i. VALUE OF BENEFIT – SECTION 5(2)(b)
Where an employee enjoys a benefit, advantage or facility of whatsoever nature in connection with employment or services rendered; the value of such benefit should be included in employee’s earnings and charged to tax.
Minimum Taxable Amount:
The minimum taxable aggregate value of a benefit, advantage or facility is Kshs.3,000 per month or Kshs. 36,000 per annum. This is with effect from 1st January 2006.
ii. Following amendments to Section5(5) of the Income Tax Act through the Finance Act 2003 and 2008 the chargeable value of a benefit, advantage or facility …
(other than motor vehicle and housing benefits)
… granted to employee by virtue of employment or services rendered should be taken as the higher of the cost to employer or fair market value of the benefit, provided that the Commissioner may from time to time prescribe rates of benefits where the cost or fair market value cannot be determined.
iii. In the case of an employee share ownership plan, the value of the benefit shall be the difference between the market value per share and the offer price per share at the date the option is granted by the employer. For clarification purposes, benefits arising from ESOPs not registered by the Commissioner are taxable.
iv. Meals served to employees in a canteen or cafeteria operated or established by the employer or a third party who is a registered taxpayer (whether the meals are supplied in the employer’s or third party’s premises) are a tax exempt benefit where the value of the meal does not exceed Kshs. 4,000 p.m per employee. Effective date: 13th June 2014.
In line with the provisions of the law, the Commissioner has prescribed rates on the following:-
PRESCRIBED RATES
A SERVICES
(i) Electricity (communal or from a generator) Kshs.1500 p.m., Kshs.18000 p.a.
(ii) Water (communal or from a borehole): Kshs.500 p.m., Kshs.6000 p.a.
(iii) Provision of Furniture: 1% of cost to employer. If hired the cost of hire should be brought to charge.
(iv) Telephone (Landline and Mobile Phones): 30% of bills
B AGRICULTURAL EMPLOYEES:
REDUCED RATES OF BENEFITS
(i) Water Kshs.200 p.m., Kshs.2400 p.a.
(ii) Electricity Kshs.900 p.m., Kshs.10800 p.a.
Note: The above rates in (A) and (B) are effective from 12th June 2003.
School fees:
Education fees of employee’s dependents or relatives will not be taxed on the employees provided the same has been taxed on the employers.