📌 Introduction
Are you a Kenyan working abroad or earning from foreign clients online? Do you receive income through PayPal, Upwork, or a foreign salary? If yes — this post is for you.
In Kenya, foreign income is taxable under certain conditions, especially if you are tax resident. Yet, most people don’t know when or how to report it correctly — and this could cost you a Tax Compliance Certificate (TCC) or even land you on KRA’s audit list.
Let’s break it all down in a simple, clear guide for 2025.
🧭 Who Needs to Declare Foreign Income?
You must declare your foreign-sourced income if:
✅ You are tax resident in Kenya, and
✅ You earned income from outside Kenya (salary, freelance, dividends, rent, crypto, etc.)
🧑🏽⚖️ What the Law Says
According to Section 3(1) of the Income Tax Act (Cap. 470):
“Tax shall be charged for each year of income… on all the income of a person, whether resident or non-resident, which is accrued in or derived from Kenya or from outside Kenya if the person is resident in Kenya.”
In short: KRA taxes worldwide income of residents.
🧱 How Is Tax Residency Determined?
As per Section 2 of the Act, you are a resident if:
- You stay in Kenya for 183 days or more in any 12-month period, or
- You have a permanent home in Kenya and stay any number of days during the year.
This includes:
- Kenyan remote workers living abroad but frequently returning
- Diaspora Kenyans maintaining a Kenyan residence
- Foreigners who live and work from Kenya for global companies
🌍 What Counts as Foreign Income?
Examples include:
- Salaries from overseas employment
- Freelance or gig income via Upwork, Fiverr, etc.
- YouTube, TikTok, Meta payouts
- Dividends from foreign companies
- Foreign property rental income
- Crypto gains held or traded offshore
- Royalties, commissions, affiliate marketing earnings
📥 How to File Foreign Income in Kenya (Step-by-Step on iTax)
1. Log in to iTax (https://itax.kra.go.ke)
Use your KRA PIN and password.
2. Go to Returns → File Income Tax Return (IT1 or IT2)
- IT1: For individuals with employment income only
- IT2: For self-assessment (business, freelance, investment, etc.)
3. Declare Foreign Income
Under Section 5: Other Income, input your earnings from abroad. Include:
- Type of income (freelance, dividends, etc.)
- Amount in KES (use CBK exchange rate of that period)
- Any foreign tax paid (see next section)
4. Upload Supporting Documents
Attach:
- Payment slips or contracts
- Proof of foreign tax deducted (where applicable)
- Bank/PESA receipt screenshots
5. Submit
Download your acknowledgment receipt.
🔁 What About Double Taxation?
Kenya has Double Taxation Agreements (DTAs) with countries like:
- UK
- Canada
- India
- South Africa
- Germany
If your foreign income was already taxed abroad, you may be eligible for relief under Section 41 of the Income Tax Act.
Tip: If no DTA applies, you may still claim relief under Section 39 — but this is partial and must be well documented.
💸 How Do I Convert Foreign Income to KES?
Use the Central Bank of Kenya (CBK) exchange rate for the month the income was earned.
Check https://www.centralbank.go.ke for historical rates.
📌 Common Mistakes to Avoid
❌ Assuming diaspora income is tax-free
❌ Ignoring KRA returns if income isn’t earned locally
❌ Using personal PayPal accounts with no record keeping
❌ Filing zero returns while receiving foreign income
❌ Not converting to KES using CBK rates
❌ Not disclosing crypto gains or remote employment
🤔 FAQs
Q1: I earn through Upwork and withdraw via PayPal. Should I declare this?
Yes. That is freelance income and is taxable in Kenya if you’re a resident.
Q2: I live abroad full-time but have a PIN. Do I still file?
Only if you are tax-resident. If you’re truly non-resident, declare only Kenya-source income.
Q3: What’s the penalty for not declaring foreign income?
KRA may issue back taxes, interest, and penalties. You may also lose eligibility for a TCC.
Q4: Can KRA detect my foreign income?
Yes. KRA collaborates with international financial intelligence networks. Bank records and remittance trails can be flagged.
🧠 Pro Tip
💡 Create a simple Excel sheet to log all your:
- Income (USD, EUR, etc.)
- Exchange rates used
- Proof of tax paid abroad
- Associated expenses (especially if self-employed)
This makes filing easier and defensible in case of audit.
🏁 Conclusion: Declare What’s Yours (Legally)
The Kenya Revenue Authority is closing tax gaps through digital intelligence and global coordination. Whether you’re in Berlin, Dubai, or Kisumu — your foreign income can be taxed in Kenya.
✅ Stay on the right side of the law
✅ Track your income
✅ File on time
✅ Claim relief where due
Need help? Ushuru.com is here to guide you — from compliance checklists to 1-on-1 consultations.