This is the full text of the articles on iTax Help (https://itax.ke), on Kenyan tax. # Keeping tax low in a new Kenyan software company > A worked example for a two-person software startup in Kenya, covering turnover tax, a small salary, dividends and medical cover, each rule linked to the law. Source: https://itax.ke/articles/software-startup-tax-kenya Take a two-person software company. The two founders each own half the shares and both are directors. The company sells subscriptions to its own product, and in its first full year it expects about Ksh 2,400,000 in receipts, or Ksh 200,000 a month. Hosting, tools and other running costs come to about Ksh 240,000 a year. Each step below is an option the law gives, and most add a monthly return. ## Turnover tax instead of corporation tax A resident person, a company included, pays turnover tax when its turnover from business is more than Ksh 1,000,000 and not more than Ksh 25,000,000 in a year[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12C__subsec_1)[[cite]](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/turnover-tax-tot). The rate is 1.5% of gross receipts[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_2__para_9), and the return and payment are due by the 20th of the following month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12C__subsec_4). It is a final tax, and no costs come off before it is worked out[[cite]](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/turnover-tax-tot). Corporation tax for a resident company is 30% of profit[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_2__intro__table_2). On Ksh 2,400,000 of receipts and Ksh 240,000 of costs, that is 30% of 2,160,000, or Ksh 648,000. Turnover tax on the same year is 1.5% of 2,400,000, or Ksh 36,000. Costs still take cash out of the company; under turnover tax they simply stop reducing the tax. A company with thin margins, or one making a loss, can come out ahead on corporation tax. The law lets it opt out of turnover tax by writing to the Commissioner[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12C__subsec_2). ### The Ksh 1,000,000 line Turnover tax starts only when the year's turnover is more than Ksh 1,000,000. At or below that figure, the company is back on corporation tax on its profit: | Turnover for the year | Tax regime | Tax, with Ksh 240,000 of costs | | --------------------- | ------------------------------- | -----------------------------: | | 900,000 | Corporation tax, 30% of 660,000 | 198,000 | | 1,100,000 | Turnover tax, 1.5% of 1,100,000 | 16,500 | | 2,400,000 | Turnover tax, 1.5% of 2,400,000 | 36,000 | If the year looks like landing near the line, work out the total in November, while there is still time to act on it. ## What turnover tax leaves out Turnover tax does not apply to rental income, to management, professional or training fees, or to income that has already borne a final withholding tax[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12C__subsec_3). The Act counts technical and consultancy services as management or professional fees[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_I__sec_2). For a software company, that splits the income in two. Subscription and licence income from its own product is inside turnover tax. A consulting day, custom development for one client or a paid support retainer is outside it and is taxed at 30% of profit. Put the two kinds of work on separate invoices with separate descriptions, so the split is plain to anyone reading the books. ## A small salary for each founder Under turnover tax a salary does not lower the company's tax, because nothing does, and a dividend costs less per shilling. A small salary can still make sense: it pays the founders for the part-time work they do as employees, and it builds NSSF savings for each of them. The aim is to keep it below the point where PAYE starts. PAYE is 10% on the first Ksh 288,000 of taxable pay in a year, which is Ksh 24,000 a month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_2__intro__table_1), and a resident employee gets personal relief of Ksh 28,800 a year, or Ksh 2,400 a month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_1__para_1). The housing levy and SHIF come off before PAYE is worked out[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_15__subsec_2), and so does NSSF, as a pension contribution[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_22A). At Ksh 9,000 a month, each founder pays no PAYE: | Each founder, per month | Ksh | | ----------------------------------------- | -------: | | Gross salary | 9,000.00 | | NSSF Tier I, 6% | 540.00 | | SHIF, 2.75% with a Ksh 300 minimum | 300.00 | | Housing levy, 1.5% | 135.00 | | Taxable pay | 8,025.00 | | PAYE: 10% is 802.50, less 2,400 of relief | 0.00 | | Net pay | 8,025.00 | NSSF's lower earnings limit is Ksh 9,000 from February 2026, so the whole contribution is Tier I[[cite]](https://www.nssf.or.ke/notice-to-employers-year-4-2026-nssf-contribution-rates). SHIF is 2.75% of gross salary and never less than Ksh 300 a month[[cite]](https://new.kenyalaw.org/akn/ke/act/ln/2024/49/eng#part_III__sec_17), and the housing levy is 1.5% of gross salary[[cite]](https://new.kenyalaw.org/akn/ke/act/2024/2/eng#part_II__sec_4__subsec_2). On top of the salary, the company pays its own NSSF of 540, a housing levy of 135 that matches the employee's[[cite]](https://new.kenyalaw.org/akn/ke/act/2024/2/eng#part_II__sec_5__subsec_1__para_b), and the NITA levy of Ksh 50 a month[[cite]](https://www.kra.go.ke/images/publications/External-Notice-on-PAYE-Return-Errors-and-NITA-Levy---30-04-2024.pdf). Each founder costs the company Ksh 9,725 a month. SHIF has no employer share. PAYE stays at nil up to a gross salary of about Ksh 26,740 a month. That is where taxable pay reaches Ksh 24,000 and the 10% tax on it equals the relief. There is no reason to go higher under turnover tax: every extra shilling of salary carries NSSF, SHIF and the housing levy, which together take more than the 5% a dividend costs. A salary this low is only lawful for genuinely part-time work. The current minimum wage order sets hourly rates as well as monthly ones[[cite]](https://new.kenyalaw.org/akn/ke/act/ln/2026/108/eng@2026-06-26), so write the hours into each founder's contract and keep the hourly pay above the rate for the job. ### The returns that come with a payroll Once the company has employees, it files the P10 PAYE return every month by the 9th, even when there is no PAYE to declare[[cite]](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye). The same return carries the NITA levy[[cite]](https://www.kra.go.ke/images/publications/External-Notice-on-PAYE-Return-Errors-and-NITA-Levy---30-04-2024.pdf). NSSF[[cite]](https://new.kenyalaw.org/akn/ke/act/2013/45/eng#part_III__sec_20) and SHIF[[cite]](https://new.kenyalaw.org/akn/ke/act/ln/2024/49/eng#part_III__sec_22) are due by the 9th as well, and the housing levy by the ninth working day after the month ends[[cite]](https://new.kenyalaw.org/akn/ke/act/2024/2/eng#part_II__sec_4__subsec_3). A PAYE return filed late costs the higher of 25% of the tax due or Ksh 10,000[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_XII__sec_83). With no tax due, that is Ksh 10,000 for every month missed. Tax paid late costs a further 5%[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_XII__sec_83A) and interest of 1% a month[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_VII__sec_38). The [PAYE return tool](/tools/paye-return) on this site prepares the P10 file for upload to the iTax portal. ## Dividends and the 5% withholding tax Whatever is left after costs, turnover tax and payroll belongs to the company, not to the founders. The way to pay it to them is a dividend, and a company may pay one only out of profits[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/17/eng#part_XVII__sec_486). For a resident individual, the company withholds 5%, and that is a final tax[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_2__para_5__subpara_e). It remits the tax with a return within five working days of deducting it[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_VI__sec_35__subsec_5). The Income Tax Act treats cash or assets that a company passes to a shareholder, or spends for a shareholder's benefit, as a dividend, whatever the payment is called[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_7__subsec_1__para_b). So every shilling that moves from the company to a founder should be one of four things: salary, a dividend, a refund of a documented business expense, or a loan. A loan to a director at less than the market interest rate brings fringe benefit tax with it[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B), as [Fringe benefit tax in Kenya](/articles/understanding-fringe-benefit-tax) explains. Section 7A of the Act taxes dividends paid out of untaxed profits. KRA's notice on it says it does not apply where the income has already borne a final tax[[cite]](https://www.kra.go.ke/news-center/public-notices/472-taxation-of-untaxed-profits-distributed-as-dividends), and