Meals Benefit
Under Section 5(4)(f) of the Income Tax Act (Cap. 470), the value of meals provided by an employer is not treated as taxable employment income, and so is not subject to PAYE, up to a set limit.
The limit
The first Kshs. 5,000 per month (Kshs. 60,000 per year) of the value of meals provided to each employee is exempt. The limit was raised from Kshs. 48,000 per year by the Tax Laws (Amendment) Act, 2024, with effect from 27th December 2024.
What qualifies
The exemption applies to the value of meals served to employees:
- in a canteen or cafeteria operated or established by the employer; or
- provided by a third party who is a registered taxpayer, whether the meals are supplied on the employer’s premises or the third party’s premises.
Notes
- This is a non-cash benefit. Meals must be provided in kind. A cash meal allowance paid to an employee is generally taxable in full as employment income.
- The exemption is subject to any conditions the Commissioner of Domestic Taxes may specify.
- It is separate from the general rule on other benefits, where benefits, advantages or facilities with a total value below Kshs. 5,000 per month (Kshs. 60,000 per year) are not taxed, but once that is exceeded the full amount is taxed. See Other Benefits.
Meals above the limit
Only the amount above Kshs. 5,000 per month is taxed. KRA’s Step-by-Step Guide for the Simplified PAYE Return says: “Capture Value of Meals. If the amount is above Kshs. 5,000 per month, the incremental amount will be taxed on the employee.” This matches the Tax Laws (Amendment) Act, 2024, under which employment income does not include “the first Kshs. 60,000 per year (Kshs. 5,000 per month) on the value of meals provided by an employer.”
This differs from other non-cash benefits. For those, the guide says that if the amount is above Kshs. 5,000 per month, the full amount is taxed on the employee.
| Benefit type | Value up to Kshs. 5,000 per month | Value above Kshs. 5,000 per month |
|---|---|---|
| Meals | Fully exempt | Only the excess is taxable |
| Other non-cash benefits | Fully exempt | The full amount is taxable |
Example
If the meal benefit in a month is Kshs. 7,500, the exempt portion is Kshs. 5,000 and the taxable portion is Kshs. 2,500. That Kshs. 2,500 goes into the taxable pay calculation.
On the simplified P10, enter the full value of meals in the relevant column. The return then subjects only the excess to tax.