The gig economy in digital content monetization, sales promotion, advertising, and transacting in the digital marketplace is rapidly becoming a popular avenue for eking out a living. While this sector continues to grow, one stakeholder is paying close attention: the taxman.
In many cases, a deduction is made by the paying agent and remitted directly to Kenya Revenue Authority (KRA). This system is known as withholding tax. There is nothing particularly new about withholding tax. It has been applied across many countries and has existed in Kenya for years. Consultants, trainers, landlords, and investors are among those commonly taxed through this mechanism.
It is important to note that income already taxed at source through withholding tax must still be declared again in the annual income tax return. For instance, if a content creator receives Sh. 95,000 from YouTube, this means the gross payment was Sh. 100,000 and 5% withholding tax remitted to KRA by YouTubes local agent. In the annual return, the taxpayer is required to declare the gross income of Sh. 100,000, not merely the net amount received.
When remitting withholding tax, the paying agent is required to quote the recipient’s PIN. This means that the transaction details are transmitted both to KRA and to the taxpayer’s ledger. That is where the real significance of the system begins. Withholding tax is sometimes jokingly described as a method of taxation through “snitching.” In practice, however, it is simply a compliance tool.
The paying agent is legally obligated to deduct and remit the tax. Further, where withholding tax applies, failure to deduct may jeopardize the deductibility of that expense for the payer. Logically, the paying party therefore has every incentive to withhold, remit, and disclose the relevant details of the recipient. Since all this information is processed electronically, it forms part of a lasting digital trail.
To tighten compliance further, KRA has introduced pre-populated tax returns. In simple terms, instead of taxpayers manually entering certain income details on the i-Tax return, the incomes already subjected to withholding tax are automatically reflected in the taxpayer’s account. This means that income subjected to withholding tax during the 2025 year of income already appear in the taxpayer’s return.
Taxes may still be reduced through allowable expense claims. However, taxpayers should also remember the e-TIMS requirement: expenses not supported by compliant electronic tax invoices are not allowable for tax purposes subject to some exemptions.
Finally, while many taxpayers are aware that annual income tax returns are due by 30th June, it is equally important to note that where additional tax is payable commonly referred to as balance of tax the due date is 30th April. This position may be confirmed under Section 92A of the Income Tax Act Cap 470.
Simply put, if you were subjected to withholding tax during the 2025 year of income, you have a date with the taxman at the end of this month of April. Siri ya Ushuru ni Kulipa.
This article does not refer to Withholding VAT!