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Withholding Tax on MMF Returns in Kenya
What Is Withholding Tax?
In Kenya, interest income earned from Money Market Funds is subject to a 15% withholding tax. This tax is automatically deducted by the fund manager before your returns are credited — you don't need to file it separately.
How It Works
When a fund reports a 14% annual yield, that's the gross yield before tax. Your actual return is lower:
| Amount | |
|---|---|
| Gross yield | 14.00% |
| Less: Management fee (2%) | -2.00% |
| Taxable yield | 12.00% |
| Less: Withholding tax (15% of 12%) | -1.80% |
| Net yield (cash-in-hand) | 10.20% |
This is why we built the Net Yield Calculator — to show you the real number.
Key Facts
- Rate: 15% on interest income (as of 2026)
- Deducted by: The fund manager (automatic)
- Filing: No separate KRA filing needed for WHT on MMFs
- KRA PIN: Required when opening an MMF account
- Exemptions: None for individual investors
Is It Still Worth It?
Absolutely. Even after the 15% withholding tax:
- MMFs net ~10-12% annually
- Bank savings accounts pay 1-4% (also taxed)
- Fixed deposits pay 7-10% (also taxed at 15%)
MMFs still significantly outperform traditional savings, with the added benefit of daily liquidity (you can withdraw anytime).
Common Misconceptions
- "I pay 15% of my investment" — No, you pay 15% of the *interest earned*, not the principal
- "I need to file this with KRA" — No, it's automatically deducted at source
- "All funds have the same tax" — True for MMFs, but different investment types have different rates