How are different expense categories treated in Kenya for reimbursement?

In Kenya, expense categories are treated in various ways for reimbursement, and many have specific requirements regarding taxability. For all expense types, proper documentation is mandatory.

Taxable Categories

Internet at Home: Internet connection at home is considered a taxable benefit and must be taxed on the employee when reimbursed.

Mobile Phone Usage: Mobile Phone expenses is considered a taxable benefit and must be taxed on the employee when reimbursed.

Furniture: Furniture purchased by the employee, even when approved for work purposes, is treated as a taxable benefit and must be grossed up and included in payroll.

Gifts: Gifts provided to clients or employees require supervisor approval and are treated as taxable benefits.

Health Insurance (Non-Approved Providers): Health insurance premiums reimbursed for insurance providers not approved by the Insurance Regulatory Authority (IRA) of Kenya are treated as taxable benefits, grossed up, and added to payroll.

For a list of approved insurers, employees must refer to the IRA website: https://www.ira.go.ke/licensed-mips/

Expenses with Special Requirements

Mileage: Mileage is reimbursed at a statutory rate of KES 72 per kilometer. Detailed journey records (date, purpose, route, distance, and person visited) are mandatory. Rates may be revised in line with guidance from AA Kenya.

Per Diem / Subsistence Allowances:

• Domestic per diems: The first KES 2,000 per day paid to an employee while out of town on official duty is treated as reimbursement of expenses and is not taxable.
• Foreign per diems: Foreign per diems may be paid subject to prior approval, with a maximum of USD 200 per day. Where meals are provided, per diems must be reduced by 25% (one meal) or 50% (two meals).

Car Rental Fuel: Fuel costs are reimbursable only when linked to approved business travel. Fuel for personal vehicles outside mileage claims is not reimbursable.

Non-Taxable Expenses

These include business travel transportation, accommodation during business trips, domestic and foreign per diems within statutory limits, parking fees with valid receipts, client entertaining when properly documented and strictly business-related, computer equipment and software used exclusively for business purposes, stationery and office supplies, dongles and data cards for business use, foreign currency exchange commissions, professional institute or association memberships required by the job role, business-related training, exchange rate differences, approved work permits and visas, and exceptional business-related expenses, provided all expenses are wholly, exclusively, and necessarily incurred for business purposes and properly documented