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What is Withholding Tax?

Withholding tax is tax that a paying business deducts at source from certain payments (such as professional fees, rent or commissions) before paying the recipient, then remits directly to KRA on the recipient's behalf.

A real Kenyan example

A company pays a consultant a professional fee, withholds the applicable percentage as withholding tax, remits it to KRA, and pays the consultant the balance.

Why it matters

If your business pays for services like consultancy, rent or commissions, you may be legally required to withhold tax and remit it, and getting this wrong exposes you to penalties. If you receive payments subject to withholding tax, the amount withheld is usually a credit against your own tax liability.

How Veira helps

Veira tracks expense categories so payments that commonly attract withholding tax are easy to identify and reconcile against what you have remitted.

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FAQs

Who deducts withholding tax?
The business making the payment (for example for professional fees, rent or certain commissions) deducts it before paying the supplier, and remits it to KRA.
What payments attract withholding tax in Kenya?
Common categories include professional and consultancy fees, rent, and certain commissions and contractual fees. Rates and the exact list of qualifying payments can change, so confirm current detail at kra.go.ke.
Can I claim back withholding tax deducted from my income?
Generally, tax withheld from your income is credited against your overall tax liability when you file, rather than lost. Confirm the current treatment with a tax professional or at kra.go.ke.
What happens if a business fails to withhold tax it should have?
It can face penalties and interest, and may still be liable for the tax that should have been withheld. Confirm current obligations before making payments that may qualify.
Is withholding tax the same as PAYE?
No. PAYE applies to employment income; withholding tax applies to specific non-employment payments such as professional fees, rent and certain commissions.

Related terms

Turnover Tax (TOT)KRA PINVAT Return

See all 72 terms