Withholding tax — when the buyer holds tax back
Certain payments to suppliers are subject to WHT. The buyer withholds a slice of your invoice and remits it to KRA on your behalf.
Withholding tax (WHT) is an income-tax mechanism: instead of you paying the income tax yourself at year-end, your customer holds back a percentage of the invoice and remits it directly to KRA. The customer gives you a Withholding Tax Certificate that you can offset against your final income-tax liability.
Common WHT rates (residents)
| Service | Rate | Notes |
|---|---|---|
| Professional fees (consultancy, audit, legal) | 5% | Most common case for service businesses |
| Management or contractual fees | 5% | Service-style contracts |
| Royalties | 5% | IP licensing |
| Rent (commercial) | 10% | Tenant withholds |
| Interest (other than banks) | 15% | |
| Dividends (other than to corporate) | 5% | |
| Construction & contracts | 3% | Builder of public works |
Non-resident rates are higher and listed separately. Confirm the specific service category against Income Tax Act §35 and the current KRA WHT schedule before invoicing a non-resident counterpart.
How a WHT invoice looks
When the buyer is a WHT agent, your invoice shows the gross value, the VAT, and a withholding-tax line that REDUCES the cash receivable. The buyer pays you the net and pays KRA the WHT directly.
| Line | Amount (KES) |
|---|---|
| Consultancy fee | 100,000 |
| VAT 16% | 16,000 |
| Gross invoice value | 116,000 |
| Less: WHT 5% of fee (100,000 × 5%) | (5,000) |
| Net cash payable to you | 111,000 |
| KRA receives from the buyer | 5,000 |
WHT is on the FEE excluding VAT. Calculating it on the gross including VAT is a common mistake — keep the two taxes separate on the invoice line breakdown.
Recording WHT in Vendly
Configure a WHT line item
Settings → Withholding Tax Configs. Define the WHT type (Professional Fees 5%, Construction 3%, etc.) with the matching GL accounts. Reuse across invoices.
Add the WHT to the invoice
When you issue an invoice to a WHT agent, expand the Withholding Tax section and pick the relevant config. Vendly deducts the WHT line, the invoice's payable balance becomes the net amount.
Collect the WHT certificate from the buyer
The buyer's iTax-issued WHT certificate is the evidence you'll use to claim the credit against your annual income tax. File a copy on the invoice's Documents tab.
Year-end
At year-end, sum the WHT certificates received and claim the total as a tax credit on your annual return. If WHT exceeds your income tax due, you can request a refund from KRA (slow) or carry the credit forward.
Kenya law that applies
- Income Tax Act §35 (Withholding Tax)
Schedule of withholding-tax rates: professional fees 5%, management fees 5%, contractual fees 3%, rent 10% (residential to non-resident), etc.
- KRA iTax portal
Where monthly PAYE, VAT and other returns are filed.