Pay As You Earn is a method of tax collection from employees, both resident and non-resident, in any gainful employment.
These earnings include salaries, casual wages, leave payout, sick pay, payment in lieu of leave, commissions, bonuses, gratuity, travelling, entertainment or other allowances received in respect of employment or services rendered to a company. PAYE is chargeable to those employees who earn income of KES 24,000 and above per month.
This means that any individual with a taxable income of up to KES 24,000 per month will not have any income tax liability. This is a positive measure to cushion those employees with very low incomes.
As Virtual Human Resources Services Limited, we ensure that PAYE deducted from all employees’ salaries at the prevailing tax rates, are remitted to KRA on or before the 9th of the following month.
Additionally, we always ensure strict adherence to PAYE filing and payment to avoid our clients from incurring any penalties/fines which is charged on the employer.
HOW IS PAYE CALCULATED?
The following individual tax bands and rates are applicable to individual employment income which we use to compute employees’ salaries. These PAYE tax brackets came into effect from 1st January 2021 following the Tax Laws Amendment (No.2) Act, 2020.
PAYE is computed as per below new tax bands:
|On the first
|On the next
|On all income in excess of
|Personal relief of KES 28,800 per annum (KES 2,400 per month) is applicable
As shown above, the current maximum rate of 30% is charged on all incomes in excess of KES 388,000 per year and KES 32,332 per month.