Kenyans working for international organisations and who have for decades been enjoying Pay as you earn exemptions will soon start remitting PAYE to the government.
The Kenya Kwanza administration now wants the bodies including the United Nations to start transmitting PAYE for locals working for the global bodies including diplomatic organisations.
The government has already issued a circular to the organisations which have signed Host Country Agreements with the government to facilitate the payment of income tax for their employees.
The Host Country Agreements, a type of international social security agreement, are usually in line with the United Nations conventions on diplomacy.
In the circular by the Ministry of Foreign and Diaspora Affairs, the government also wants to address issues about immunity for foreign employees in these organizations.
"Section 37 of the Income Tax Act, Chapter 470, Laws of Kenya provides that: 'An employer paying emoluments to an employee shall deduct therefrom, and account for tax thereon, to such extent and in such manner as be described," said the Ministry of Foreign Affairs in a letter dated January 10, 2024.
"This places responsibility on such organisations as employers to deduct income tax from local staff and remit it to the Kenya Revenue Authority (KRA).''
All United Nations-affiliated organisations enjoy income tax exemptions for Kenyans working for them.
This is the latest of the many initiatives the government has come up with to widen the tax net as it seeks additional resources to finance its ambitious budget.
President William Ruto has insisted that all Kenyans must pay taxes saying his administration will continue to slash borrowing to bridge the budget gaps.
Insiders say that the government's move to issue the circular was informed by the 'misguided ' belief that Kenyans working for international organisations are exempt from tax.
The Kenya Revenue Authority is keen to bring on board all Kenyans working with international organisations under the tax bracket as it seeks to shore up revenue.
Under the Diplomatic Immunity Act and the UN Conventions, non-Kenyans working in international organisations are exempt from income tax but not locals employed by the same agencies.
President Ruto has set an ambitious target for KRA to collect Sh2.6 trillion in the 2023-2024 financial year.
