Corporate Tax Instalments in Kenya: How to Calculate, Forecast & Avoid Penalties in 2026

As Kenya enters the 2026 tax year, many businesses—small, medium, and large—are searching for reliable guidance on Corporate Tax Instalments in Kenya. Instalment tax remains one of the most common areas where companies face penalties from KRA, simply because many business owners do not fully understand how the system works, when payments are due, or how to calculate their instalments correctly.

This article breaks everything down in simple, clear language so Kenyan companies can confidently stay compliant, avoid unnecessary penalties, and plan their taxes smoothly throughout 2026.

What Are Corporate Tax Instalments?

Corporate tax instalments are advance tax payments made to the Kenya Revenue Authority (KRA) during the year. Instead of waiting until year-end to pay the full corporate tax amount, companies pay four instalments spread throughout the financial year.

Instalment tax is calculated based on either:

1. Last year’s corporate tax payable (the prior-year basis), or

2. Projected profits for the current year (the current-year estimate method).

This system ensures:

• Businesses avoid one large lump-sum payment at year-end

• KRA receives revenue consistently throughout the year

• Companies improve cash flow planning and financial predictability

Why Corporate Tax Instalments Matter in 2026

The 2026 tax year is expected to bring stricter compliance due to:

• Enhanced KRA monitoring systems

• Automated detection of late or incorrect instalments in iTax

• Increased underpayment penalties

• Higher risks for SMEs that fail to forecast correctly

A simple miscalculation, missed deadline, or underestimated profit projection can trigger automatic penalties and accumulating interest.

How to Calculate Corporate Tax Instalments

There are two official methods approved by KRA. Below is the simplest guide to each method.

1. Prior-Year Basis Calculation (Most Common Method)

This method is best when your business expects similar profits to the previous year.

Formula:
Instalment Amount = Previous Year’s Corporate Tax ÷ 4

Example

If your business paid KES 1,200,000 in tax last year:

KES 1,200,000 ÷ 4 = KES 300,000 per instalment

This method is simple, safe, and preferred by most businesses to avoid miscalculations and penalties.

2. Current-Year Estimate Method (For Growing or Declining Businesses)

Use this method when you expect major changes in profits.

Steps

1. Estimate your taxable profit for 2026

2. Apply the corporate tax rate (usually 30%)

3. Divide the tax into four equal instalments

Example

If your projected profit for 2026 is KES 6,000,000:

• Corporate tax = 30% × 6,000,000

• Tax payable = KES 1,800,000

• Instalment = KES 450,000 each

⚠️ Warning

If your estimate turns out too low, KRA will apply:

• 20% underpayment penalty, plus

• 1% monthly interest on the unpaid balance

Because of this, most Kenyan companies prefer the prior-year method unless professionally assisted by tax experts.

Corporate Tax Instalment Due Dates in Kenya (2026)

Kenyan companies must pay instalment tax four times a year. For calendar year taxpayers, deadlines are:

Companies using a non-calendar financial year follow instalment deadlines based on:

• End of 4th month

• End of 6th month

• End of 9th month

• End of 12th month

Missing any of these deadlines leads to automatic penalties.

How to Forecast Instalment Tax Properly (Avoid Penalties)

The biggest challenge for businesses is accurately forecasting income. The following techniques help ensure you stay compliant and avoid penalties.

1. Use Historical Performance

Review:

• Profit trends for the last 3 years

• Seasonal income fluctuations

• Long-term contracts

• Revenue growth or decline patterns

This reduces errors in estimating taxable profit.

2. Track Cash Flow Monthly

Good cash flow planning ensures instalments are paid on time without straining the business.

Top strategies include:

• Setting aside a monthly tax reserve

• Using invoicing software to track receivables

• Monitoring expenses closely

• Predict upcoming cash shortages early

3. Use Professional Forecasting Tools

Tools used by professional accountants in Kenya include:

• Cloud accounting platforms

• Automated tax calculators

• Financial dashboards

• Profit forecasting software

Penalties for Wrong or Late Corporate Tax Instalments

KRA applies penalties automatically through iTax. Here is the complete breakdown:

1. Penalty for Late Payment of Instalment Tax

If a corporation tax instalment is paid after the due date, the following charges apply:

✔ 5% Late Payment Penalty

A flat 5% of the unpaid tax is charged immediately.

✔ 1% Monthly Late Payment Interest

KRA additionally charges:

• 1% interest per month,

• Compounded on the outstanding amount,

• And continues accruing until full payment is made.

This continues even if the delay is accidental.

2. Penalty for Wrong (Underpaid) Instalments

If instalments are too low throughout the year, resulting in a big balance due during annual filing, KRA charges:

✔ 20% Underpayment Penalty

Applied on the difference between:

Actual corporate tax liability – Total instalments paid

This penalty applies even if instalments were paid on time — as long as they were under-calculated.

3. Consequences of Non-Compliance

Failing to comply with instalment requirements may trigger:

✔ Automated iTax penalties

The system automatically posts penalties without human review.

✔ Debt recovery actions

KRA may:

• Freeze your bank accounts via Agency Notices

• Recover unpaid taxes from clients or suppliers

• Start legal enforcement

• Impose restrictions on tax compliance certificates

✔ Additional annual tax return penalties

These are separate from instalment penalties.

4. What to Do If You Cannot Meet Instalment Deadlines

If your business anticipates difficulty:

✔ Contact KRA Early

You may request:

• Extended payment arrangements

• Time-based instalment plans

• Waivers on penalties or interest (not guaranteed)

However:

The principal tax must still be paid in full.

Early communication reduces risk and shows good compliance behaviour.

5. Where to Manage Your Instalment Tax

All instalment tax obligations must be managed through:

KRA iTax Portal (official payment & filing platform)
KRA Contact Centre (for account issues or reconciliations)

Avoid KRA Penalties with Professional Tax Support from Spondoo Kenya

Take the guesswork out of instalment tax. With Spondoo Kenya, you get accurate tax calculations, proactive forecasting, and full KRA compliance support—ensuring your business stays penalty-free and financially confident throughout 2026. Get expert help today and let us handle your corporate tax while you focus on growth.