Tag: freelance

  • Understanding Your Tax Obligations As a Freelancer & Consultant Living in Kenya

    Understanding Your Tax Obligations As a Freelancer & Consultant Living in Kenya

    When it comes to taxes in Kenya, individual consultants and freelancers are subject to the same regulations. This is because they have multiple sources of income. Their income is determined by their productivity.

    In this article, I will shed a light on the kind of tax obligations that consultants and freelancers needs be enrolled in.

    Income Tax

    This is compulsory tax for all people with a Tax PIN. Income tax is filled annually by the taxpayer on iTax portal. This is the direct tax on income and is charged for each year of income on all the income of a person, with resident or non resident that is accrued in or was derived from Kenya.

    As of July 2023, tax rates now vary depending on the amount of income you earn per year. Here is table.

    Tax BandAnnual Income ksh.Monthly Income Ksh.Rate
    On the first 288,00024,00010%
    On the next100,0008,33325%
    On the next5,612,000467,66730%
    On the next3,600,000300,00032.5%
    On the excess of9,600,00032,33335%
    Source : Kenya Revenue Authority.
    Watch Video – Understanding Tax Obligations as a freelancer or consultant

    Every individual tax payer is entitled to get a Personal Relief of Kshs. 28,800 per annum (Kshs. 2,400 per month). This only applies to resident tax payers. Non residentials are expected to pay their taxes at the rates indicated above with no relieve.

    Most consultancy clients will withhold 5% of the total cost of services and remit the amount to Kenya Revenue Authority. This amount reflects in your account and deducted from tax payable at the end of the year. E.g if your tax payable at the end of the year is Ksh. 50,000 and your total withholding tax credit amount is Ksh. 20,000, then you will pay Ksh. 30,000 as tax payable.

    Penalties – If you don’t file your income tax returns 6 months after your annual accounting year has ended, you will be penalized Ksh. 20,000.

    VAT Tax

    VAT tax is an indirect tax that is paid by person who consumes taxable goods and services supplied and consumed in Kenya. This is another tax obligation that a freelancer or a consultant needs to voluntarily enroll in order to benefit. Its not mandatory but necessary if you are charging VAT on your services or your client is withholding VAT tax on the services that you have rendered.

    Additionally, it benefits you as all the VAT tax on purchases on your PIN will be credited into your tax account via ETIMS. This is accounted for when you file your return at the end of the month.

    Unless otherwise, VAT tax rate for freelancers and consultants is 16% of the total cost of goods or services.

    Once you are enrolled for VAT tax, you will be required to file return before the 20th date of every month. As of November 2024, most of the purchases and sales tax are prepopulated into the downloadable return excel sheet to simplify the process.

    How To Claim VAT Tax

    1. In order to claim VAT tax on all your purchases, you need to first enroll for VAT tax via iTax portal. Once the VAT obligation is added to your PIN, you can start claiming VAT on all your purchases while filling your monthly returns.
    2. When making purchases, ask your seller for VAT tax receipt. They will request that you give them your PIN number. This way your purchase will qualify as it will be registered on ETIMS.
    3. Keep all receipts with claimable VAT in your file for easy reference.
    4. File your VAT returns before 20th day of the following month for previous months return. e.g. You file January VAT returns before 20th Feb.
    5. You will be penalized Ksh.10,000 if you file your returns later than 20th day of the month.

    Digital Marketplace Supplies Registration

    If you’re a non-resident freelancer or consultant selling goods or services in Kenya over the internet, an electronic network, or a digital marketplace, you must register for Value Added Tax (VAT). This applies even if your sales are less than the usual KES 5 million annual turnover threshold.

    Paying Your Taxes

    You can pay your tax online on iTax portal. You can pay via Mpesa or Bank. You will first need to generate a payment slip on iTax portal then use the payment slip No. for the payment to be processed. If you have any problem, its advisable to contact KRA support for assistance.

    Conclusion

    Understanding your tax obligations makes navigating the tax system straightforward. Paying taxes is essential for the growth and expansion of your freelance or consultancy business. Don’t be misled into avoiding your tax responsibilities.

    Tax-compliant freelancers and consultants are often the preferred choice for businesses and individuals seeking services. Adhering to tax regulations also opens doors to higher-value contracts, as many organizations require proof of tax compliance before awarding significant projects.

    And that is it from me here. I hope you have found this article helpful. Let me know your thoughts in the comments section below. And if you need help to create content, you can reach out to me here.

    Up until next time, bye bye and take care.

    Follow me on social media @cheptionymutai

  • I was Almost Scammed On Reddit With a Freelance Job Offer!

