KRA Explains How Installment Tax Works for Companies

The Kenya Revenue Authority (KRA) has outlined how companies are required to pay corporate income tax in advance through an installment tax system.

In a statement on April 17, KRA stated that the Installment tax allows companies to spread their tax payments over the year rather than paying the full amount at the end of the accounting period.

The system is designed to make tax compliance easier and help businesses plan their finances better.

KRA Explains What is Installment Tax?

According to KRA, Installment Tax is an advance tax paid by companies, and under the law, companies are required to pay their estimated annual corporate tax liability in four equal installments during their accounting period.

“Companies are required to pay tax in four equal installments during their accounting period in what is known as installment tax,” stated KRA.

Each installment is due on or before the 20th day of the 4th, 6th, 9th, and 12th months of the accounting period.

According to KRA, paying tax in installments helps companies:

Spread their tax payments evenly across the year
Avoid pressure from a single large payment at year‑end
Stay compliant with tax requirements

By paying portions of the tax earlier, companies reduce the risk of penalties and interest arising from late payments.

How Installment Tax is Calculated

Companies are required to estimate their total tax payable for the year. This estimated amount is then increased by 10 per cent, as required by law.

The resulting figure is divided by four to determine the value of each installment.

For example, a company that estimates its total tax liability at Ksh 100,000 would first add 10 per cent, bringing the amount to Ksh 110,000. This amount is then divided into four equal installments of Ksh 27,500 each.

Installment tax payment dates

For a company whose accounting period runs from January to December, the instalment payments would be made as follows:

Instalment	Month Due	Due Date	Amount
1st instalment	4th month (April)	20 April 2025	Ksh 27,500
2nd instalment	6th month (June)	20 June 2025	Ksh 27,500
3rd instalment	9th month (September)	20 September 2025	Ksh 27,500
4th instalment	12th month (December)	20 December 2025	Ksh 27,500

Each installment must be paid on or before the due date to avoid penalties and interest.

What Happens After the Accounting Period Ends

KRA explains that once the accounting period ends, companies are required to prepare their books of account and have them audited.

After this, the company must file its Corporate Income Tax return, commonly referred to as IT2C, through the iTax system.

“At the end of the accounting period, Companies are required to have their books of accounts audited before filing their annual return after the end of their accounting period,” noted KRA.

If the actual tax payable for the year exceeds the installment tax already paid, the company is required to pay the balance of tax.

Using the earlier example, if the company’s actual tax payable is Ksh 150,000 and it has already paid Ksh 110,000 through installment tax, the balance due would be Ksh 40,000.

Deadline for Paying the Balance of Tax

KRA states that the balance of tax must be paid by the last day of the fourth month after the end of the accounting period.

For companies with a January to December accounting period, the tax balance must be paid by 30 April of the following year.

According to KRA, companies that fail to pay the installment tax or the balance of tax on time are subject to:

A 5 per cent late payment penalty on the tax due
Interest charged at 1 per cent per month on the outstanding amount

To avoid penalties and interest, companies are encouraged to meet all payment deadlines.

KRA notes that the installment tax is intended to help companies meet their tax obligations smoothly by paying gradually over the year.

“To avoid penalty and interest, pay any Balance of tax by 30th April 2026. Installment Tax is simply a smarter way for companies to meet their tax obligations by gradually paying their taxes instead of all at once.”