Taxes involve more than just the amount you pay, they also involve receiving the reliefs and refunds to which you are legally entitled. Employer's refusal to provide tax relief on PAYE and the onerous tax refund procedure are two long-standing problems that the Finance Bill 2025 attempts to address to make life easier for taxpayers.
If you work in Kenya as a salaried employee, you are aware that you can receive tax relief for specific contributions or expenses. For instance, each resident taxpayer receives personal relief, and there are special reliefs for things like mortgage interest, insurance premiums, and so forth. Theoretically, these ought to be included by your employer in your monthly PAYE computations to reduce your monthly tax payment if you qualify for a relief. Many employers haven't been doing this in reality. Some payrolls simply deduct PAYE on gross salaries without properly applying the reliefs, particularly for things like insurance or mortgage relief. This can be due to system limitations, oversight, or ignorance.
To address this, the Finance Bill 2025 suggests making it legally mandatory for employers to use all relevant exemptions and reliefs when calculating PAYE. That is to say, it is required and neither voluntary nor a favor. If you are eligible for a 15% discount on your life insurance premiums, for example, your employer is required to include that discount in your monthly PAYE calculation. The same is true for mortgage interest, and other contributions.
The goal of the bill's relief and refund changes is to improve the efficiency and fairness of the tax system. To prevent you from having to pay out of pocket, you should receive the reliefs for which you are eligible right away. If you do wind up overpaying, the state should reimburse you within a fair amount of time. As a taxpayer, you have that right. These policies greatly enhance the daily experience of tax compliance, even though they might not make as much news as new tax rates. If properly executed, you'll see that you're no longer lending KRA money through excessive deductions, and when users see that refunds are arriving on time, their trust in the system may grow. The tax authorities are making a sort of "goodwill" gesture by promising to treat you more fairly even as we ask you to make your fair share of payments.
