Withholding Tax in Kenya: Rates, Rules and 2026 Changes for SMEs
Withholding tax (WHT) is the tax deducted at source when you pay someone — before the money reaches them. Kenyan SMEs meet it constantly: rent, dividends, professional fees, royalties, consultancy and even some payment-platform charges. This guide covers the 2026 rates, who must deduct, when to remit, and what the Finance Act 2026 changed.
1. What Is Withholding Tax?
When your business pays a supplier, contractor or investor for certain categories of income, you must deduct a percentage of the payment and remit it to KRA on their behalf. The recipient then claims it as a tax credit. As the payer, you are the withholding agent — and if you fail to deduct or remit late, you become personally liable for the tax, plus penalties and interest.
2. The 2026 Withholding Tax Rates
Rates differ for residents and non-residents. The most common categories for SMEs:
| Payment | Resident | Non-resident |
|---|---|---|
| Management / professional / training fees | 5% | 20% |
| Royalties | 5% | 20% |
| Dividends (below 12.5% shareholding) | 5% | 15% |
| Interest (general) | 15% | 15% |
| Contractual fees | 3% | 20% |
| Digital content creators | 5% | 20% |
| Digital marketplace/platform payments | 5% | 20% |
| Winnings (betting/gaming) | 20% | 20% |
| Rent — immovable property (non-resident) | — | 30% |
| Insurance / reinsurance premiums | — | 5% |
| Sales promotion, marketing, advertising | 5% | 20% |
| Supply of goods to a public entity | 0.5% | 5% |
3. When to Remit Withholding Tax
Withholding tax must be remitted within 5 working days after the deduction (for most categories). File through iTax (WHT return) and pay via the portal — see our iTax filing guide for the workflow.
4. What the Finance Act 2026 Changed
The Finance Act, 2026 expanded the definitions of management or professional fees and royalties to include:
- Interchange fees and merchant service fees from card payments (paid to issuing banks)
- Payments for use of or access to digital platforms, payment networks and payment-processing systems
- Software distribution arrangements with regular payments through distributors
5. How to Register and File
- Ensure your business has a KRA PIN (see our KRA PIN guide)
- Register for the Withholding Tax obligation on iTax under "Registration"
- Deduct WHT at the correct rate on each qualifying payment
- Issue the recipient a withholding certificate (they need it for their tax credit)
- File the WHT return and remit within 5 working days
6. Penalties for Getting It Wrong
- Late remittance: penalties and interest on the unpaid amount (see our deadlines calendar for the rates)
- Failure to deduct: you become personally liable for the tax itself
- Late filing: the standard late-filing penalty applies per obligation
7. Common Questions
See the FAQ below for the everyday scenarios — rent paid to a landlord, freelancers, dividends, and cross-border payments.
Frequently Asked Questions
What is the withholding tax rate for professional fees in Kenya?
Management, professional and training fees attract withholding tax of 5% for resident payees and 20% for non-residents. If a double tax treaty applies, the rate may be reduced.
Who is required to deduct withholding tax in Kenya?
A payer must withhold only where the Income Tax Act requires it or KRA has appointed the payer as a withholding agent. Rent treatment depends on the regime: resident landlords under Monthly Rental Income (MRI) and appointed resident agents have specific rules; non-resident rental income is treated separately. Do not assume every tenant must deduct WHT. Failure to deduct makes the payer personally liable for the tax.
When must withholding tax be remitted to KRA?
For most categories, withholding tax must be remitted within 5 working days of the deduction. Returns and payment are done through the KRA iTax portal.
Does withholding tax apply to M-Pesa or card payment fees in 2026?
Under the Finance Act 2026, the definitions of management or professional fees and royalties were expanded to capture interchange fees, merchant service fees, and payments for digital platforms and payment networks. Businesses paying these fees should confirm with KRA or a tax adviser whether withholding now applies to their specific payments.
Sources and update record
Updated 26 October 2026: Limited rental withholding claims to appointed agents and distinguished related tax regimes.
Stay updated
Stay updatedGet the next guide in your inbox.