market values whichever is higher. The Commissioner may, from time to time, prescribe the value of the benefit where the cost or the fair market value of a benefit cannot be determined. The prescribed rates currently in force are:
- Furniture – 1% of the cost per month. Full cost if hired.
- Water - Ksh 500 per month.
- Electricity –Ksh 1,500 per month
- Telephone (mobile and landlines)- 30% of bills.
- ESOP’s – market value less offer price
A motor-vehicle benefit is valued at the higher of Commissioner’s prescribed values and 2% per month of the capital cost. Where a vehicle is leased, the benefit value is the higher of the prescribed rates and lease hire costs. Restricted use may be allowed by the Commissioner upon application.
Housing benefit valuation for tax purposes is calculated as follows:
- for an owner director of a company the higher of: 15% of total income, market rental value or rent paid by employer
- for whole time service director the higher of: 15% of employment income, market rental value, or rent paid by employer.
- for employees – the greater of 15% of employment income and actual rent paid at arms length. Where premises are owned by the employer the rental market value is taken,
- For agricultural employees: 10% of employment income (required to reside at the farm).
- Where premises are occupied for part of the year the benefit is apportioned accordingly.
- Any rent paid by the employee to the employer is deducted from the total housing benefit.