PAYE is a tax collection method for individuals in employment, with taxable income including wages, bonuses, and various allowances. It operates on a graduated scale with specific rates and due dates for remittance, mandating employers to deduct and submit the tax. Non-compliance incurs penalties for late filing and payment.

1. Introduction To PAYE
PAYE is a method of collecting tax at source from individuals in gainful employment.

2. Gains or Profits includes wages, casual wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission,
bonus, gratuity, or subsistence, travelling, entertainment or other allowance received in respect of employment or
services rendered.

3. Rates
PAYE is calculated on a graduated scale as shown in the table below:
Annual Monthly Rates
On the first Shs. 288,000 24,000 10%
On the next Shs. 200,000 16,667 15%
On the next Shs. 200,000 16,667 20%
Above Shs. 688,000 57,334 25%

4. Due Dates
• PAYE is due on or before the 9th of the following month. This includes both the return and payment.
• Returns are submitted online via iTax

5. Eligibility of PAYE
• This tax obligation is mandatory for all employers.
• All employers are required to deduct PAYE from their employees' salaries and wages at the prevailing rates and
remit the same to KRA.

6. Incomes chargeable to PAYE
• Fringe Benefit Tax (FBT), Non-Cash Benefit above 3,000 pm e.g. airtime, Car Benefit and Value of premises
provided by employer.

7. Incomes not chargeable to PAYE
• Meals provided by employer to employee not exceeding Kshs. 48,000 pa, Subsistence, Night-out of Kshs. 2,000 per
day, Medical Cover by employer and Pension Contribution made by employer.

8. Penalties for non-compliance
Penalty on late filing: Whichever is higher between, 25% of the tax due or Kshs. 10,000.
Penalty on late payment: 5% of the tax due and a late payment interest of 1% per month on the unpaid tax until the tax
is paid in full.