    As Covid-19 continue to claim lives and wreck havoc on businesses across the world, remote way of working has become the new modus operandi. Fraudulent business groups on social media are emerging everyday targeting new and existing freelancers who are desperate to make money online.

    In this blogpost, I will share my personal way of identifying a typical fraudulent Freelancer recruitment funnel on social media. This will in give you a picture of how the scheme looks like and how it is very hard to suspect. They will lure you to doing work for free or once you are in, they pay as they wish with false promises of increasing the pay.

    These rackets are all over Reddit. This does not mean Reddit is a bad social media network. It’s the bad motives by some of the users.

    If you have never been to Reddit, all I can say based on my personal experience is, it’s a good social media network where people share valuable information for free. Note the word FREE. This is the catch that fraudsters are using to get free service  from You -the user- without you suspecting anything.

    For the short time have been on Reddit, I have enjoyed every bit of information that I found shared on Reddit groups.

    It got even better when I noticed that people were posting work opportunities for Freelancers. Me being a full time Freelancer, I decided to respond to one of them by messaging the person who offered the opportunity.

    Here is a snippet of the offer.

    Hiring Freelance Video Editors

    Please take note of what the client is offering here. I have highlighted them in yellow so that you can see their hook.

    They offer $10-100 to edit 1 Minute Videos

    It means they will pay each editor that gets into their funnel based on how the negotiate for a given assignment. If you are confident enough to negotiate, you will be paid better. Sadly, many new and even experienced freelancers are afraid to negotiate because they fear being denied the opportunity. So if the client fixes a budget on a given video, they will accept. This takes me to the second hook.

    10-20 Videos Per Week

    This is very enticing to anyone looking for sustainable income. Any Freelancer will do a quick math using the average pay which is around $55 per video. If you do 10 videos a week you make $550 and if you do 20 videos a week, you make $1100. This is good money. Moreover, it will be recurrent work. One has a potential of earning $2200-4400 a month working directly with the client. In fact if you are paid $100 per video, you will earn $4000-$8000 a month.

    This is enough to blind any freelancer. I mean this is good money. One can do anything to get the job:-). This is where they begin their show now that they have your attention.

    The Screening Process

    Like any other interview, before you are considered, you are required to submit your portfolio. That’s what Freelancers do everyday right inside their cover letters when bidding for work.

    As you can see, they will first review your porfolio and if you are fit, they will ask you to do a ‘test project‘ to confirm your capability. Now, this is where one knows if its going to end well or it is going to turn out as a fraudulent opportunity.

    Trusted freelancing sites like Upwork have implemented a policy regarding to test project to protect freelancers from fraudulent clients who their sole purpose is to waste Freelancers time. The condition is; that clients have to pay Freelancers for any test projects.

    Having found this policy helpful is protecting myself, I apply it everywhere.

    Now, in the post, the client concluded that the test project will be paid-which is still in line with the policy.

    Next Steps After Submitting My Portfolio

    The client liked my portfolio and not elevated me to the next stage of their Freelance Recruitment funnel, a slack channel for Video editors working for them. The channel had more than 40 members.

    All instructions on how to go about the test project was in there. After, going through the files, I was happy. The instructions was very clear. Seeing that I had all that I needed to proceed, I contacted the team lead to clarify 3 things;

    1. How they pay editors – Is it via Paypal, or bank transfer e.t.c
    2. If they have an Non Disclosure Agreement to sign before starting work
    3. How much they pay for the test project which looked like everyone in the channel was supposed to work on.

    The VA could not answer that. This was the first sign that was something was not right. In response, she referred me to their accountant who deals with paying freelancers.

    She avoided the question on having and signing a contract before work. That’s was alarming. I mean, who works for a company without a contract in place especially when you consider the amount of money one will earn while doing the job?

    This is very important. Loosing $4000 a month is not a joke. What if they pay at the end of the month and after you do the job, they remove you from the slack channel or stop responding to your concerns. Anything is possible.

    Having a contract is a sign of commitment.

    Contradicting Statements

    In their video editing post, they said they were going to pay for the test project. But on persistently consulting the accounts clerk on Slack before working on the test project, I was surprised to learn from her that they DON’T PAY for test project.

    This is enough. If they don’t pay for test, withdraw from the interview and forget it.

    But how many Freelancers do this?

    If all of the 40+ Freelancers in the channel had started doing the job without confirming if they were going to be paid for the test or not, what does it tell you about their level of seriousness towards freelancing? Its vague right.

    Those are the same freelancers you will hear soon crying that they were not paid.

    Conclusion

    The only way we can stand out as full time freelancers online is upping our game based on our experiences for us to gain trust and respect from new clients looking to hire online.

    What do you think of the jobs being offered in reddit?

    Until next time, be vigilant and take care.

    Follow me on twitter @cheptiony.