Withholding tax on insurance commission in Kenya
Why a Kenyan broker's insurance commission arrives net of withholding tax, how to book the gross and the withheld part, and how to claim the credit.
By Achekam · · 4 min read · For Insurance businesses in Kenya
The commission statement from the insurer shows one figure. The amount that lands in the brokerage's bank account is smaller. The difference is not an error and not a fee: it is withholding tax, deducted by the insurer before it paid you and sent to KRA on your behalf. Handled properly, it is a credit against your own income tax. Handled carelessly, it is income that vanishes from the books and a tax credit nobody claims.
This piece explains, from KRA's own guidance, why commission arrives net, what the insurer must do with the tax it deducts, and how a Kenyan brokerage or agency should record the receipt and claim the credit at year end.
Insurance commission is on KRA's list
KRA says payments of interest, dividends, royalties, pensions, gambling winnings, management, professional, training and contractual fees, digital content monetization, sales promotion, marketing and advertising services, insurance commission and rent for immovable property are subject to withholding tax.
Insurance commission is named in that list, so an insurer paying commission to a broker or agent is the payer, and the broker or agent is the payee. Check the current rate for commission on KRA's withholding tax pages when you set up your procedures, rather than copying it from an old commission statement.
Deducted at source, remitted within five working days
KRA says the payer of incomes subject to withholding tax must deduct the tax at source and remit it to KRA within 5 working days after the deduction is made. It adds that the withholder pays the recipient the amount net of the tax deducted, and a withholding tax certificate is issued to the recipient as evidence once the tax is remitted to KRA.
For the broker, that sets three expectations:
- the commission received will be net of the tax;
- the insurer, not the broker, remits the tax;
- a certificate should follow once the insurer has remitted it.
The certificate on iTax
KRA says that once the payer remits the tax, a withholding tax certificate generated on iTax is sent automatically to the payee, and the payee claims it when filing its annual return.
Those certificates are the evidence of the credit. Without them, you have paid tax you cannot show. Download them from iTax regularly rather than at year end, and file each one with the commission statement it relates to.
Not a final tax for a resident brokerage
KRA says withholding tax is a final tax for payments to non-residents with no permanent establishment in Kenya, while for most payments to residents it is not final: the payee must declare the income and the withholding certificates in its annual return and pay any balance.
For a Kenyan brokerage, that means two things. The income to declare is the gross commission, not the net amount banked. And the tax withheld is a prepayment of your own tax, set against what you owe when the return is filed.
Booking the net receipt and the withheld part
A worked example in words. An insurer's statement shows gross commission for the month. It pays the brokerage the gross less the withholding tax. The books should show:
- the bank receiving the net amount;
- a withholding tax recoverable account, an asset, holding the tax deducted;
- commission income at the gross amount.
How you get there depends on how commission enters your books.
From the bank line. In Achekam a business imports bank statements as PDF, CSV, Excel, OFX, QIF, MT940 or CAMT.053, and each import is checked so that the opening balance plus movements equals the closing balance. When the insurer's net payment appears, record it with a manual journal: the bank for the net, withholding tax recoverable for the tax, and commission income for the gross. A business can post manual journals; an unbalanced journal or one dated in a closed month is refused, and a posted journal is corrected only by a reversal, which keeps the history clean if a statement is later revised.
Against an invoice. If the brokerage invoices insurers for commission, know the limit. When a customer pays net of withholding tax, the receipt screens cannot settle the withheld part of the invoice. The receipt clears the net, and the withheld part stays open on the invoice. Agree with your accountant how to clear that balance against the withholding tax recoverable account, and do it every month, so open balances on insurers' accounts mean money genuinely owed. Commission from insurers into the bank covers the wider routine for matching insurer payments.
Matching certificates to statements at year end
Before the annual return, list every commission statement for the year with its gross commission and the tax deducted. Beside each, put the iTax certificate that covers it. Then:
- Total the tax on the statements, and total the certificates.
- Agree the certificates total to the withholding tax recoverable account in the ledger.
- For any statement with no certificate, ask the insurer whether the tax was remitted; until it is, no certificate exists to claim.
- Declare the gross commission and claim the certificates in the return.
A gap can mean an insurer that deducted the tax but has not yet remitted it, or remitted it against the wrong PIN. Both are cheaper to fix in the year than after the return is filed.
The same tax works in reverse when the brokerage pays professional or contractual fees to its own suppliers; withholding tax on supplier payments in Kenya covers that side. KRA's frequently asked questions on withholding tax list the payments subject to the tax and explain deduction, remittance and certificates.
Set up the withholding tax recoverable account this month, book the next commission receipt at its gross, and download the certificates as they appear. At year end, the credit will be there to claim.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
