With the release of the Finance Act, No. 8 of 2020 a few changes have been introduced that will affect the tax on Employment income. To view this document, please click here.
The following changes will affect your payroll:
- Tax on Overtime/Bonus
- The end of the Home Ownership Savings Plan (only effective 1 January 2021)
1. Tax on Overtime/Bonus - Effective 30 June 2020
Previously, employees whose taxable employment income before bonus and overtime allowances did not exceed the lowest tax band (below KES 12,298 per month) were not subject to PAYE on receipt of bonuses and overtime allowance over and above their basic pay.
The Act has removed the exemption from tax of bonuses, overtime and retirement benefits paid to employees whose taxable employment income before bonus and overtime allowances does not exceed the lowest tax band.
The new change is only applicable from 30 June 2020 and not for the full tax year.
Before installing the software, take note of the following:
- Your payroll software must be on Release 5.4a/b/c which is available on the Customer zone.
- Your companies must be in a new pay period.
- Remember to re-link the affected bonus, overtime and retirement benefit earning definitions.
Click here to visit the software downloads page and follow the instructions below:
- Select the Africa tab
- Click on the Download button next to Kenya Tax changes for Premier/Sage200c: R54a/b/c (July 2020 – File Version 20207)
- Download the file, extract the contents of the zip file to your payroll folder, and overwrite any/all existing files.
For more details, refer to the document included in the download file.
Should you have an Annual Tax calculation set up, please click here before making any changes to the current Kenya company.
2. The end of the Home Ownership Savings Plan
Communication regarding these changes will follow in January 2021.