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The Kenya Revenue Authority (KRA) recently announced significant changes to the computation of Pay-As-You-Earn (PAYE) taxes, as introduced by the Tax Laws (Amendment) Act, 2024. Effective from 27th December 2024, these amendments will impact taxable employment income, tax reliefs, and benefits derived from employment. Here’s a summary of the key updates and what they mean for employers and employees:

1. New Deductions from Taxable Employment Income

Employees can now benefit from the following deductions when determining taxable income:

• Affordable Housing Levy Contributions: Deductions under the Affordable Housing Act, 2024.
• Post-Retirement Medical Fund Contributions: Up to Kshs. 15,000 per month.
• Social Health Insurance Fund (SHIF) Contributions: Amounts contributed to SHIF are deductible.
• Mortgage Interest Payments: Interest on loans for residential property up to Kshs. 360,000 per year (or Kshs. 30,000 per month) is deductible.
• Retirement Fund Contributions: Contributions to registered pension or provident funds up to Kshs. 30,000 per month.

2. Tax Reliefs Eliminated

The following tax reliefs have been repealed:

• Affordable Housing Relief
• Post-Retirement Medical Fund Relief

This means that employees will no longer claim these specific tax reductions.

3. Adjustments to Gains and Profits from Employment

Certain benefits and allowances have been revised, including:

• Non-Taxable Benefits: Benefits with an aggregate annual value below Kshs. 60,000 (or Kshs. 5,000 per month) will not be taxed.
• Meal Allowances: The first Kshs. 60,000 per year for meals provided by an employer is non-taxable.
• Gratuity Payments: Payments for registered retirement pension schemes will not exceed Kshs. 360,000 per year as non-taxable income.

Implications for Employers and Employees

Employers must ensure compliance with these changes when computing PAYE for December 2024 and beyond. Employees are encouraged to consult with their payroll teams or tax professionals to understand how these adjustments may affect their net pay and financial planning.

KRA’s Commitment to Compliance

The Kenya Revenue Authority is dedicated to supporting taxpayers in meeting their obligations. For further clarification, taxpayers can contact the KRA through the provided helplines or visit the nearest Tax Service Office.

Stay informed about the latest tax laws to ensure you remain compliant and take advantage of the available benefits. For more details, visit KRA’s official website.