2025 EFFECTIVE TAX RATE GUIDE – KENYA (Cap 470)
1. INDIVIDUALS – EMPLOYEES (PAYE)
Below are practical effective rates based on Kenya PAYE bands + personal relief (2,400 per month).
Monthly Salary vs Effective Rate (REAL % of gross pay lost to PAYE):
| Monthly Salary (KSh) | PAYE Payable (approx.) | Effective Rate |
| 20,000 | 0 | 0% |
| 30,000 | ~2,140 | 7.1% |
| 50,000 | ~6,700 | 13.4% |
| 80,000 | ~13,500 | 16.9% |
| 120,000 | ~23,700 | 19.7% |
| 200,000 | ~43,700 | 21.8% |
| 500,000 | ~153,700 | 30.7% |
| 1,000,000 | ~358,700 | 35.9% |
👉 Insight: Most middle-income Kenyans pay an effective rate of 14%–22%, not the statutory 30%.
👉 High earners (above 800k) approach an effective rate close to 36% because of the 35% top band.
2. SOLE PROPRIETORS & SMALL BUSINESSES (TURNOVER TAX / NORMAL TAX)
If using Turnover Tax (TOT):
- 3% of gross turnover (final tax)
Effective rate = 3%, no deductions allowed.
But applies only for businesses with KSh 1M – 25M turnover and NOT excluded sectors.
If using normal income tax (individual rates):
- Effective rate is same as PAYE table above, but based on taxable profits after expenses.
For many SMEs, the effective rate is 10%–18% because deductibility of expenses reduces taxable income
3. CORPORATIONS (RESIDENT COMPANIES)
Standard Corporate Tax Rate
- 30% of taxable profit
Typical effective rates (after adjustments, capital allowances, deductions, losses):
| Business Type | Typical Effective Rate |
| Small to Mid-sized company | 18% – 25% |
| Capital-intensive manufacturing | 10% – 20% (due to high capital allowances) |
| Loss-making companies (with carried forward losses) | 0% – 8% |
| Service-based companies | 22% – 30% |
special corporate regimes
| Category | Effective Rate |
| NIFC-certified companies | 15% (first 3 years) → 20% (next 4 years) |
| Special Economic Zones (SEZ) | 10% for first 10 years → 15% thereafter |
| Multinationals under Pillar 2 (Minimum ETR) | Minimum 15% by top-up tax |
4. RENTAL INCOME – LANDLORDS
| Rental Type | Effective Rate |
| Residential Rental (monthly return) | 7.5% of gross rent (final tax) |
| Commercial property (normal corporate/individual tax) | 10%–30% depending on expenses |
Residential rental tax is very favourable:
Effective rate = 7.5% (no deductions)
5. CAPITAL GAINS TAX (CGT)
| Disposal Type | Effective Rate |
| Normal property sale | 15% (final tax) |
| Shares of private companies | 15% |
| NIFC-certified entities | 5% |
Effective rate is exactly these percentages because CGT is based on the net gain, not gross sales
7. WITHHOLDING TAX (KEY EFFECTIVE RATES)
| Transaction | Rate |
| Management/Professional fees (Residents) | 5% |
| Management/Professional fees (Non-residents) | 20% |
| Dividends (Residents) | 5% |
| Dividends (Non-residents) | 15% |
| Contractual payments (Residents) | 3% |
| Rent to non-residents | 30% |
| Royalties | 20% |
| Interest | 15% |
WHT is final tax for non-residents in many categories.
