Introduction

If you employ staff in Kenya, one of your tax responsibilities is handling PAYE (Pay As

You Earn).

PAYE is a system where employers deduct income tax from employee salaries and

remit it to the Kenya Revenue Authority (KRA) on behalf of employees. Employers are

required to deduct and remit PAYE using the applicable income tax rates.

PAYE applies whether you run:

• A small business
• A startup
• An SME
• A company with many employees

What Is PAYE?

PAYE is income tax deducted directly from employee earnings.

Taxable employment income may include:

• Basic salary
• Bonuses
• Commissions
• Overtime
• Allowances
• Some non-cash benefits
• Director fees and other employment-related payments

Who Must Register for PAYE?

Any person or business paying employment income is generally required to register

for PAYE obligations with KRA.

Examples:

• Sole proprietors with employees
• SMEs
• Companies
• NGOs
• Schools

How PAYE Is Calculated

The basic process looks like this:

Gross Salary

− Allowable deductions and reliefs

= Taxable Income

Apply PAYE rates

− Personal relief and applicable tax reliefs

= PAYE payable

Employers are required to apply applicable reliefs, deductions and exemptions

where eligible.

Simple Example

Suppose an employee earns:

Basic salary: KSh 80,000

Possible deductions may include:

• Pension contributions
• Statutory deductions
• Applicable reliefs

After adjustments:

Taxable income is determined and PAYE is calculated using prevailing tax bands.

Because tax rates and relief rules can change, many employers use payroll software

or KRA guidance tools instead of manually calculating every employee's PAYE.

Current PAYE bands range from 10% to 35% under prevailing rates.

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Step-by-Step: How to File PAYE

Step 1: Log into KRA iTax

Open:

KRA iTax Portal

Enter:

• KRA PIN
• Password

Step 2: Select File Returns

Navigate:

Returns → File Return

Choose:

Income Tax – PAYE

Step 3: Download the PAYE Return Template

KRA requires employers to download the PAYE filing template and complete

employee details.

Information commonly required:

• Employee names
• Employee KRA PINs
• Gross pay
• Tax deductions
• PAYE amount

KRA introduced simplified PAYE return processes and templates for employers.

Step 4: Validate the File

Validate the completed return.

The system generates a ZIP file for upload.

Step 5: Upload and Submit

Upload:

• Validated ZIP file

Accept terms and submit the return.

Step 6: Make Payment

PAYE deducted from employees must be paid to KRA.

Employers are required to file and remit PAYE on or before the 9th day of the

following month.

Example:

• PAYE deducted in April → file and pay by 9 May

Common Employer Mistakes

• Missing filing deadlines
• Using incorrect employee PINs
• Forgetting non-cash benefits
• Applying wrong tax reliefs
• Poor payroll records

Frequently Asked Questions

Do I file PAYE if I have one employee?

Yes. Employers paying employment income generally need PAYE obligations.

Do I file if there is no PAYE to declare?

Yes. Nil returns may still be required where applicable.

What happens if PAYE is filed late?

Late filing and payment can attract penalties and interest.

Key Takeaway

The PAYE process can be simplified as:

Register PAYE → Calculate payroll → Deduct tax → File through iTax → Pay by the

9th

For employers, accurate payroll records and timely filing can prevent penalties and

make tax compliance easier.

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