Corporate Taxation in Kenya
Companies operating in Kenya are subject to various taxes, including income tax, value-added tax, excise duty, withholding tax, and customs duty. Each tax has its own specific legislation and rates. Companies are advised to consult with tax experts to ensure compliance with the tax laws and to take advantage of tax incentives.
Income Tax:
Kenya operates a self-assessment income tax system, which is regulated by the Income Tax Act (Cap 470) and administered by the Kenya Revenue Authority (KRA). Companies are taxed at a rate of 30% of their taxable income. The taxable income is calculated by subtracting allowable deductions from the gross income. Allowable deductions include expenses incurred in generating income, depreciation, and capital allowances.
Value Added Tax (VAT):
VAT is regulated by the Value Added Tax Act (Cap 476) and administered by KRA. VAT is charged at a rate of 16% on the supply of taxable goods and services in Kenya. The VAT rate can be reduced or increased by the Cabinet Secretary for National Treasury. Companies with an annual turnover of less than Ksh. 5 million are not required to register for VAT.
Excise Duty:
Excise duty is regulated by the Excise Duty Act (Cap 147) and administered by KRA. Excise duty is charged on specific goods such as alcohol, tobacco, and petroleum products. The rate of excise duty varies depending on the product. For instance, excise duty on beer and spirits is Ksh. 175 and Ksh. 182 per liter, respectively.
Withholding Tax:
Withholding tax is regulated by the Income Tax Act (Cap 470) and administered by KRA. Withholding tax is charged on specific transactions such as dividends, interest, and royalties. The rate of withholding tax varies depending on the transaction. For instance, the withholding tax rate on dividends paid to a non-resident person is 10%.
Customs Duty:
Customs duty is regulated by the East African Community Customs Management Act (2004) and administered by the Kenya Revenue Authority. Customs duty is charged on imported goods based on their value, and it varies depending on the product. For instance, the customs duty on clothing ranges from 0% to 35%.
Export Duty:
There are no export duties in Kenya.
