PAYE is a method of collecting tax from individuals in gainful employment. According to the Kenya Revenue Authority, gain or profits include wages, casual wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission, bonus, gratuity or subsistence, traveling, entertainment or other allowances received in respect of employment or service rendered.
All employers are required to register for this obligation. Deductions on salaries and wages are remitted to Kenya Revenue Authority on or before 9th of the month that follows.
The returns on PAYE are done online via the iTax system, but where an individual has zero income, then they have to file a nil return. However, an employer cannot file a nil return on employee deductions.
Employers should note the need for compliance to avoid the harsh penalty that comes with late filing of returns and or late remittance. Penalty for late filing of returns is 25% of the tax due or Kshs 10,000 whichever is higher.
The penalty for late remittance is even more punitive, especially where an employer has a vast number of employees. It attracts a penalty of 5% of the tax due and 1% per month on the unpaid tax until the tax is paid in full.
For an employer who is unable to remit or pay taxes on time perhaps due to inadequate funds to pay salaries when the same is due are nonetheless required to file returns. This is important for employer order to avoid paying the penalty for both late remittance and late filing.