turnover tax is one. The 5% is the whole charge on the dividend. ## Medical cover, paid straight to the insurer Medical insurance that an employer pays for is not taxable pay, and the law extends this to a director who controls more than 5% of the company[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_5__subsec_4__para_b). For a director who is not a whole-time service director, the tax-free value is capped at Ksh 1,000,000 a year[[cite]](https://new.kenyalaw.org/akn/ke/act/ln/2026/164/eng). Each founder here owns half the company, so each has that cap. Two conditions come with it. The insurer has to be approved by the Commissioner of Insurance, and the company should pay the insurer itself: the Act exempts insurance paid for by the employer, and a refund of a premium a founder paid personally is easily read as pay. Premiums paid this way come out of money that would otherwise go out as a dividend, so each shilling of genuine premium also saves the 5% withholding on it. The exemption only lowers the cost of cover the founders would buy anyway. ## Pension, once there is a real salary Contributions to a registered pension fund come off taxable pay, up to the lowest of what was paid, 30% of pensionable income, and Ksh 360,000 a year[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_22A__subsec_1). On a salary of Ksh 9,000, 30% is Ksh 2,700 a month, so a private pension adds little until a founder draws a real salary. Until then, NSSF Tier I is the pension. ## The year's figures | Where the Ksh 2,400,000 goes | Ksh a year | | ---------------------------------------------------- | ---------: | | Running costs, paid by the company | 240,000 | | Turnover tax at 1.5% | 36,000 | | Two salaries of Ksh 9,000 a month | 216,000 | | Employer NSSF, housing levy and NITA on them | 17,400 | | Medical cover for both founders, paid to the insurer | 200,000 | | Paid out as dividends | 1,690,600 | | Withholding tax on the dividends, at 5% | 84,530 | NSSF goes into the founders' own accounts, so leave it aside. The rest of the tax and levies come to Ksh 135,410: turnover tax, the dividend withholding, SHIF, both halves of the housing levy and NITA. That is about 5.6% of receipts. Under corporation tax, the same year would carry about Ksh 518,000 of corporation tax alone, before any dividend. ## VAT registration at Ksh 5,000,000 Turnover tax runs up to Ksh 25,000,000 a year, but VAT comes much sooner. Registration is compulsory once taxable supplies reach Ksh 5,000,000 in any twelve months, or are expected to, and the application is due within 30 days[[cite]](https://new.kenyalaw.org/akn/ke/act/2013/35/eng#part_IX__sec_34__subsec_1). That is about Ksh 417,000 a month. Exported services are zero-rated[[cite]](https://new.kenyalaw.org/akn/ke/act/2013/35/eng#att_2__part_A__para_23), and a zero-rated supply is still a taxable supply[[cite]](https://new.kenyalaw.org/akn/ke/act/2013/35/eng#part_III__sec_7__subsec_1), so sales to customers abroad count toward the Ksh 5,000,000. KRA's own guidance says a turnover tax payer who crosses the line has to register for VAT[[cite]](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/turnover-tax-tot). Watch the twelve-month total every month. ## Records and the calendar Keep the books in Kenya shillings, and keep every record for five years[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_IV__sec_23). A business has to issue its invoices through KRA's electronic tax invoice system, eTIMS[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_IV__sec_23A). Give the company its own bank account, record each payment to a founder under what it is, and keep consulting work on its own invoices. The dates that recur: - By the 9th: the P10 PAYE return with NITA, then NSSF and SHIF, all for the month before. - By the ninth working day after the month ends: the housing levy. - By the 20th: the turnover tax return and payment. - Within five working days of paying a dividend: the withholding tax and its return. - Within six months of the year end: the company's income tax return[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_VIII__sec_52B__subsec_1). - By 30 April: each founder's own income tax return, starting with the 2026 year. The Finance Act 2026 moved individuals from the sixth month after the year to the fourth[[cite]](https://new.kenyalaw.org/akn/ke/act/2026/19/eng). All payments to KRA can go through the government PayBill 222222, with the payment slip number as the account[[cite]](https://www.kra.go.ke/news-center/public-notices/2070-tax-payment-through-paybill-number-222222). This