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EMPLOYMENT INCOME

INCOME TAX ACT CAP 340

F/Y:2008/09

IMPORTANT DEFINITIONS

EMPLOYER: A person (individual or corporate) who employs/remunerates an

individual

EMPLOYEE: An individual engaged in an employment

EMPLOYMENT: (i) Position of an individual in employment of another. (ii) Directorship of a Company

(iii) A position entitling an individual a xed or ascertainale remuneration. !hismay e contractual" permanent or part#time.

(iv) $olding/ Acting in a Pulic %&ce

COMPOSITION OF EMPLOYMENT INCOMEEmployment income comprises of the folloin! "mo#nts "ccor$in! tothe l":%o Amount of private/personal expenditure discharged or reimursed y the

employer.

o !he value of any enets in 'ind provided y/on ehalf of the employer.

o Any amount in compensation of termination of employment or contract.

o

nsurance premiums paid y a tax#exempt employer for life insurance of anemployee and/or his dependants.

o Payments in respect of change of employment/contract terms or payment for

agreement to any restrictive conditions of employment.

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o ages" salary" leave pay" payment in lieu of leave" overtime pay" fees"

commission" gratuity" onus" allowance (entertainment" duty" utility" welfare"housing" medical" any other)

o Discounts in shares allotted to an employee and prot/gain on disposal of such

shares.

NOTE: ALL OR ANY OF THE ABOVE IN COMBINATION COMPRISEEMPLOYMENT INCOME.

EMPLOYEE&S RELIEF

'Employment !"ins not incl#$e$ in ch"r!e"(le income)Pension* Pension is tax exempt.

Me$ic"l E*penses: Discharge or reimursement of an employee+s medical

expenses.

Life Ins#r"nce: Premiums paid y a taxale employer for insurance of thelife of an employee or his/her dependant.

O+ci"l Employment E*pen$it#re: Allowances for or discharge orreimursement of expenses met y an employee while performing duties ofemployment.

Me"ls "n$ Refreshments: !he value of meals/refreshments provided to allemployees at e,ual terms in premises operated y or on ehalf of the employer.

Retirement f#n$: -mployer+s contriution to a retirement fund for theenet of the employee (employee+s contriution is taxale).

Loc"l Ser,ice T"*: !his is deductile efore computing tax.

Other -ene.ts: Any enet whose value is less than shs " duringthe month.

Threshol$: !he rst 0sh.1" per month is tax free for all residentemployees.

Termin"l -ene.ts: 234 of terminal enets (for employees who haveserved the employer for at least years)

COMMON -ENEFITS IN /IND0e h",e "lre"$y note$ th"t the ,"l#e of "ny (ene.t in 1in$ pro,i$e$(y "n employer is p"rt of employment income2

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0h"t is " -ene.t In /in$3 t is facilitation directly/indirectly y an employer of an employee inrelation to past" present or future employment (not necessarily contractual).

T"*"(le Non c"sh Employment (ene.ts #n$er the L" "re:%

o Private use of o&cial motor vehicleo Provision of Domestic 5ervants" 0tilities.

o 6eals" 7efreshment" -ntertainment

o 7elief of Det %ligations/nterest.

o Provision of property y employer to employee (at non arm+s length terms).

o Provision of 7esidential Accommodation.

o nterest on loans elow the statutory rates.

o Any other enets not classied aove.

0hen is " (ene.t $eeme$ to h",e (een pro,i$e$ (y "n employer3Note: A enet need not e provided y the employer or e provided to the

employee. t can e provided y the associate of an employer or it can eprovided to an associate of the employee.

A (ene.t is s"i$ to h",e (een o(t"ine$ in respect of employment:o hen it is provided y an employer or y a third party under arrangement with

the employer or an associate of an employee.o hen it is provided to an employee or an associate of an employee

o hen it is provided in respect of past" present or prospective employment.

4AL5ATION OF -ENEFITS IN /IND!he valuation of enets for the purposes of susection (1) of section 2 of theAct is determined as follows.

. here a enet provided y an employer to an employee consists of theuse or availaility for use" of a motor vehicle wholly or partly for the privatepurposes of the employee" the value of the enet is calculated according to thefollowing formula #

'678 * A * -9C) % D

where"A is the mar'et value of the motor vehicle at the time when it was rstprovided for the private use of the employee8- is the numer of days in the year of income on which the motorvehicle was used or availale for use for private purposes y the employee for allor a part of the day8C is the numer of days in the year of income8D is any payment made y the employee for the enet.

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2. here a enet provided y an employer to an employee consists of theprovision of a house'eeper" chau9eur" gardener" or other domestic assistant" thevalue of the enet is the total employment income paid to the domesticassistant in respect of services rendered to the employee" reduced y any

payment made y the employee for the enet.

For e*"mple if the comp"ny p"ys " !"r$ener sh2 ;7

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the time the enet is reducedy any payment made y the employee for theenet.

PAY AS YO5 EARN RATES OF TAH

Ch"r!e"(le Income R"te of T"*

ot exceeding shs 1" il

-xceeding 5hs. 1" ut 4 of the amount y

not exceeding 5hs. 213" which chargeale income exceeds 5hs.1".

-xceeding 5hs. 213" ut 5hs. "3 plus 24 of the amount

not exceeding 5hs. :" y which chargeale income exceeds

5hs. 213"

-xceeding 5hs. :" 5hs. :3"3 plus 14 of the amount y

which chargeale income exceeds 5hs. :"

PLEASE NOTE:Non resi$ent employees "re not entitle$ to the threshol$ 'shs=7

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Acco#nt"(ility: Account for tax deducted from every employee on amonthly asis.

M"inten"nce of Employees& Recor$s: !o maintain records and 'eepthem for

inspection y 07A on demand for at least ve (3) years.

EMPLOYEE&S O-LIATION9RIKTSo f you are deriving income from more than one source" complete an end of

year return and declare*o !otal income from all sources including usiness income.

o !otal tax paid at source such as PAE-" ithholding tax or provisional tax. (!his

excludes presumptive tax and rental tax paid y such employee).o !ax payale.

EMPLOYEE&S RIKTSAn -mployee*

s not re,uired to furnish return if taxpayer+s source of income is only one

employment and tax is fully deducted and paid at source.

s entitled to claim refund of over#paid tax where applicale.

s entitled to accountaility for all taxes deducted and paid at source y the

employer.

!herefore it is in the interest of the taxpayer to le a return of income wherehe/she has multiple source of income. o one can enFoy a refund of overpaid taxwithout ma'ing a declaration.

0KAT KAPPENS IF TAH IS DEFA5LTED3An employer who fails to withhold tax as re,uired y law is personally liale topay the tax together with any penal tax and interest thereon.

$owever the employer is entitled to recover the tax from the employee" if hewishes to do so" ut c"nnotrecover the interest or penalty from the employee.

DISCLAIMER: This Inform"tion is strictly for p#rposes of !#i$"nce to o#rclientele "n$ is s#(ect to ch"n!e on "men$ment of t"* le!isl"tions "ny other re!#l"tions th"t !o,ern t"* "$ministr"tion2

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