Taxation

Company Tax

All resident companies are subject to tax on their incomes at the rate of 30%. Branches of non-resident companies pay tax at the rate of 37.5%. Taxable income is generally defined to be income sourced in or from Kenya. Companies newly listed at the Nairobi Stock Exchange (NSE) are taxed at 25% for a period of five years following the date of listing.

Dividends distributed to residents and non-residents are subject to a final withholding tax at the rate of 5%. They are not subject to any further tax in the hands of the recipients. Dividends not distributed out of after tax profits are subject to a compensating tax at the company tax rate. Dividends received by financial institutions as trading income are not subject to tax. Corresponding expenses are not tax deductible.

Import Duties

Goods imported into Kenya are subject to import duties at various rates as per the import duty schedules. duty remission is granted on capital goods,plant,machinery and equipment for investment,including equipment for generation and distribution for elecricity

Value Added Tax (VAT)

VAT is levied on goods imported into or manufactured in Kenya, and taxable services imported or provided. The minimum turnover level for registration is Kshs 10 million for manufacturers, traders and suppliers of services. The standard VAT rate is 16%. VAT remission is granted on capital goods,including plant and machinery and equipment for new investment,expansion of investment and replacement.
Unprocessed agricultural products and aircraft are exempt from VAT. Inputs into health care, education and agricultural sectors as well as exported goods and services are zero-rated water drillingg services including water treatment chemicals and aviation full purchased by light aircraft operators are also zero-rated.

Excise Duties

These are levied on beer, tobacco products, matches, spirits, wines,soft drinks, mineral water and biscuits,mobile phone air time,casinos,jewelleries and petroleum. The rates vary for different products.

Personal Income Tax

Income tax is charged on the income earned by any person resident in Kenya. A resident is defined as someone who has a permanent home in Kenya, and has spent any part of the working year in the country; or someone who, without a permanent home in Kenya, has spent 183 days or more, working in the country in the year of assessment. A foreign employee in a non-Kenyan firm who is resident in Kenya is subject to tax on all emoluments.
However, non-Kenyans working for regional headquarters are entitled to make a deduction equal to one third of their income if they are absent from work for at least 120 days per annum. To qualify, they must reside in Kenya only for the purpose of working at the headquarters, and their salary costs may not be recharged to a local branch or subsidiary.

Individual income is taxable at rates graduated from 10 per cent up to 30%. The top tax bracket starts at annual incomes of Kenya Pounds 22,225. Tax allowances are provided for all individual taxpayers. Kenya residents working abroad are given credit of foreign tax paid on the salaries earned in those countries.
Taxable income includes all business income, employment income, dividends, interests and property income.

Individual Rates of Tax

1K£= KShs. 20

Tax Treaties

Kenya has tax treaties with Tanzania and Uganda, (under the East African Community), COMESA countries, Canada, Denmark, Malawi, Norway, Sweden, the United Kingdom, and Zambia, while negotiations are underway with other countries. These treaties generally provide for avoidance of double taxation and reduction or waiver of withholding taxes.