Uli-Invoice 100K. Mbona Iliingia 95K?

You've sent a client an invoice for KES 100,000.

A few days later, only KES 95,000 lands in your account.

You check the payment advice.

You check the invoice.

Then you check your account again.

Something doesn't add up.

Where did the other KES 5,000 go?

If you're a Videographer, Music Producer, Photographer, Graphic Designer, Social media manager, Content Creator or any other kind of freelancer, you've probably experienced this before.

You ask the client,

They tell you:

"We've deducted withholding tax."

End of conversation.

Or so it seems......

The truth is, that missing 5% is one of the most misunderstood parts of freelancing in Kenya.

Thousands of creatives lose money, file incorrect tax returns, or end up with compliance issues simply because nobody properly explained what happens after Withholding Tax(WHT) is deducted.

Let's fix that!

The 5% Mystery: Why Clients Keep Paying You Less Than You Invoiced

Imagine you've just completed a corporate video project,

Or written website copy.

Or produced a soundtrack for a brand campaign,

You finish the work!

The client approves,

So you send your invoice.

Instead of paying the full amount, the company deducts a percentage and sends you the balance.

That deduction is called Withholding Tax (WHT).

Under Section 35 of the Income Tax Act (Cap. 470), certain companies, government institutions, and registered organizations are legally required to deduct tax before paying for professional services!

The responsibility belongs to them.

Not you.

In simple terms:

Your client acts as KRA's collection agent.

They withhold part of your payment and remit it directly to KRA on your behalf.

The income categories covered under Section 10(1) of the Income Tax Act include management fees, professional fees, and training fees.

For most freelancers and creatives, this means income earned from:

- Copywriting

- Photography

- Videography

- Music production

- Graphic design

- Creative consulting

- Content creation

- Social media management

Any one of this is treated as professional fee income.

And yes—KRA is tracking it!

For Resident individuals, the withholding tax rate commonly applied to professional and management fees is 5%.

Which means every time a registered company pays you, a small percentage of your income may already be finding its way to KRA before it reaches your account.

WHT Is an Advance Tax, Not a Final Tax!

This is where many people in the creative economy get confused.

They assume:

"The client already deducted tax."

"KRA already got their money."

"I'm done!"

Unfortunately, that's not how it works.

Withholding Tax is not your final tax bill.

It's an advance payment.

Think of it like this......

Imagine you paid a deposit for an event venue six months before the event.

The deposit isn't the final payment.

It's simply money you've already put toward the final bill.

That's exactly how withholding tax works!

Under Section 39(1) of the Income Tax Act, the tax deducted by your client is treated as tax already paid on your behalf.

But that payment can only be credited against your Annual Income Tax Assessment if you actually file your return.

No return.

No assessment.

No credit!

Which means KRA may be holding your money, but unless you properly declare your income, that credit remains unused.

And that's where expensive mistakes begin!

Let's Follow the Money, A Real Freelancer's Story

Meet Wanjiku.

Wanjiku is a freelance videographer in Nairobi.

Throughout 2025 she worked on:

- Corporate videos

- Product campaigns

- Event coverage

- Social media content

Her total invoices for the year came to:

KES 1,200,000

During the same year she incurred business expenses such

- Equipment rental

- Software subscriptions

- Internet

- Transport

- Production costs

Total allowable expenses:

KES 240,000

Her net business income came to:

KES 960,000

Meanwhile, her clients deducted withholding tax from her payments throughout the year.

Total withholding tax remitted to KRA:

KES 60,000

Now let's calculate what happens when she files her return.

Step 1: Calculate Taxable Income.

Gross Income: KES 1,200,000

Less Allowable Expenses: KES 240,000

Net Taxable Income: KES 960,000

Step 2: Calculate Income Tax.

Using the applicable resident income tax bands:

INCOME BANDSRATETAX

First KES 288,00010%KES 28,800

Next KES 100,00025%KES 25,000

Remaining KES 572,00030%KES 171,600

Total Tax Liability: KES 225,400

Step 3: Apply Available Reliefs

A Relief is any government provision, incentive, or program designed to reduce an individual's or business's overall tax burden

For this example, assume no applicable reliefs.

Tax Due: KES 225,400

Step 4: Claim the Withholding Tax Credit

Remember the KES 60,000 already deducted by clients?

Now it finally comes into play.

Tax Due: KES 225,400

Less WHT Already Paid: KES 60,000

Balance Payable: KES 165,400

That's a difference of KES 60,000!

Not because KRA gave Wanjiku a discount.

Because it was her money all along.

The only reason she can use that credit is because she filed correctly.

The Nil Return Trap That Has Caught Thousands of Freelancers!

Now let's talk about the mistake many freelancers make,

You may have heard advice like:

"Just file nil."

"KRA won't notice."

"Tax was already deducted anyway."

Sounds harmless,

It's not!

When you file a Nil Return, you are effectively telling KRA:

"I earned no taxable income during the year.",

But here's the problem,

KRA may already have records showing:

- WHT deductions

- eTIMS transactions

- Client declarations

- Payment records

In other words:

KRA already knows you got paid!

So when you declare zero income while their records show otherwise, the discrepancy becomes visible,

And that's where compliance issues begin!

From 2026 onwards, KRA's increasing use of automated returns means this information is becoming even easier for them to cross-reference.

Hapa ndio wengi wa hustle economy hujipata kwa shida bila kujua.

Receipts Ni Life! They are documents You Cannot Afford to Lose.

If there's one habit every freelancer should develop, it's record keeping.

Make sure you keep:

✓ Every WHT certificate

✓ Every eTIMS receipt

✓ Every invoice issued

✓ Every invoice received

✓ Every contract

✓ Every expense receipt

✓ Every proof of payment

Think of these documents as your Insurance Policy.

Because if KRA ever questions your figures, your records become your first line of defence.

A good rule of thumb..

Treat your WHT certificates the same way you'd treat a title deed or passport, never lose them!

What Happens When KRA Says, "Tunajua Ulilipwa"

Nobody likes talking about penalties.

But every freelancer should understand the risks.

If KRA determines that income was underdeclared or omitted, additional assessments may arise.

Interest may apply!

Penalties may apply!

Tax credits may be delayed or disallowed until records are verified.

And in serious cases, enforcement powers available under the Tax Procedures Act can become relevant.

The point isn't to create fear.

It's to understand that compliance is usually cheaper than fixing problems later!

As many freelancers eventually discover:

Ignoring tax doesn't make it disappear.

It simply makes future conversations more expensive.

Here's What Every Freelancer Needs to Remember!

If Withholding Tax (WHT) was deducted from your payments:

✓ KRA already has part of your tax money.

✓ That money is not lost.

✓ It can work in your favour.

✓ But only if you file correctly.

The biggest mistake isn't paying tax.

The biggest mistake is failing to claim the tax you've already paid.

Most of us don't get into freelancing because they love tax law.

They get into it because they love writing, filming, designing, producing, building........

But as your hustle grows, understanding where your money goes becomes just as important as understanding how to earn it.

The good news?

Once you understand Withholding Tax (WHT), you're already ahead of thousands of freelancers who are still filing blind.

Na hiyo ni win kubwa kuliko wengi wanadhani.

This article is intended for educational purposes only and does not constitute legal, tax, or financial advice. For guidance specific to your circumstances, consult a qualified tax professional or an ICPAK-certified practitioner.