Module 1: Getting Started with iTax
How the Kenyan Tax System Is Organised
Before you open iTax for the first time, it helps to know who collects tax in Kenya, which laws they apply and how the different taxes fit together. Once you see the overall map, the screens on iTax stop looking like a maze of codes and start making sense. You will also find it easier to ask the right question when you call KRA or speak to a tax agent.
Who collects tax and under which laws
The Kenya Revenue Authority (KRA) is the government agency responsible for assessing, collecting and accounting for most national taxes. KRA does not make tax law. Parliament makes the law, and KRA administers it. The main laws you will meet as an individual or small business are:
- The Income Tax Act, which taxes income from employment, business, rent, investments and other sources.
- The Value Added Tax Act, which taxes the supply of most goods and services by registered businesses.
- The Tax Procedures Act, which sets the rules for registration, filing, payment, record keeping, penalties, objections and appeals across all taxes.
- The Excise Duty Act, which applies to specific products and services such as certain drinks, fuel and some financial services.
- The annual Finance Act, which Parliament passes most years to change rates, thresholds, reliefs and procedures in the other laws.
The Finance Act is the reason this course keeps telling you to confirm current figures with KRA. A rate or threshold that was correct last year may have changed on 1 July. KRA publishes updates, public notices and guides on its official website, and those are your reference points.
Direct and indirect taxes
Kenyan taxes fall into two broad groups. Direct taxes are charged on the income of the person who earns it. Income tax is the main example, and it is collected in several ways: Pay As You Earn (PAYE) deducted by employers, withholding tax deducted by payers on certain payments, instalment tax paid during the year, and the balance settled when you file your annual return. Turnover Tax and Monthly Rental Income tax are simplified forms of income tax for specific groups of taxpayers.
Indirect taxes are built into the price of goods and services and passed on to the final buyer. VAT and excise duty are the main ones. A registered business charges VAT to its customers, deducts the VAT it paid on its own purchases, and pays the difference to KRA.
Where iTax fits
iTax is KRA's online system for most domestic taxes. Through it you register for a PIN, see your tax obligations, file returns, generate payment slips, apply for a Tax Compliance Certificate, and view your ledger, which shows what KRA believes you owe or have paid. Customs and border taxes run on separate systems, and eTIMS, which you will meet later, handles electronic invoicing. For everyday personal and small business filing, iTax is where you will spend your time.
Worked example: one person, several taxes
Consider Wanjiru, a hypothetical accountant employed by a Nairobi logistics firm. She also rents out a bedsitter in Kasarani and runs a weekend cake business from home.
| Activity | Tax involved | Who handles it |
|---|---|---|
| Salary | Income tax through PAYE | Her employer deducts and remits monthly; she reports it in her annual return |
| Rent from the bedsitter | Rental income tax (check whether the monthly rental income regime applies to her) | Wanjiru files and pays herself |
| Cake sales | Income tax on business profit, or Turnover Tax if she qualifies and registers for it | Wanjiru keeps records, files and pays |
Wanjiru has one PIN but several possible obligations. Each one appears separately on iTax with its own return and deadline. Her employer only takes care of the salary part. Everything else is her own responsibility.
Common mistakes to avoid
- Assuming PAYE settles everything. PAYE covers salary only. Side income from rent, business or consultancy must be declared separately.
- Relying on old figures. Rates and thresholds copied from a blog post or a friend may be out of date. Check KRA's current guidance.
- Confusing KRA with the law. If you disagree with an assessment, the Tax Procedures Act gives you rights to object and appeal. Knowing that the law sits above KRA helps you use those rights properly.
- Ignoring the ledger. Your iTax ledger is KRA's record of your account. Look at it at least once a year so that surprises do not build up.
Exercise
List every source of income you received in the last twelve months, such as salary, rent, business sales, consultancy fees or interest. Next to each source, write which tax you think applies and who is responsible for paying it: you, your employer, or a payer who deducts it. Keep this list; you will compare it with your iTax obligations in a later lesson.
Key points
- KRA administers tax law; Parliament makes it, and the Finance Act changes rates most years.
- Income tax is direct; VAT and excise duty are indirect taxes passed on in prices.
- One PIN can carry several obligations, each with its own return and deadline.
- PAYE covers salary only; other income must be declared by you.