is general information, not advice for your company. The law and KRA's rates change, so check each figure against the linked source, or with a licensed tax agent, before you rely on it. # P10 relief caps: personal relief, insurance, meals and NITA > Where the P10 form stops crediting a value, and why your total can change when a field crosses a cap. Source: https://itax.ke/articles/paye-relief-caps Some P10 cells take a number and cap it before it reaches the tax. The workbook does this without saying so; **iTax Help** shows the same caps as field hints, so a total never changes without an explanation. ## Personal relief Personal relief is Ksh 28,800 a year[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_1__para_1), which the form applies as Ksh 2,400 a month for each resident employee. ## Insurance relief Insurance relief is 15% of the premiums paid on a qualifying policy, and it stops at Ksh 60,000 a year[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_1__para_2), or Ksh 5,000 a month on the form. ## Deductions before tax SHIF comes off in full[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_15__subsec_2__para_ae), and so does the employee's affordable housing levy[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_15__subsec_2__para_ac). Pension contributions, NSSF plus any other registered fund, are credited up to Ksh 30,000 a month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_22A). The law also limits them to 30% of the employee's pensionable pay, which the form does not check, so look twice at a large contribution on a small salary. A post-retirement medical fund is credited up to Ksh 15,000 a month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_15__subsec_2__para_ad), and mortgage interest up to Ksh 360,000 a year, which is Ksh 30,000 a month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_IV__sec_15__subsec_3__para_b). ## Meals and non-cash benefits Meals are tax-free up to Ksh 60,000 a year, Ksh 5,000 a month, when they are served in a canteen or cafeteria the employer runs, or by a third party who is a registered taxpayer[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_5__subsec_4__para_f). Only the part above Ksh 5,000 is added to taxable pay. Non-cash benefits work differently. The law taxes them once their value for the year reaches Ksh 60,000[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_5__subsec_2__para_b), and the form applies that monthly: benefits worth Ksh 5,000 or less in a month are not taxed at all, and once they go over Ksh 5,000 the whole amount is taxed, not just the part above the line. A benefit of Ksh 5,000 adds nothing to taxable pay; a benefit of Ksh 5,001 adds Ksh 5,001. ## Housing levy and NITA Each employee pays a housing levy of 1.5% of gross salary[[cite]](https://new.kenyalaw.org/akn/ke/act/2024/2/eng#part_II__sec_4__subsec_2), and the employer pays an equal amount on top[[cite]](https://new.kenyalaw.org/akn/ke/act/2024/2/eng#part_II__sec_5__subsec_1__para_b). The amount remitted is the employees' total plus the same again from the employer, due by the ninth working day after the month ends[[cite]](https://new.kenyalaw.org/akn/ke/act/2024/2/eng#part_II__sec_4__subsec_3). The NITA levy is Ksh 600 a year for each employee[[cite]](https://new.kenyalaw.org/akn/ke/act/ln/2007/113/eng), and the P10 collects it monthly at Ksh 50 for each employee[[cite]](https://www.kra.go.ke/images/publications/External-Notice-on-PAYE-Return-Errors-and-NITA-Levy---30-04-2024.pdf). Both land in Section E as live totals. When a figure you type moves a total by less than you expected, check the field's hint: a cap is the likely reason. # Fringe benefit tax in Kenya: who pays it and how much > An employer that lends to staff below KRA's market interest rate pays 30% tax on the interest saved, declared on the monthly P10 return. Source: https://itax.ke/articles/understanding-fringe-benefit-tax When an employer lends money to an employee, a director, or a relative of either, at an interest rate lower than the market rate, the difference is a benefit of the job. That benefit is taxed, and the employer pays the tax. This is Fringe Benefit Tax (FBT), under section 12B of the Income Tax Act[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_1). ## How the benefit is valued The taxable value is the interest the loan would have cost at the **market interest rate**, less the interest the borrower actually pays[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_2): ```text