Learn how to calculate and pay KRA installment tax in Kenya, including deadlines, rates, who is eligible, and how to avoid penalties for late or underpayment.
Understanding Installment Tax: What It Is and Who Pays It
Installment tax in Kenya is a type of advance income tax paid periodically to the Kenya Revenue Authority (KRA) throughout the financial year. It applies to both individuals and companies that expect to have an annual tax liability exceeding KES 40,000, and is regulated under the Income Tax Act Cap 470.
This tax does not apply to persons taxed under the Turnover Tax (TOT) regime.
When Is Installment Tax Due?
Installment tax is paid before the year of income ends — even before your financial accounts are finalized. This form of advance tax is meant to help taxpayers spread their tax liability over the year rather than making a lump sum payment at the end.
Installment Tax Deadlines for Non-Agricultural Sector
For all other taxpayers except those in the agricultural sector:
- 1st Installment – 20th of the 4th month of the accounting year
- 2nd Installment – 20th of the 6th month
- 3rd Installment – 20th of the 9th month
- 4th Installment – 20th of the 12th month
For Agricultural Sector Taxpayers
- 75% of total tax due by the 9th month
- 25% balance due by the 12th month
How to Calculate Installment Tax in Kenya
Installment tax can be calculated in two ways:
1. Prior Year Basis (110% Rule)
Multiply last year’s tax liability by 110% to estimate your current year’s tax.
2. Current Year Estimate
Estimate your current year’s profit and apply the appropriate income tax rate (e.g. 30% for companies or PAYE rates for individuals). Deduct expected withholding tax (WHT) and other credits to get the net tax payable, then divide it into equal installments.
What Happens If You Don’t Pay Installment Tax?
- Failure to pay installment tax on time or underpaying comes with significant penalties and interest charges.
- Late payment penalty: 5% of the unpaid tax
- Interest on unpaid amount: 1% per month or part thereof
- Underpayment penalty: 20% of the difference between what was due and what was paid
- Avoid penalties by planning your tax payments early and reviewing your estimated tax position quarterly.
Claiming Installment Tax Already Paid
If you’ve made installment tax payments during the year, you can claim them as advance tax payments when filing your annual income tax return. The total amount paid is offset against your final tax liability, and you only pay the balance.
Any overpayment may be carried forward or refunded after reconciliation.
Installment tax is a crucial tool for managing your annual income tax burden in Kenya. Whether you’re a salaried professional with extra income, a consultant, or a business owner, complying with KRA installment tax requirements helps you avoid penalties and improves your cash flow management.
Need help estimating or paying your installment tax in Kenya? Contact our expert tax advisors today!
TCC Eligibility: Who Can Get a Tax Compliance Certificate?
To be eligible for a TCC, you must:
- File all tax returns on or before the due dates for all applicable taxes (PAYE, VAT, Income Tax, etc.)
- Pay all taxes due on time
- Clear all outstanding tax liabilities or have an agreed payment plan with KRA
KRA may deny your application if:
- There are missing tax returns
- You have pending tax payments
- You’re under investigation for tax non-compliance
What Happens if You’re Not Compliant?
If you’re not tax compliant, your TCC application will be rejected, and KRA will issue a notice detailing the non-compliance reasons. You must rectify the issues — either by filing missing returns, paying outstanding tax, or agreeing on a payment plan — before reapplying.
A Tax Compliance Certificate is more than just a piece of paper — it’s a gateway to business opportunities, employment, and legal operation in Kenya. Whether you’re an individual, business owner, job seeker, or contractor, ensuring tax compliance with KRA is essential.
Need help applying for your KRA TCC or resolving tax issues before submission? Talk to our tax experts today and stay compliant!
