Nairobi — The Kenya Revenue Authority (KRA) has clarified that if an employer provides meals valued above Sh48,000 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.
This was according to a circular issued by KRA in 2017, 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.'
In a statement, KRA noted that if an employer provides meals valued above Sh48,000 annually to an employee, the entire value of those meals no longer qualifies as a nontaxable benefit; rather, the entire benefit is then subject to tax on the employee.
KRA has asserted that this tax law was put in place so as 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," it stated.
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KRA 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 so as to alleviate the burden on employees from increased tax liability on meals.
KRA has further urged employees to review their records so as to determine any historical exposure from potential additional assessments for tax on meal benefits to their employees, after which they are required to pay the full tax liabilities, inclusive of penalties and interests, if they find any historical exposure.
"If an employer has any historical exposure, they may consider taking advantage of the ongoing tax amnesty to enjoy a waiver of penalties and interest for the period ending 31 December 2022. The amnesty program runs until 30 June 2024. However, for any exposure outside the tax amnesty period,employers would be required to pay the full tax liability inclusive of penalties and interest," it stated.
