Fringe Benefit Tax
For the purposes of Section 12B of the Income Tax Act, the market interest rate remains 7% for October, November, and December 2021.
A tax known as fringe benefit tax shall be payable by the employer in respect of loans provided at an interest rate lower than the market interest rate to an individual who is a director or an employee or a relative of a director/employee.
Fringe benefit tax shall apply to loans provided after 11 June 1998.
The taxable value of the fringe benefit shall be the difference between the interest that would have been payable on the loan if calculated at the market interest rate and the actual interest paid on the loan.
Fringe benefit tax payable by the employer is taxable at corporation rate of tax of 30% of the determined value of the benefit.
Low Interest Rate
For purposes of section 5(2A), the low interest rate is currently 7%. This is applicable for the months of July, August, September, October, November, and December 2021.
Where an individual is a director or an employee or is a relative of a director or an employee and has received a loan including a loan from an unregistered pension or provident fund by virtue of his position as a director or his employment, or the person to whom he is related. The director/employee/relative shall be deemed to have received a benefit in that year of income.
The taxable value of the fringe benefit shall be the difference between the interest that would have been payable on the loan received if calculated at the prescribed rate of interest and the actual interest paid on the loan.
The low interest benefit applies to loans provided on or before 11 June 1998.
Click here for the Public Notice issued.
Official Kenya Interest Rate Change
Official Rates for October to December 2021:
|Interest on fringe benefits loans||7%|
|Interest on loans for corporate taxes||7%|
|Corporate tax rate||30%|
Impact of Kenya Interest Rate Change on PaySpace
• The new rate for interest on fringe benefit has been implemented on the system effective 01 November 2021.
• No other statutory changes have been announced.
Should you have any questions regarding this change, please feel free to visit our Support page for more ways to get in touch, or email us at [email protected].
The PaySpace Team