Clarification On Taxation Of Meals Provided By Employers


Background: 

The Kenya Revenue Authority (KRA) issued a Technical Circular (Ref: 1005/1) in March 2017, outlining guidelines for the taxation of employment income, particularly regarding benefits provided to employees. Among these benefits, the circular stated that meals provided to employees up to a value of Kshs. 48,000 per year per employee were not subject to tax, in accordance with Section 5(4)(f) of the Income Tax Act.

Clarification: 

Recently, there has been confusion regarding the interpretation and application of this provision. The KRA has clarified that if an employer provides meals exceeding the value of Kshs. 48,000 per annum per employee, the entire value of the meal becomes taxable income for the employee. Essentially, any amount spent on meals beyond the specified limit is now subject to taxation under the Income Tax Act.

Implications for Employers: This clarification places the responsibility on employers to ensure compliance with tax regulations regarding employee benefits, specifically meals provided. Employers must now accurately assess the value of meals provided to employees and account for any amounts exceeding the non-taxable limit of Kshs.48,000 per annum per employee. Failure to do so could result in non-compliance with tax laws and potential penalties.

Conclusion: 

Employers are urged to adhere to this clarification from the KRA to avoid any legal repercussions and ensure proper tax compliance. By understanding the revised interpretation of Section 5(4)(f) of the Income Tax Act, employers can accurately determine the tax implications of providing meals to their employees. This measure aims to enhance transparency and accountability in tax matters while supporting the government's revenue collection efforts. 

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