Tax on Benefits

Are you aware of the taxable and non-taxable benefits for workers?

Taxation of Benefits

Payment of Employees' Bills

Where an employer takes responsibility by paying rent, electricity, telephone bills, water bills, school fees, or school association fees, club membership fees and similar payments, the employer is required to add such payments to the employee's emoluments and deduct tax under Pay As You Earn (PAYE).

Benefits that cannot be converted into cash

Benefits which cannot be converted into cash are not taxable on employees. However, no deduction in respect of the cost of providing the benefit may be claimed by the employer.

(a) In the case of free residential accommodation provided by an employer, in a house owned or leased by the employer, the cost to be disallowed in the employer's tax computation is 30% of the taxable income paid to the employee. Payments for utilities such as electricity, telephones, water bills, security and similar payments are not included in the meaning of free residential accommodation.

(b) In the case of the provision of motor vehicles to employees on a personal-to-holder basis, the benefit to be disallowed in the employer's tax computation is as follows:

(i) Luxury Cars (2800cc and above) - K20, 000,000 per annum.

(ii) Other Cars

1800cc and below 2800cc - K15, 000,000 per annum.

Below 1800 cc - K9, 000,000 per annum.

Note: A personal-to-holder vehicle means a vehicle provided to an employee for both business and personal use and usually involves payment by the employer of all the expenses associated with running and maintaining the vehicle.

Cash Benefits paid in the form of Allowances

All cash benefits paid in the form of allowances are taxable on the employee under P.A.Y.E.

Examples of such cash benefits are:

• Education allowance
• Housing allowance
• Transport allowance
• Domestic Utility allowances e.g. for electricity, telephone and water
• Commuted car allowance
• Settling in allowance