Which taxes are mandatory for entrepreneurs in Kenya?

According to the Kenya Revenue Authority, the taxes commonly applicable for entrepreneurs are:

1. Income Tax: Income tax is a tax charged for each year of income, upon all the income of a person whether resident or non-resident, which is accrued in or was derived from Kenya.

Generally, based on the sources of income, Income Tax can be further divided into:

a. Corporation Tax - 30% for Resident Companies, 37.5% for Non-resident companies

This is levied on corporate bodies such as Limited companies, Trusts, and Co-operatives, on their annual income. Companies that are based outside Kenya but operate in Kenya or have a branch in Kenya pay Corporation Tax on income accrued within Kenya only.

b. Pay As You Earn (PAYE)

This is imposed on individuals in gainful employment. Companies and Partnerships with employees are required to deduct tax according to the prevailing tax rates from their employees' salaries or wages on each payday for a month and remit the same to KRA on or before the 9th of the following month.

c. Withholding Tax (WHT)

This is a tax that is deductible from certain classes of income at the point of making a payment, to non-employees.

WHT is deducted at source from the following sources of income:

Interest/Dividends/Royalties/Management or professional fees (including consultancy, agency or contractual fees)/Commissions/Pensions/Rent received by non-residents/Other payments specified

Companies and partnerships making the payment, are responsible for deducting and remitting the tax to the Commissioner of Domestic Taxes.

d. Advance Tax

This is a tax paid in advance before a public service vehicle or a commercial vehicle goes for the annual inspection.

e. Installment Tax

Installment tax is paid by persons who have tax payable for any year that amounts to KES 40,000 and above.

f. Turnover Tax (TOT)  - 3% on the gross sales/turnover and is a final tax.

In accordance with the Finance Act, 2019, TOT has been re-introduced and will be payable from 1st January 2020. Applicable to any small traders whose turnover from business does not exceed or is not expected to exceed KES 5,000,000 during any year of income.

2. Rental Income Tax - 10% for residential rental

This is a tax charged on rental income received from renting out property. Taxation of rental income depends on how the rented property was used for residential or commercial purposes.

Companies and Partnerships that rent out property to other persons for either residential or commercial use are required to pay income tax on rent received

3. Value Added Tax (VAT) - 16% general rate, and 0% for goods and services in agricultural inputs, pharmaceutical products, educational materials and supplies to privileged persons

Value Added Tax is charged on supply of taxable goods or services made or provided in Kenya and on importation of taxable goods or services into Kenya.

While companies & partnerships can voluntarily register for VAT they MUST register if their annual revenue exceeds KES. 5,000, 000.

4. Excise Duty

This is a duty of excise imposed on:

- Goods manufactured in Kenya, or;

- Imported into Kenya and specified in the 1st schedule to Excise Duty Act, 2015.

The List and types of Excisable goods and services are listed in the 5th Schedule as read together with Section 117 (1) (d) of the Customs and Excise Act, CAP 472 Laws of Kenya, including

Mineral water/Juices, soft drinks/Cosmetics and Preparations for use on hair/Other beer made from malt/Opaque beer/Mobile cellular phone services/Fees charged for money transfer among others.

5. Capital Gains Tax (CGT) - 5%

This is a tax chargeable on the whole of a gain which accrues to a company or an individual upon transfer of property situated in Kenya, whether or not the property was acquired before 1st January, 2015.

6. Agency Revenue

This is a type of payment that KRA collects on behalf of various revenue collection agencies in Kenya, including Stamp Duty Betting and Pool Tax.

a. Stamp Duty- It is charged on transfer of properties, shares and stock.

b. Betting Tax- 20% of the amount wagered or staked.

How do I pay for my tax?

The Personal Identification Number (PIN) identifies a person for purposes of transacting businesses with Kenya Revenue Authority, other Government agencies and service providers. The PIN number is processed by Domestic Tax Department. The Kenya Revenue Authority is the principal collector of tax revenue for the government of Kenya, so it is the institution to which most taxes are paid. Please click here for the iTax portal.

Corporate Income Tax (CIT)

Companies are required to pay installment taxes on income as the year progresses. For non-agricultural businesses, there are four installments to be paid by the 20th of the month as set out below:

• 1st installment – 4th month
• 2nd installment – 6th month
• 3rd installment – 9th month
• 4th installment – 12th month.

Agricultural installments are payable by the 20th day of the 9th and 12th month in the year of income.

Value Added Tax (VAT)

After filing your VAT returns online, generate a payment slip for any tax due and make payment to any of the KRA appointed banks or through any mobile money transfer platform.

Employees’ Tax [PAY-AS-YOU-EARN (PAYE)]

PAYE returns are filed online via iTax. Companies and Partnerships without PAYE to remit should file a NIL return via iTax. After filing the PAYE return, generate a payment slip online via iTax and make payment at any of the KRA appointed banks.

Useful Links

Filing and Paying Taxes for Companies & Partnerships