The Kenya Revenue Authority (KRA) has stated that an employee that provides meals worth more than Ksh 48,000 per year, the total amount of those meals is no longer considered a non-taxable benefit under Section 5(4)(f) of the Income Tax Act.
In a circular issued by KRA in 2017, the corporation said gains or profits from employment do not include the value of meals served to employees in a canteen or cafeteria operated by the employer.
It also excluded meals sold in canteens provided by a third party who is a registered taxpayer.
KRA clarified that if an employer delivers meals worth at more than Ksh 48,000 per year to an employee, the entire value of the meals is no longer considered a nontaxable benefit, and is taxed on the employee.
KRA noted that this tax provision was meant to help low- and middle-income employees, who make up the vast majority of meal benefit claimants.
“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 Ksh 48,000 per year per employee, subject to such conditions as the Commissioner may specify,” KRA said.
Additionally, KRA recommended businesses to bulk up the value of meal benefits for tax reasons by including the tax amount in the benefit itself.
It also encouraged businesses to remit the PAYE payable on behalf of the employee, hence reducing the burden on employees due to increasing tax responsibility on meals.
KRA further urged 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 interest, if they discover any historical exposure.