The Kenya Revenue Authority (KRA) has stated that if the employer provides Kes 48,000 meals annually to an employee, the entire value of those meals no longer qualifies as a non-taxable benefit under Section 5(4)(f) of the ITA.
In a statement, KRA asserted that this tax law was implemented to cushion the incomes of low—and middle-income employees, who constitute the majority of meal benefit recipients.
“The above circular was issued pursuant to Section 5(4)(f) of the ITA, which states that gains or profits from employment do not include the value of meals served to employees in a canteen or cafeteria operated or established by the employer or provided by a third party who is a registered taxpayer, where the value of the meal does not exceed the sum of Kes 48,000 per year per employee, subject to such conditions as the Commissioner may specify,” KRA said.
The taxman has urged employers to gross up the value of meal benefits for tax purposes by including the tax amount in the benefit itself and remitting the PAYE due on behalf of the employee to alleviate the burden on employees from increased tax liability on meals.
Further, It has called upon employees to review their records to determine any historical exposure from potential additional assessments for tax on meal benefits to their employees, after which they must pay the full tax liabilities, including penalties and interests if they find any historical exposure.
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