So we are blessed with a new year. The best wishes from us
here at Ongz Solutions.
Been out of the scene for a while but let me look at an
issue that raises a great deal of confusion-Withholding Tax(WT)
Withholding Tax – in its efforts to diversify the type of
taxes the tax regulating authority in our case KRA, makes use of Withholding taxes.
This refers to a tax which is withheld by the payer of a
service or from the following sources of income:
Interest, dividends, management or professional fees,
royalties, commissions, rent, appearance and performance fees for entertaining,
pension or retirement annuity, sporting or diverting an audience.
1. Dividends;
- A rate of 5% for resident individuals and for listed shares for the citizens of East African Community
- 10% for Non Residents
- Nil tax for an institution that qualifies as a Financial institution
- Nil for an individual or an organization that has ownership of more than 12.5% of the controlling interests of the paying Company
2. Interest;
- Interest from Financial Institutions for example our local Commercial Banks are deducted at a rate of 15%
- Bearer certificates are withheld at a rate of 25%
- Bearer bonds withholding tax at 10%
3. Management
or Professional Fees or Technical Service Fee;
- At 10% withholding rate for services provided by a resident
- A rate of 20% is utilized for services provided by a Non-Resident
4. Royalties;
- A rate of 5% is directly withheld for royalties payable to a resident
- 20% will be the rate utilized for royalties payable to a non-resident
5. Commission;
- A rate of 15% on commission issued by Insurance companies
6. Rent;
·
A rate of 20% is withheld for rent receivable by a Non-resident
7. Appearance
and performance fees for entertaining;
- A rate of 20% is withheld for the above fees if payable to a Non-resident
- The same rate of 20% is withheld for payable fees for Supporting, assisting or arranging an appearance. This case applies to Non-Residents
8. Pension or
Retirement Annuities;
- A rate of 5% is withheld for Pension or Retirement Annuities being received by a Resident individual
9. Winnings from betting and gaming
- For both residents and ‘non residents are now subject to withholding Tax a rate of 20% has been proposed as per Finance Act 2012.The withholding tax is a final tax for resident individuals Only
A Point should be noted : the withholding organization or individual has up to the 20th day of the next month to file the returns and submit the same to KRA failure which attracts penalties and interests.
The individual from whom the Withholding Tax was withheld from should hold on to the Withholding Certificates (as supporting documents) that will be utilized to reduce the final tax at the preparation of Final Financial Reports.
