Differentiate between the low interest benefit tax and the fringe benefits tax

Low interest benefit tax and the fringe benefits tax

Low interest benefit results from the charging of a low rate of interest on an employment benefit as compared to the commissioner‟s prescribed marked rate of interest. The employment benefit applicable is normally staff loan(s) advanced to staff at a concessionary rate(s) of interest.

The difference between the commissioner‟s prescribed market rate (currently 15%) and the concessionary rate of interest charged to staff by the employer constitutes a taxable benefit for all loans given before 12 June 1998. The benefit is taxable on the employee based on the ruling PAYE rates.

Fringe benefits tax (FBT)

Fringe benefits tax is applicable to all employment benefits (loans) given to employees or their relatives on or after 12 June 1998 at concessionary rates of interest. It is based on the 91 days
average treasury bill rates. The average rate is computed and issued by the Kenya Revenue Authority through the press.

The tax is payable by the employer at the average treasury bill rate less the interest rate charged to the employees. The tax is based on the ruling corporate tax rate which is currently 30%.

FBT is submitted together with PAYE before 10th of the following month together with PAYE.

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