8. VAT (NOT INCOME TAX BUT IMPACTS EFFECTIVE COSTS)
| Category | Rate |
| Standard | 16% |
| Petroleum | 16% |
| Zero-rated | 0% |
| Exempt | 0% but non-creditable |
SUMMARY OF THE RATES -2025
| Category | Sub-category / Description | Effective Rate 2025 |
| Individuals (PAYE) | Salary 20,000 | 0% |
| Individuals (PAYE) | Salary 30,000 | 7.1% |
| Individuals (PAYE) | Salary 50,000 | 13.4% |
| Individuals (PAYE) | Salary 80,000 | 16.9% |
| Individuals (PAYE) | Salary 120,000 | 19.7% |
| Individuals (PAYE) | Salary 200,000 | 21.8% |
| Individuals (PAYE) | Salary 500,000 | 30.7% |
| Individuals (PAYE) | Salary 1,000,000 | 35.9% |
| SMEs & Sole Proprietors | Turnover Tax (TOT) | 3% of gross (final tax) |
| SMEs & Sole Proprietors | Normal Income Tax (with expenses) | 10% – 18% |
| Corporations | Standard Corporate Tax | 30% |
| Corporations | Typical Effective Rate – SMEs | 18% – 25% |
| Corporations | Capital-Intensive Industry | 10% – 20% |
| Corporations | Loss-Making Companies | 0% – 8% |
| Corporations | SEZ Enterprises | 10% (first 10 yrs) → 15% thereafter |
| Corporations | NIFC-Certified Companies | 15% (3 yrs) → 20% (4 yrs) |
| Corporations | Minimum Top-Up Tax (Pillar 2) | 15% minimum ETR |
| Rental Income | Residential Rental Tax | 7.5% of gross (final tax) |
| Rental Income | Commercial Rental (normal tax) | 10% – 30% |
| Capital Gains Tax | Normal Property / Shares | 15% |
| Capital Gains Tax | NIFC Certified | 5% |
| Digital / Non-Resident | Significant Economic Presence Tax | 3% of gross |
| Digital / Non-Resident | Withholding Tax Range | 5% – 20% |
| Digital / Non-Resident | Permanent Establishment Tax | 30% |
| Withholding Tax | Professional Fees (Resident) | 5% |
| Withholding Tax | Professional Fees (Non-Resident) | 20% |
| Withholding Tax | Dividends (Resident) | 5% |
| Withholding Tax | Dividends (Non-Resident) | 15% |
| Withholding Tax | Contractual Payments | 3% |
| Withholding Tax | Royalties | 20% |
| Withholding Tax | Interest | 15% |
| VAT | Standard Rate | 16% |
| VAT | Zero Rated | 0% |
| VAT | Exempt Supplies | 0% (non-creditable) |
- INDIVIDUALS – EMPLOYEES (PAYE)
Below are practical effective rates based on Kenya PAYE bands + personal relief (2,400 per month).
Monthly Salary vs Effective Rate (REAL % of gross pay lost to PAYE):
|
Monthly Salary (KSh) |
PAYE Payable (approx.) |
Effective Rate |
|
20,000 |
0 |
0% |
|
30,000 |
~2,140 |
7.1% |
|
50,000 |
~6,700 |
13.4% |
|
80,000 |
~13,500 |
16.9% |
|
120,000 |
~23,700 |
19.7% |
|
200,000 |
~43,700 |
21.8% |
|
500,000 |
~153,700 |
30.7% |
|
1,000,000 |
~358,700 |
35.9% |
👉 Insight: Most middle-income Kenyans pay an effective rate of 14%–22%, not the statutory 30%.
👉 High earners (above 800k) approach an effective rate close to 36% because of the 35% top band.
- SOLE PROPRIETORS & SMALL BUSINESSES (TURNOVER TAX / NORMAL TAX)
If using Turnover Tax (TOT):
- 3% of gross turnover (final tax)
Effective rate = 3%, no deductions allowed.
But applies only for businesses with KSh 1M – 25M turnover and NOT excluded sectors.
If using normal income tax (individual rates):
- Effective rate is same as PAYE table above, but based on taxable profits after expenses.
