“Pay As You Earn” (PAYE), as a method of tax deduction from employee’s salaries or wages applies to all income from any office or employment. It applies to weekly wages, monthly salaries, annual salaries, bonuses, commissions…e.t.c. Pretty much every single coin earned in this country within employment is liable to tax!

So as part of our two cents to Kenyan start-ups/ SMEs on workers, is that you have to do PAYE for your fixed employees and/or Withholding tax for any consultants (refer to post on Howto do Withholding tax on iTax) who are assisting you briefly – everyone “working” on your start-up is one or the other.

This post is part of our continued coverage of how to use the iTax system (refer to post, An introduction to iTax). Since we have declared there is no way around it, the best way we can handle it is by doing it right so as to avoid getting into any trouble.

Step 1: Download the PAYE excel sheet from iTax (similar to the one from the old tax-payer software/ ITMS).

The PAYE excel sheet that you need to download is found under the “Returns” menu item. You have to pretend that you are doing an actual return to actually get the required files.
So, go to Returns >> File Returns >> Income tax – PAYE >> Download File.

The PAYE spreadsheet is available in both Excel format and Open Document Format (for Open Office). However, when we tested it the ODF format file we found that it was not working at all! So that seems that right now, the only way is to buy Microsoft Excel (not cheap) and use the excel version. Also for the smoothest operation we recommend that you do this on a Windows machine.

PAYE Kenya
PAYE Kenya

Step 2: Fill out the details of the excel sheet and generate the output – zip file.

The PAYE excel sheet has various tabs and you need to fill out all the relevant ones. When you are done, validate the spreadsheet – if it has any errors, the validation will let you know otherwise it will prompt you to generate a zip file that you will upload onto iTax.

Save the zip file on your machine where you can easily access it for uploading.

Step 3: Upload the zip file onto iTax.

Using your company PIN and iTax password, log onto your iTax account then under “Returns” on the to menu item, select “File Return”.