Loading
Withholding tax (WHT) is a common feature of doing business in Kenya. It is deducted by a payer from specified payments—such as professional fees, consultancy fees, or rent—and remitted to the Kenya Revenue Authority (KRA) on behalf of the recipient. Although deducted by another party, withholding tax is legally the taxpayer’s tax and operates as a prepayment of income tax.
Once properly remitted, withholding tax becomes a tax credit that can be used to offset a taxpayer’s final income tax liability. For most payments, the credit reduces the tax payable or may result in a refund position. In limited cases, such as certain dividend or interest income, withholding tax is final and no further tax is due.
In practice, challenges often arise where the tax deducted does not reflect in the taxpayer’s iTax ledger. This commonly occurs when the payer fails to remit the tax, uses an incorrect PIN, or delays filing the withholding tax return. During audits, KRA may disallow credits that are not properly supported, leading to unexpected assessments.
Taxpayers are therefore required to demonstrate that the tax was both deducted and remitted, usually through withholding tax certificates and supporting documentation. Kenyan tax dispute decisions consistently emphasise that credits will only be allowed where there is clear evidence linking the income earned to the tax withheld.
The key takeaway for businesses is simple: withholding tax is not an expense but a tax prepayment. Proper record-keeping, regular reconciliation of iTax ledgers, and timely follow-up with withholding agents are essential to avoid disputes and protect available tax credits.
