KRA announces new rates for Fringe Benefit Tax
The Kenya Revenue Authority (KRA) has announced new rates for Fringe Benefit Tax, a tax applied on loan facilities.
The market interest rate has shifted from nine per cent prescribed at the beginning of 2023, to the current 15 per cent. At the beginning of 2023, the prescribed rate of interest was also nine per cent.
Fringe Benefit Tax is charged on the taxable value of a fringe benefit provided by an employer in a month and is due and payable on or before the 9th of the following month. Currently, the market interest rate of the tax is 15 per cent.
"For the purposes of Section 12B of the Income Tax Act, the market interest rate is 15%. This rate shall be applicable for the months of January, February and March 2024. For purposes of section 16(2)(ja) of the Income Tax Act, the prescribed rate of interest is 15%. This rate shall be applicable for the months of January, February and March 2024. Withholding tax rate of 15% on the deemed interest shall be deducted and paid to the Commissioner within five working days following the computation," KRA stated.
"For purposes of section 5(2A), the prescribed rate of interest is 14%. This rate is applicable for the months of January, February, March, April, May and June 2024."
In July 2023, the taxman raised the Fringe Benefit Tax to 11 per cent before hiking it to 13 per cent in November 2023.
About Fringe Benefit Tax
Fringe Benefit Tax was instituted in 1998, paid by employers with PAYE obligation. Failure to remit attracts a penalty of 25 per cent of the tax due and late payment attracts a penalty of five per cent of tax due.
The tax is paid by employers with respect to loans provided to staff members at an interest rate that is lower than the market value since it is counted as a benefit to the employee.
The taxable value of fringe benefit tax is the difference between the market interest rate and the actual interest paid on the loan.
Where the term of the loan extends beyond the date of termination of employment, it applies as long as the loan remains unpaid.
