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How to File Pay As You Earn Returns in Kenya

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  • Post category:Blog on Tax
  • Post last modified:February 24, 2025
  • Reading time:6 mins read
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All taxpayers registered for pay as you earn (PAYE) are expected to collect and remit without fail. If they fail to do so, they are penalised.

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What is Pay As You Earn?

Pay as you earn (PAYE) is a tax system in which employers deduct income tax from their employees’ salaries before paying them. The deducted amount is then remitted monthly to the Kenya Revenue Authority (KRA). This system ensures that employees pay their taxes gradually throughout the year instead of making a lump-sum payment at the end of the year.

Importance of PAYE

There are many benefits of PAYE to the government. The following are some of those benefits.

  • Ensures tax compliance by both employers and employees.
  • Provides the government with a steady flow of revenue.
  • Reduces the burden of annual tax payments for employees.

Who is Expected to File PAYE Returns?

There are two persons expected to file tax returns:

a) Employers

b) Employees

a. Employers

Employers in Kenya must file PAYE returns if they have employees earning a taxable income above the set threshold. The employers are responsible for deducting, filing, and remitting the taxes to the KRA.

b. Employees

Employees themselves do not file PAYE returns directly. However, they should ensure that their employers have deducted and remitted the correct amount of tax. Employees can check their tax compliance status via the KRA iTax portal.

Self-Employed Individuals

Self-employed individuals do not pay PAYE. Instead, they pay income tax under a different category, such as Turnover Tax (TOT) or Instalment Tax.

Step-by-Step Guide to Filing PAYE Returns in Kenya

Filing PAYE returns is a crucial process for businesses to remain tax-compliant. Below is a step-by-step guide to help employers file PAYE returns efficiently.

Step 1: Log into the iTax Portal

  1. Visit the KRA iTax portal.
  2. Enter your KRA PIN and password to log in.
  3. Click “Returns” and select “File Return” from the dropdown menu.

Step 2: Select the PAYE Return Form

  1. Under the tax obligation section, choose “PAYE” as the tax type.
  2. Download the PAYE Excel return template provided by KRA.

Step 3: Fill in the PAYE Return Form

  1. Open the downloaded Excel template.
  2. Enter employer details such as KRA PIN, name, and contact information.
  3. Input employee details, including:
    • Employee names and KRA PINs.
    • Gross salary before tax deductions.
    • PAYE amount deducted from each employee’s salary.
    • Any allowable deductions (e.g., pension contributions, insurance reliefs).

Step 4: Validate the PAYE Return Form

  1. Use the KRA Taxpayer Software (TPV) to validate the Excel sheet.
  2. Ensure there are no missing details or errors.
  3. Generate the ZIP file required for submission.

Step 5: Upload and Submit PAYE Returns

  1. Go back to the iTax portal and click on “File Returns”.
  2. Select “Upload” and attach the ZIP file.
  3. Click Submit the return and wait for a confirmation message.

Step 6: Generate the Payment Slip

If there is a PAYE liability (tax payable), follow these steps:

  1. Click “Payment” on the iTax portal.
  2. Select “Generate Payment Slip”.
  3. Download and print the payment slip.

Step 7: Make PAYE Payment

You can pay PAYE via:

  • Bank Deposit – Visit any authorized bank and present the payment slip.
  • Mobile Money (M-Pesa Paybill 222222) – Enter the payment slip number as the account number.
  • Electronic Funds Transfer (EFT) – Transfer directly from your bank to KRA’s account.

Step 8: Confirm PAYE Filing and Payment

  1. Check your email for an acknowledgement receipt from KRA.
  2. Verify your PAYE balance on the iTax portal.
  3. Ensure all payments are reflected on your tax compliance certificate (TCC).

Penalties for Late Filing or Non-Compliance

  • Late Filing Penalty – Kshs 10,000 or 5% of the tax due, whichever is higher.
  • Late Payment Penalty – 25% of the unpaid tax plus interest at 1% monthly.
  • Legal Action – Continuous non-compliance can result in legal proceedings.

Common Mistakes to Avoid When Filing PAYE Returns

  • Failing to validate the Excel sheet before uploading.
  • Entering incorrect employee details such as KRA PINs or salary amounts.
  • Missing the filing deadline (by the 9th of every month).
  • Not generating a payment slip before making payments.

Benefits of Filing PAYE Returns on Time

  • Avoid penalties and interest charges.
  • Maintain a clean tax compliance record with KRA.
  • Enable employees to receive tax refunds or benefits without complications.
  • Enhance business credibility and compliance with government regulations.

Conclusion

Employers have a crucial tax obligation to file pay-as-you-earn (PAYE) returns in Kenya. By following the steps outlined above, businesses can ensure compliance with KRA regulations and avoid penalties. The key to a smooth PAYE filing process is timely submission, accurate data entry, and efficient use of the iTax portal.

Remember to keep documents and records of the submitted returns and payments to stay on top of your tax obligations. By understanding and adhering to PAYE tax regulations, employers and employees can contribute to Kenya’s economic growth while maintaining legal compliance.

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