Fringe Benefit Tax

For the next 3 months to the year end 2012, the Fringe Benefit tax prescribed rate has been set at 10% appling to the months October ,November and December .
This will be utilised in assesing the deemed interest in ascertaining the FBT.
 Also to note, is that there is a 15% withholding tax that should be deducted and forwarded one month after the Month of computation.
As set by the Commissioner Of Domestic Taxes

Deemed Interest on Free Loans

Ok here is the breakdown ,
So According to the Authority any loan that is acquired supposedly free, the KRA will deem it to have earned interest at the rate of 16% as indicated for the months on Jan to March,

Now on this supposedly free loan, the KRA will calculate a deemed interest of 16% of the sum and require that the lender withhold a 15% of the interest per month to be paid to KRA by the 20th day of the next month of calculation as withholding tax on the interest part


EXAMPLE: James given a free loan of Kshs 5,000,000

INTEREST RATE PER MONTH: 16% divided by 12months=1.333% p.m reducing balance

ASSUMING A FREE LOAN OF : Kshs 5,000,000

THE DEEMED INTEREST FOR JANUARY WILL BE: Kshs 5,000,000*1.333/100=Kshs 66,500

WITHHOLDING TAX TO BE PAID BY 20th FEBRUARY: 15% of 66,500=Kshs 9,975