How to Reduce Your Taxes in Kenya-legally

6 ways to beat the  8% vat tax on fuel 

Kenyans have witnessed a erratic increase of costs of all kinds . The Kenyan government through Kenya Revenue Authority has not been mindful of the plight of Wanjiku either. With tough economic times they have gone ahead to increase taxes on fuel (The famous 8% VAT on petroleum) and financial products.

In an effort to help Kenyans tighten the belt here are a few pointers to help reduce the tax burden and save some cash while at it

Register with a mortgage firm to save towards a home ownership plan and get tax exemption.

The income law in Kenya allows for tax exemption when you save  Kes 4000  and above monthly. look at this as a double edged sword ,it gives you a chance to save towards something worthwhile while reducing your tax burden

Take Life Insurance. 

Kenyan tax laws allow tax relief of up to Kes: 5000 monthly for premium paid on life insurance policies with a maturity period of at least 10 years . So this ideally means the government will be paying for your life insurance.

Apply for a Tax Exemption Certificate

People with disability qualify for a 5 years renewable tax exemption certificate of up to Kes 12,500 from their income per month. This is a huge saving either way you look at it.

Register with Pension Scheme.

There are many registered retirement benefits schemes that one can register with in addition to NSSF. When you save for retirement with this schemes, you qualify for tax exemption for up to 20,000 per month and 240,000 per year. It makes money sense to save with a retirement scheme rather than the normal bank savings account because it serves you twice, no tax and higher savings interest.

Avoid Tax Return Fines and Penalties

Simply put file your tax returns in time . The best way to go about this is to file returns in January rather than wait till June the deadline.

When you file your KRA tax returns late you will be charged additional tax equivalent to 5% of the normal tax or KES 2,000 for individuals, whichever is higher, this penalty is charged every year. Furthermore, there is interest on unpaid tax, being 2% per month on the unpaid amount plus the penalty. This starts accruing one month after the due date.

Invest in tax-free Instruments

The Kenya Post office Savings Bank offers a good environment to invest in fixed deposits tax free. Post Bank is able to do this because it regulated by the Kenya post office savings bank act cap 493B unlike other commercial banks that are regulated by the central bank of Kenya.

Sources:

1. https://www.standardmedia.co.ke/lifestyle/article/2001297321/8-ways-to-legally-reduce-your-tax-burden