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Withholding tax

Royalties are subject to withholding tax at a rate of 5% and 20% when paid to resident and non-resident persons respectively on the gross royalty payment made.

Interest when paid to both resident and non-resident persons is liable to withholding tax at 15% on the gross interest paid, with the exception of interest from housing bonds to resident persons which is subject to withholding tax at the rate of 10% on the gross interest paid.

Dividends when paid to residents and citizens of the East African Community Partner States are subject to withholding tax at a rate of 5%, while a rate of 10% is applicable to dividends paid to non-residents (other rates as appropriate).

Where a double tax treaty exists, lower withholding tax rates for royalties, interest and dividends may apply. 

With effect from January 2018 - Management or professional fees or training fee – paid by  Special  Economic  Zone Enterprise,  Developer  or  Operator  to  a non-resident  persons  shall  be  5%  of  the gross amount payable.

 

With effect from January 2018 -  Royalty  paid  by  any  Special  Economic Zone  Enterprise,  Developer  or  Operator  to a  non-resident  person  shall  be  5%  of  the gross amount payable.

With effect from January 2018 - Interest  paid  by  any  Special Economic  Zone  Enterprise,  Developer  or Operator  to  a  nonresident  persons,  5%  of  the gross amount payable.

Withholding tax exemptions

Payments exempt from withholding tax provisions include the following:

  1. Dividends received by a company resident in Kenya from a local subsidiary or associated company in which it controls (directly or indirectly) 12.5% or more of the voting power.
  2. Marketing commissions and residue audit fees paid to foreign agents in respect of export of flowers, fruits and vegetables.
  3. Interest payments to banks and insurance companies.
  4. Payments made to tax exempt bodies.
  5. Local management and professional fees whose aggregate is below Ksh 24,000 in a month.
  6. Air travel commissions paid by local air operators to overseas agents.