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Money Market Funds (MMFs): Taxes, Charges, and Maximizing Returns

Money Market Funds (MMFs) are a type of Collective Investment Scheme (CIS) whose model relies on pooling funds from several investors to invest in financial instruments, for example, treasury bills, to earn an interest shared with the individual investors.

 

Related Article: What Is A Money Market Fund (MMF)?

 

As with all investments, we encourage investors to research related charges, including taxes and charges, to maximize possible returns.

 

Some of the fees associated with Money Market Funds (MMFs) in Kenya include:

 

Management Fees:

Some Money Market Fund (MMF) providers charge a fee for managing your investments plus VAT (Value Added Tax).

 

Transactional Fees:

Some Money Market Funds (MMFs) have introduced charges per transaction made, including depositing and withdrawing funds, with several others transferring the cost of deposits or withdrawals through mobile money to the investor.

 

Withholding Tax:

Money Market Funds (MMFs) in Kenya are exempt from income and capital gain taxes but subject to a 15 percent withholding tax on the interest distributed to investors, which translates to Ksh 15 for every Ksh 100 you make as interest, meaning the Money Market Fund (MMF) provider will distribute to you Khs 85 for every Ksh 100 you make as interest.

 

Related Article: How To Choose A Money Market Fund (MMF)

 

Consider the fees applicable to specific MMFs (Money Market Funds) when choosing which provider to invest with, as it impacts your net returns.

 

Keep up-to-date with fee shifts among individual Money Market Fund (MMF) providers, as some charges may impact your net returns depending on how the fee is applied. For example, an active account may accumulate higher charges from per transaction fees.

 

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