For many SMEs, the effective rate is 10%–18% because deductibility of expenses reduces taxable income
- CORPORATIONS (RESIDENT COMPANIES)
Standard Corporate Tax Rate
- 30% of taxable profit
Typical effective rates (after adjustments, capital allowances, deductions, losses):
|
Business Type |
Typical Effective Rate |
|
Small to Mid-sized company |
18% – 25% |
|
Capital-intensive manufacturing |
10% – 20% (due to high capital allowances) |
|
Loss-making companies (with carried forward losses) |
0% – 8% |
|
Service-based companies |
22% – 30% |
special corporate regimes
|
Category |
Effective Rate |
|
NIFC-certified companies |
15% (first 3 years) → 20% (next 4 years) |
|
Special Economic Zones (SEZ) |
10% for first 10 years → 15% thereafter |
|
Multinationals under Pillar 2 (Minimum ETR) |
Minimum 15% by top-up tax |
- RENTAL INCOME – LANDLORDS
|
Rental Type |
Effective Rate |
|
Residential Rental (monthly return) |
7.5% of gross rent (final tax) |
|
Commercial property (normal corporate/individual tax) |
10%–30% depending on expenses |
Residential rental tax is very favourable:
Effective rate = 7.5% (no deductions)
- CAPITAL GAINS TAX (CGT)
|
Disposal Type |
Effective Rate |
|
Normal property sale |
15% (final tax) |
|
Shares of private companies |
15% |
|
NIFC-certified entities |
5% |
Effective rate is exactly these percentages because CGT is based on the net gain, not gross sales
- WITHHOLDING TAX (KEY EFFECTIVE RATES)
|
Transaction |
Rate |
|
Management/Professional fees (Residents) |
5% |
|
Management/Professional fees (Non-residents) |
20% |
|
Dividends (Residents) |
5% |
|
Dividends (Non-residents) |
15% |
|
Contractual payments (Residents) |
3% |
|
Rent to non-residents |
30% |
|
Royalties |
20% |
|
Interest |
15% |
WHT is final tax for non-residents in many categories.
- VAT (NOT INCOME TAX BUT IMPACTS EFFECTIVE COSTS)
|
Category |
Rate |
|
Standard |
16% |
|
Petroleum |
16% |
|
Zero-rated |
0% |
|
Exempt |
0% but non-creditable |
SUMMARY OF THE RATES -2025
|
Category |
Sub-category / Description |
Effective Rate 2025 |
|
Individuals (PAYE) |
Salary 20,000 |
0% |
|
Individuals (PAYE) |
Salary 30,000 |
7.1% |
|
Individuals (PAYE) |
Salary 50,000 |
13.4% |
|
Individuals (PAYE) |
Salary 80,000 |
16.9% |
|
Individuals (PAYE) |
Salary 120,000 |
19.7% |
|
Individuals (PAYE) |
Salary 200,000 |
21.8% |
|
Individuals (PAYE) |
Salary 500,000 |
30.7% |
|
Individuals (PAYE) |
Salary 1,000,000 |
35.9% |
|
SMEs & Sole Proprietors |
Turnover Tax (TOT) |
3% of gross (final tax) |
|
SMEs & Sole Proprietors |
Normal Income Tax (with expenses) |
10% – 18% |
|
Corporations |
Standard Corporate Tax |
30% |
|
Corporations |
Typical Effective Rate – SMEs |
18% – 25% |
|
Corporations |
Capital-Intensive Industry |
10% – 20% |
|
Corporations |
Loss-Making Companies |
0% – 8% |
|
Corporations |
SEZ Enterprises |
10% (first 10 yrs) → 15% thereafter |
|
Corporations |
NIFC-Certified Companies |
15% (3 yrs) → 20% (4 yrs) |
|
Corporations |
Minimum Top-Up Tax (Pillar 2) |
15% minimum ETR |
|
Rental Income |
Residential Rental Tax |
7.5% of gross (final tax) |
|
Rental Income |
Commercial Rental (normal tax) |
10% – 30% |
|
Capital Gains Tax |
Normal Property / Shares |
15% |
|
Capital Gains Tax |
NIFC Certified |
5% |
|
Digital / Non-Resident |
Significant Economic Presence Tax |
3% of gross |
|
Digital / Non-Resident |
Withholding Tax Range |
5% – 20% |
|
Digital / Non-Resident |
Permanent Establishment Tax |
30% |
|
Withholding Tax |
Professional Fees (Resident) |
5% |
|
Withholding Tax |
Professional Fees (Non-Resident) |
20% |
|
Withholding Tax |
Dividends (Resident) |
5% |
|
Withholding Tax |
Dividends (Non-Resident) |
15% |
|
Withholding Tax |
Contractual Payments |
3% |
|
Withholding Tax |
Royalties |
20% |
|
Withholding Tax |
Interest |
15% |
|
VAT |
Standard Rate |
16% |
|
VAT |
Zero Rated |
0% |
|
VAT |
Exempt Supplies |
0% (non-creditable) |
