Net returns after the 15% withholding tax on MMF interest.
Net return after tax
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Gross interest
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WHT (15%)
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Net effective yield
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Your breakdown
Updates live as you type
Item
Amount
Worked example
Take KES 500,000 placed in a money market fund quoting 11% a year, with a KES 10,000 top-up every month, held for three years. Interest compounds monthly, so the starting KES 500,000 and each top-up earn at about 0.9167% a month. After 36 months the fund is worth about KES 1,118,671. You contributed KES 860,000 in total, the starting amount plus 36 top-ups, so the gross interest earned is about KES 258,671.
Item
Value
Total contributions
KES 860,000.00
End value (before tax)
KES 1,118,670.55
Gross interest
KES 258,670.55
Less 15% withholding tax
KES 38,800.58
Net interest
KES 219,869.96
Net effective yield
9.35%
Withholding tax of 15% takes KES 38,800.58 off the interest, leaving KES 219,869.96 net, which brings the headline 11% down to a net effective yield of about 9.35%. The chart below splits the gross interest into the part kept and the tax withheld.
How it is calculated
The fund value is built in two parts. The starting balance grows by monthly compounding, its future value being the amount times (1 plus the monthly rate) raised to the number of months, where the monthly rate is the annual yield divided by 12. The monthly top-ups are treated as a future-value annuity, summed as the top-up times (1 plus the monthly rate) raised to the number of months minus one, all over the monthly rate. Adding the two gives the gross end value. The gross interest is that end value minus everything you contributed. Kenyan money market fund interest is subject to a final withholding tax of 15%, deducted by the fund manager, so the tool takes 15% off the interest to show the net return and a net effective yield. This treats the quoted yield as the gross annual rate, which is how Kenyan fund factsheets present the daily yield annualised, so your real after-tax growth is always a little below the headline number.
Frequently asked questions
Are money market fund returns taxed in Kenya?
Yes. Interest earned in a Kenyan money market fund is subject to 15% withholding tax, which the fund deducts before crediting your returns. For most investors this is a final tax, so the net yield you actually receive is about 85% of the quoted gross yield. This tool shows both the gross and the net effective yield.
How does a money market fund compare to a fixed deposit after tax in Kenya?
Both instruments are subject to 15% withholding tax on interest for resident investors, so the after-tax comparison is mainly about the gross yield and liquidity terms. Money market funds typically allow daily or notice-period withdrawals and compound interest continuously, while fixed deposits lock your money for a fixed term and may penalise early withdrawal. If the quoted yields are similar, the MMF net effective yield often edges ahead because of daily compounding, but confirm both net yields before deciding.
Does the 15% withholding tax on MMF returns count as a final tax?
For most Kenyan resident investors in a collective investment scheme it is treated as a final withholding tax, meaning you do not need to declare the interest on your annual return or pay additional income tax on it. Corporate investors and some high-net-worth structures may be treated differently. Confirm the final-tax status for your specific situation with a tax adviser or the fund manager, particularly if your overall income puts you in the higher PAYE bands.
What does the net effective yield shown by this calculator mean in practice?
The net effective yield is the gross annual yield multiplied by 0.85, reflecting the 15% withholding tax taken off all interest earned. It is the rate at which your money actually grows after tax, comparable to the return on a net-of-tax fixed deposit or treasury bill. When fund managers quote a daily yield annualised, they usually quote the gross figure, so dividing by 0.85 gives you the post-tax rate for comparison with other net-of-tax investments.