Types of Taxes in Kenya

 

1. Income Tax

Income tax applies to all income earned in Kenya, including:

• Business and employment income
• Rental income
• Dividends and interest
• Pension income
• Digital marketplace earnings
• Natural resource income

Collection Methods:

• Corporation Tax: Levied on corporate entities like companies, trusts, and cooperatives. Foreign companies are taxed only on income generated within Kenya.
• PAYE: Employers deduct income tax from employee salaries and remit it monthly.
• Withholding Tax: Deducted from payments such as interest, dividends, royalties, and professional fees.
• Advance Tax: Paid for commercial vehicles before inspection.
• Installment Tax: Paid by those with annual tax liabilities exceeding Ksh 40,000.

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2. Rental Income Tax

Tax is levied on earnings from rented properties for residential or commercial use. KRA agents may withhold and remit a portion of the gross rent as tax.

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3. Value Added Tax (VAT)

VAT applies to taxable goods and services supplied in or imported into Kenya.

• Mandatory for businesses with annual revenue exceeding Ksh 5 million.
• KRA appoints agents to collect VAT on certain transactions.

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4. Excise Duty

This tax applies to:

• Locally manufactured or imported goods like soft drinks, cosmetics, and beer.
• Services such as mobile phone usage and money transfers.

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5. Capital Gains Tax (CGT)

A tax on profits from selling property in Kenya, applicable from January 1, 2015.

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6. Agency Revenue

KRA collects additional taxes on behalf of other agencies:

• Stamp Duty: On property transfers, shares, and stocks.
• Betting Tax: Includes 20% on winnings and 15% on bookmakers’ gross revenue.

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7. Turnover Tax (TOT)

For businesses with annual revenues between Ksh 1 million and Ksh 25 million:

• Taxed at 1% of gross monthly sales.
• Filing and payment are done via iTax or the KRA M-Service app.
• Simplified record-keeping and filing process.

Exemptions: TOT doesn’t apply to rental income, professional fees, or income subject to final withholding tax.

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Penalties for Non-Compliance

• Late Filing: Ksh 1,000 penalty.
• Late Payment: 5% of the tax due.
• Interest on Unpaid Tax: 1% per month.

For more information or to register for taxes, visit the iTax portal.

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