Taxation for Not-For-Profit Organisations
Types of Taxes for NPOs
Income of NPOs is exempt from tax in Kenya provided that it is expended in Kenya for the benefits of residents of Kenya. Gains or profits from businesses run by NPOs are not exempt from tax.
1. Pay As You Earn (PAYE)
Kenyans working for NPOs are not exempt from PAYE.
Foreigners working for NPOs may get exemptions on their PAYE but this applies on a case-by-case basis.
PAYE is deducted monthly at the prevailing individual income tax rates, on or before 9th of the following month.
How do I file for PAYE?
PAYE returns are filed online via itax
NPOs without PAYE to remit should file a NIL return via iTax.
How do I pay for PAYE?
After filing the PAYE return, generate a payment slip online via iTax and make payment at any of the KRA appointed banks.
Does PAYE include earnings from casual employment?
Are employee benefits taxable?
How are loans to employees taxed?
Use our calculator to work out PAYE.
2. Withholding Tax
There no exemptions associated with Withholding Tax.
What is the rate of taxation for Withholding Tax?
Withholding Tax rates vary depending on the income, and whether the recipient of the income is resident or non-resident.
What are the prevailing Withholding Tax rates?
How do I pay withholding Tax?
Payment is done via iTax.
Generate a payment slip and present it, with the tax due, at any of the KRA appointed banks.
After successful payment of Withholding Tax, both the Withholder and Withholdee will receive a withholding certificate via email.
What is the penalty for late payment?
What is exempt from Withholding Tax?
3. Value Added Tax (VAT)
What is the rate of taxation for VAT?
There are 3 rates for VAT;
- 0% - for Zero rated supplies. Goods listed in the 2nd Schedule to the VAT Act e.g. Exportation of goods/services, goods supplied to EPZ, Priviledged persons and Public bodies etc.
- 8% - Petroleum oils obtained from bituminous, Motor Spirits (Diesel Supero, AViation spirit etc.)
- 16% - General rate for other Goods and Services
VAT exemptions for NPOs.
Use our calculator to work out VAT.
How do I file for VAT?
VAT returns are filed online via iTax, on or before the 20th of the following month, by filling a VAT3 Return form.
How do I account for VAT on imported services?
When is VAT on Imported Services due?
How do I pay for VAT?
After filing your VAT returns online, generate a payment slip for any tax due and make payment to any of the KRA appointed banks.
Payment can be made in Cash, Cheque or RTGS.
4. Excise Duty
What is the rate of taxation for Excise Duty?
The rate varies depending on the goods and services.
Types of Excise Duty
- Specific Duty Rate: This is where a specific amount of tax is charged per unit of measure on an excisable product e.g. Kshs. 120 per litre of spirit.
- Advalorem Duty Rate: This is where a percentage rate of duty charged on the value of an excisable product.
- Imports tax is charged on the total Cost, Insurance and Freight (CIF) and;
- Locally manufactured goods advalorem rate is charged on the Ex-factory selling price.
How do I pay for Excise duty?
Excise Duty on import is paid at the port of entry.
Domestic Excise Duty should be paid by 20th day of the following month.
Generate a payment slip via iTax and present to any of the KRA appointed banks to make the payment.
5. Customs Duty
To get an exemption on Customs Duty, NPOs must apply to the Cabinet Secretary for National Treasury through the NGO Board.
6. Turnover Tax
What is the rate of taxation for TOT?
- Turnover Tax is charged at the rate of 1% on the gross monthly sales
- Expenses are not deductible
- This is a final tax
How do I pay TOT?
TOT will be filed and paid on a monthly basis. The due date is on or before 20th of the following month.
Turnover Tax Return
- Login to iTax
- Under the returns menu, select file return, then turnover tax and download the excel return.
- Complete the return and submit
- After filing the return, go to payment menu, select 'payment', select the amount payable, and generate a payment slip.
- Make the payment at a partner bank or through M-pesa
You can now also file and pay your TOT using the new KRA M-service App.