Fringe benefit = loan amount × (market rate − actual rate) ``` The tax on that benefit is the resident corporate rate, which is **30%**[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#att_3__subpart_nn_2__para_15). KRA publishes the market rate in a public notice every quarter. Its notice of 14 July 2026 set it at 8% for July to September 2026[[cite]](https://www.kra.go.ke/news-center/public-notices/2379-fringe-benefit-tax,-deemed-interest-rate-and-low-interest-benefit-7), and the [FBT rates page](/tools/fbt) keeps the current rate and every one before it. Take a Ksh 3,000,000 loan at 3% while the market rate is 8%. The benefit is 5% of the loan, Ksh 150,000 a year or Ksh 12,500 a month, and the FBT on it is Ksh 3,750 a month. Where a loan runs past the end of employment, the benefit keeps applying for as long as the loan is unpaid[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_2). Loans made on or before 11 June 1998 are outside the charge, unless their terms have changed since[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_1). ## Who pays, and when The employer pays. The Act makes FBT due by the 10th of the month after the benefit month[[cite]](https://new.kenyalaw.org/akn/ke/act/1973/16/eng#part_II__sec_12B__subsec_3), but it is declared in section D of the P10 PAYE return, and that return is due by the 9th[[cite]](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye). File and pay by the 9th and both dates are met. ## Filing or paying late FBT goes in with the PAYE return, so a late return costs the higher of 25% of the tax due or Ksh 10,000[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_XII__sec_83). Tax paid late costs a further 5% of the unpaid amount[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_XII__sec_83A), plus interest of 1% a month until it is paid[[cite]](https://new.kenyalaw.org/akn/ke/act/2015/29/eng#part_VII__sec_38). # The P10 return, without the macro workbook > KRA's monthly PAYE return, and how to fill it in the browser without the macro workbook. Source: https://itax.ke/articles/p10-return-without-macros KRA's P10 Simplified Unified Payroll Return is the monthly PAYE return. An employer with staff files it by the 9th of the following month, and files it even when there is no PAYE to declare[[cite]](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye). The employer lists the payroll, and the return works out PAYE, fringe benefit tax and the housing levy from it. For periods from May 2023 it has carried the NITA levy as well[[cite]](https://www.kra.go.ke/images/publications/External-Notice-on-PAYE-Return-Errors-and-NITA-Levy---30-04-2024.pdf). KRA's tool for this is a simplified Excel return, downloaded from its publications page[[cite]](https://www.kra.go.ke/news-center/public-notices/2230-kra-simplifies-the-paye-return-filing-process). The workbook runs on macros: type the payroll in, let the macros calculate, then export a ZIP that the iTax portal accepts. **iTax Help** does the same job in the browser. You fill in the same sections the workbook has: - **A, return information.** Employer PIN, type of return, entity type and the return period. - **B, employees.** One row per employee: PIN, name, resident status, type of employee, and all pay and benefit values for the month. - **C, lump sum, gratuity and arrears.** One-off payments, which are taxed on their own rules. - **D, fringe benefit tax.** Loans to employees at less than the market interest rate. - **E, tax due.** The totals, worked out live as you type. ## The checks stay the same The workbook's validation rules, its show-and-hide and lock rules, and its tax maths are reproduced from the workbook's own macros, quirks included. A locked cell stays locked in **iTax Help**, and a value that the workbook would reject is rejected here with the same message. ## Where the upload file comes from The last step packages the return exactly as the workbook does: one XML file with the summary cells and the hashes the iTax portal checks, plus one CSV per list sheet. You can preview every file in the ZIP before downloading it, and you can drop an existing ZIP back in to have it checked. ## No account, and it works offline Drafts are saved in this browser as you type, never on a server, so there is nothing to sign in to. Once the page has loaded, the form and its maths run without a connection; only the upload to the iTax portal needs one. **iTax Help** is an independent tool and is not affiliated with the Kenya Revenue Authority; KRA's forms, rates and rules belong to KRA.