Last reviewed – 26 February 2025
Taxation of Employment Income in Kenya
In Kenya, taxable employment income includes all payments made by an employer to an employee. This covers:
Fringe Benefits – Non-cash benefits such as housing, vehicles, loans, and education fees.
Fringe Benefits & Taxation Rules
| Fringe Benefit | Tax Treatment |
|---|---|
|
Housing Benefit
|
Taxed at the higher of 15% of gross remuneration (excluding housing) or the rent paid by the employer. If the employer owns the property or rent is not at arm’s length, tax is based on fair market value.
|
|
Company Cars
|
Taxed monthly at the higher of 2% of the vehicle’s initial cost (if employer-owned) or prescribed standard rates.
|
|
Employee Loans (Interest-Free/Low-Interest)
|
Tax burden falls on the employer under Fringe Benefit Tax (FBT).
|
|
Education Fees for Employee Dependents
|
Taxed as part of the employee’s income unless the employer disallows the cost for corporate tax purposes.
|
Net Salary Contracts – If a contract states that remuneration is net of all taxes, the salary must be grossed up to determine taxable income.
PAYE System – All employment benefits are taxed under the Pay-As-You-Earn (PAYE) system.
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