Withholding Tax in Kenya: Which Payments It Covers and Who Deducts It
Withholding tax is deducted by the person making the payment, not the person receiving it. If you pay a resident for professional services, building work, royalties or marketing, you usually keep back 3 or 5 percent, pay the supplier the balance, and send the tax to KRA within five working days.
Many owners only learn this when KRA asks why the tax was never deducted. By then, the bill has become theirs.
Who must deduct
The rule is in section 35 of the Income Tax Act. It applies to “a person” making a listed payment. It is not limited to companies or VAT-registered businesses, so sole proprietors and partnerships need to check it too.
There are three points to note:
- Rent is different. You deduct tax from rent paid to a resident landlord only if KRA has appointed you in writing to do so (section 35(3A)).
- Exempt income is left out. You make no deduction from a payment that is exempt from tax (section 35(4)).
- Private payments. If you are paying in a purely personal capacity, not for a business, confirm your position with KRA.
Common payments and rates
These rates come from Head B of the Third Schedule to the Income Tax Act, in the version as at 1 July 2026. “Non-resident” here means a person with no permanent establishment in Kenya. A tax treaty may lower a non-resident rate.
| Payment | Resident | Non-resident |
|---|---|---|
| Management, professional, training, consultancy or agency fees | 5% | 20% |
| Contractual fees for building, civil or engineering works | 3% | 20% |
| Royalties, including software | 5% | 20% |
| Sales promotion, marketing and advertising | 5% | 20% |
| Interest, general | 15% | 15% |
| Qualifying dividends | 5%, final | 15% |
| Rent for land or buildings | 7.5%, appointed persons only | 30% |
| Goods supplied to a public entity | 0.5% | 5% |
| Sale of scrap metal | 1.5% | 1.5% |
Some details matter here:
- The KES 24,000 rule. For residents, fees in the first two rows are caught when they total KES 24,000 or more in a month.
- Rent. KRA’s website still shows 10 percent for commercial rent, while the Act says 7.5 percent. Follow your appointment letter and confirm the rate with KRA.
- Dividends. KRA’s web table also shows a different figure for some resident dividends, and says a resident company holding more than 12.5 percent can be exempt. Confirm the position before you declare a dividend.
- Interest. Interest paid to the financial institutions listed in the Fourth Schedule is left out.
This table is not complete. Pensions, insurance commissions, digital content and digital marketplace payments, and some other items have their own rules.
What changed on 1 July 2026
The Finance Act 2026 made changes that reach ordinary businesses. Our Finance Act 2026 briefing covers the wider Act.
- Software. The new definition of royalty includes software, proprietary or off-the-shelf, whether paid as a licence, development, training, maintenance or support fee. Review your software bills against this.
- Card fees. Interchange and merchant service fees on card payments now count as management or professional fees. If you accept cards, ask your bank how it is handling this.
- Scrap metal and winnings. Scrap metal sales now carry 1.5 percent, and winnings from licensed operators 20 percent.
- EAC dividends. The 5 percent rate for citizens of East African Community states is gone, so the 15 percent non-resident rate applies.
How to do it
- Deduct at the point of payment. Pay the supplier the balance.
- Pay KRA within five working days. Send the tax with a return through iTax. This is not the 20th of the month, whatever older guides say.
- Make sure the supplier gets a certificate. The law requires one, and KRA says iTax sends it to the supplier’s registered email once the tax is paid.
Your invoice records still matter separately. A payment can have tax deducted correctly and still need a valid eTIMS invoice to count as an expense.
If you do not deduct
Under section 39A of the Tax Procedures Act, KRA can collect the tax from you as if it were your own, from the date it should have been paid. You also face a 5 percent late payment penalty (section 83A) and interest of 1 percent a month (section 38). The interest stops growing once it equals the tax, and you cannot recover it from anyone else.
Section 39A(2) gives some relief: you need not pay the tax itself if the supplier has already accounted for it in full. That relief refers only to the tax, not to penalties or interest.
If tax is deducted from you
For most residents, the deduction is a credit, not an extra cost. You declare the full income in your return, claim the tax withheld and pay any balance.
Check iTax regularly for your certificates, and chase any that are missing. Since 1 January 2026, KRA has compared returns with withholding tax data, so income on your certificates that is not in your return can raise a query. Keeping this straight is part of regular bookkeeping.
Frequently Asked Questions
Is withholding tax due on the 20th of the month?
No. Section 35(5) of the Income Tax Act says you must pay it to KRA, with a return, within five working days after making the deduction.
Do I deduct withholding tax from every supplier?
No. It applies to the payments listed in section 35 of the Income Tax Act, such as professional fees, building work and royalties. An ordinary purchase of goods from a resident supplier is not on the list, unless you are a public entity or you are buying scrap metal.
Is withholding tax an extra tax for the person who receives the payment?
Usually not. For most resident recipients it is an advance payment, which they claim as a credit in their income tax return. It is final for non-residents without a permanent establishment in Kenya, and for residents on qualifying interest and qualifying dividends.
Not sure where you stand on Withholding Tax?
Our tax experts will check your position and tell you what to do next, so you stay compliant.
General information, not professional advice. Last updated 3 Aug 2026. Tax rules change, so check the current position before acting.