Withholding Tax is a type of tax that is deducted at the source of payment. This includes one time payments or regular payments that are not from employment. Common examples include payments from consultancy work or interest paid out from various investments.
As its name implies, this tax is paid (i.e. withheld) before the payment is done. What this means is that the entity making the payment (e.g. an investment bank) will withhold a percentage from the payment (e.g. interest) before paying it to the customer.
This amount that is withheld is the Withholding Tax and the bank in this case is referred to as the Withholder and the customer is the Withholdee.
The withholder is expected to remit this tax to KRA while specifying the withholdee’s KRA Pin in order to identify the beneficiary of the payment.
On receiving the tax, KRA issues a Withholding Tax Certificate to the withholdee for purposes of filing returns. The withholdee is therefore expected to declare this income when filing their yearly returns filing even if they have no other source of income such as employment.
This post is going to cover on how to file the returns for withholding tax in the context of those that have no other income i.e. those who would otherwise have had to just file nil returns (e.g the unemployed, students, retired etc).
Step 1: Prepare Withholding Tax Certificates
For each payment that is issued, KRA will send you a Withholding Tax Certificate to the email address registered in your iTax. The certificate is a PDF file that contains a summary of the paid amount and the tax withheld, both of which you’ll need to file the returns.
If you cannot locate the PDFs in your email you can reprint your Withholding Tax Certificates from your iTax dashboard as explained below.
How to Reprint KRA Withholding Tax Certificates
- Log into your iTax account.
- In the menu, go to the Certificates option and select Reprint Withholding Tax Certificate.
- In the form leave all the boxes empty and click the Consult button. Doing that will generate a table containing a summary of all the Withholding Tax Certificate that have been issued to your PIN.
- Go to the last column of the table called WHT Certificate No and click the number to download the certificate in PDF.
Make sure you only reprint certificates falling in the tax period you’re filing for i.e the previous year (e.g you only need certificates issued in 2020 if you’re filling your 2021 returns).
Tax certificates issued in the current year will have to be filed in the subsequent year. Use the Certificate Date column to identify the dates the certificates were issued.
Armed with your tax certificates, you now have all the data necessary to file your returns.
Step 2: File Returns in the IT1 Individual Resident Return Excel
- Log into your iTax account, go to the Returns option in the menu and select the File Returns.
- Select your Tax Obligation as Income Tax – Resident Individual and click Next.
- Download the Income Tax – Resident Individual Form (Excel) from the page. It’s essential that you use the latest Excel spreadsheet that is provided in this page. Other versions on the internet may be outdated and thus will be rejected by iTax when uploading the generated returns.
- Open the Excel Spreadsheet using Microsoft Word Excel (2007 and later) and enable Macros when prompted.
- Go to the second sheet (A_Basic_Info) and enter your KRA Pin and select the type of return as Original.
- Next enter the return period from the 1st of January (e.g. 0/01/2020) to the 31st of December of the previous year (e.g. 31/12/2020).
- Select Yes for the next row that asks ‘Do you have any income other than employment income?‘.
- Go to the next sheet (B_Profit_Loss_Account_Self). At the top you’ll notice the following columns:
- Business (Ksh)
- Farming (Ksh)
- Rental (Ksh)
- Interest (Ksh)
- Commission (Ksh)
- Other (Ksh)
- Decide which column corresponds or rather is most appropriate to the Withholding Tax you’re filing for.
For instance, if you’re filing Withholding Tax for interest payments then you’ll use the Interest (Ksh) column and if it’s commission from consultancy work then you’ll use the Commission (Ksh) column.
- In row 1.1 Gross Turnover (General Trading / Manufactured Goods) or 1.2 Gross Turnover of Profession / Consultancy enter the total amount of the money paid out to you as listed in the Withholding Tax Certificate(s).
You can find this amount listed as Gross Amount of Transaction (Ksh) under the Details of Tax Withheld section.
- In the same sheet go to section 5 (Operating Expenses) and enter any expenses you incurred to obtain the above income under the provided categories.
If the expense category you need is not provided, use Part 1: Other Expenses section at the bottom of the sheet to specify your expenses.
- Go to the next sheet (C_Balance_Sheet) and enter any numeric value (e.g 1) in row 1.1 (Land and Building) and the same value in row 6.1 (Proprietor’s Capital).
- Go to the last sheet (T_Tax_Computation) and in row 13.4 Withholding Tax (Total of “Withholding Tax” from O_WHT_Credits) enter the gross amount of the tax withheld as listed in the Withholding Tax Certificate(s).
You can find this amount listed as Amount of Tax Withheld (Ksh) under the Details of Tax Withheld section. Refer to the screenshot in 10 above.
- Next check row 14 (Tax Due) and confirm the value generated. A positive value indicates that you owe KRA the listed sum, whereas a negative value indicates that KRA owes you the sum.
If the value is negative you are required to fill your bank details in the second sheet (A_Basic_Info) under Section A Part 2 before proceeding to the next step.
If the value is positive, make sure you’ve filled the gross amounts correctly and have included any expenses that you incurred.
- Finally, click the VALIDATE button at the bottom of the sheet (T_Tax_Computation) sheet.
- After some time you’ll get a prompt asking whether to generate the upload file. Click Yes. The generated Zip file will be saved automatically in your Documents folder.
Step 3: Upload Zip File in iTax
- Go back to the iTax dashboard where we left off in Step 2 above.
- Below the Income Tax – Resident Individual Form section, select the type of return as Original and enter the same return period you filled in the Excel sheet.
- In the Upload Form section click the Browse button and select the generated Zip file.
- Check the ‘I Agree to the Terms and Conditions‘ and click the Submit button. The Zip file will be uploaded into the iTax system and an e-Return Acknowledgment Receipt will be generated in PDF for you to download.
So that’s it. Hope you found this tutorial useful and not as confusing as the KRA tutorial on YouTube that is partly responsible for this post. Cheers!