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Income tax as the name denotes is a tax payable on a person’s taxable income and is classified as a direct tax. It is regulated by the provisions of the Income Tax Act of 1993 and its regulations thereof. It is imposed upon all persons earning income; being individuals, partnerships, companies or other taxable entities, to name a few; associations, trusts, clubs. It is assessed annually and all rates changes also fixed annually by parliament’s motion through the Minister of Finance’s recommendation through his budget speech.

Pay As You Earn (PAYE) is a tax charged by an employer from an employee’s earnings, then remitted to LRA. All natural persons are entitled a tax credit (which is a saving of tax) from their tax liability, the amount of which is reviewed annually by the Minister of Finance

Employment income is the total earnings of an employee that arise from an employment relationship. Total earnings refer to all income received by or credited in favor of an employee arising from an employment relationship.

Employment income includes the following: wages, salaries, bonuses, allowances, overtime payments, leave payments, commission, gratuity, supplementary pay, fees, severance pay and other income of similar nature. It may even be gifts by the employer or third parties that would otherwise not be given, but for the employment relationship.

 

How is the employment income taxed?

Under the PAYE system, the amount of tax to be deducted from the employee’s remuneration or total earnings depends on the following:

  • The employees’ total earnings,
  • The applicable marginal tax rates,
  • Allowable deductions (e.g. Contributions to an approved pension fund, retirement annuity fund.)

Resident Individuals: marginal rates per annum –

1st M61, 080. 00 @ 20%,

excess @ 30%

less Tax Credit of M7, 260.00

Non-residents: standard rate – 25%

 

Tax Tables PAYE Tax Calculator
 

This is tax paid ahead of the financial year end, usually/preferably in Two (quarterly) installments. This helps ease the burden of paying the taxes due as a lump sum at the end of the financial year, with the taxpayer adding a little more to his payment if he had been under assessed and where the taxpayer had been over assessed, a refund will be made. Find the guide on the attachments below

Advanced Corporation Tax (ACT):

This is a tax arising as consequence of distributions of dividends by a company and is not imposed on the company but on shareholders receiving such dividends. Find the guide on the attachments below

 

This is a tax imposed by the LRA on the employer, based on the employer’s fringe benefit taxable amount (the value of non cash benefits) afforded to the employee. It is a requirement of the law that taxpayers file a return at the end of the financial year, being March 31st, with late submissions being charged penalty after the 30 June. A taxpayer can lodge an application for late submission with The CommissiTwor General, citing reasons and at the CommissiTwor’s discretion, an extension may be granted.
 
This is money withheld by the payer from the Gross amount (before VAT) payable to the payee on services rendered; that is, the payer (withholding agent) makes payment to the payee, less the withholding tax deduction and remits such to the LRA. As a general rule, withholding taxes are levied on supply of services and are applicable to both resident and non resident suppliers.