Consultants set to pay higher tax on income - In2EastAfrica

By In2EastAfrica - Mon Jun 20, 9:04 pm

Finance minister Uhuru Kenyatta reads the Budget at the National Assembly this year. He proposed to increase tax rates for professionals in his June 8 Budget speech when he said that consultants, contract staff, and commission sales agents pay a withholding tax of 10 per cent, compared to five per cent previously. Frederick Onyango

Consultants and professionals holding multiple jobs will start paying higher taxes on their earnings this month in a move aimed at putting them at par with workers in regular employment.

Finance minister Uhuru Kenyatta proposed to increase tax rates for professionals in his June 8 Budget speech when he said that consultants, contract staff, and commission sales agents pay a withholding tax of 10 per cent, compared to five per cent previously.

Mr Kenyatta said the review would give a fairer tax burden for employees across the board, observing that professionals have been taking home most of their earnings.

Those holding multiple jobs will only claim a monthly tax relief from one main employer. Kenyan employees are entitled to a uniform monthly personal relief (MPR) of Sh1,162 (Sh13,944 annually) irrespective of their marital status and remuneration scale.
?I have noted that some employees work for more than one employer and? end up getting multiple reliefs. I propose to amend the PAYE rules to provide that an employee shall only qualify for one personal relief,? Mr Kenyatta said.

The higher taxes mean that going forward, professionals in the affected categories will keep less of their earnings as the tax-man claims a larger share of their income while cutting back on their relief claims. The increased taxes for the independent professionals are, however, still lower compared to those applied to professionals in regular employment, a move that preserves the high margins in the independent professional services market.

PAYE taxes for regular employees are graduated, with higher earners paying more taxes. For instance, those earning less than Sh10,165 pay 10 per cent on their pay as taxes while those earning from Sh38,893 upwards pay 30 per cent.

Independent professionals have been paying lesser taxes because most of them meet the cost of delivering their services as they, for instance, rent office space and pay telephone bills.

For regular employees, who enjoy extra benefits aside from salaries, such costs are paid for by their employers hence their heavier tax burden.

By ELIZABETH WANJIRU, Business Daily

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Source: http://in2eastafrica.net/consultants-set-to-pay-higher-tax-on-income/

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