Companies operating in Kenya are subject to corporate income tax governed by Income Tax Cap 470. Pay As You Earn (PAYE) requires employers to deduct taxes from employee salaries and wages and remit to the Kenya Revenue Authority. PAYE tax rates range from 10-25% depending on monthly or annual taxable pay. Excise duty is charged on locally produced or imported goods like alcohol and tobacco at varying rates, while capital gains tax of 5% is levied on the transfer of property acquired before January 2015, with exemptions for primary residences and small agricultural land.
Companies operating in Kenya are subject to corporate income tax governed by Income Tax Cap 470. Pay As You Earn (PAYE) requires employers to deduct taxes from employee salaries and wages and remit to the Kenya Revenue Authority. PAYE tax rates range from 10-25% depending on monthly or annual taxable pay. Excise duty is charged on locally produced or imported goods like alcohol and tobacco at varying rates, while capital gains tax of 5% is levied on the transfer of property acquired before January 2015, with exemptions for primary residences and small agricultural land.
Companies operating in Kenya are subject to corporate income tax governed by Income Tax Cap 470. Pay As You Earn (PAYE) requires employers to deduct taxes from employee salaries and wages and remit to the Kenya Revenue Authority. PAYE tax rates range from 10-25% depending on monthly or annual taxable pay. Excise duty is charged on locally produced or imported goods like alcohol and tobacco at varying rates, while capital gains tax of 5% is levied on the transfer of property acquired before January 2015, with exemptions for primary residences and small agricultural land.
Companies operating in Kenya are subject to corporate income tax governed by Income Tax Cap 470. Pay As You Earn (PAYE) requires employers to deduct taxes from employee salaries and wages and remit to the Kenya Revenue Authority. PAYE tax rates range from 10-25% depending on monthly or annual taxable pay. Excise duty is charged on locally produced or imported goods like alcohol and tobacco at varying rates, while capital gains tax of 5% is levied on the transfer of property acquired before January 2015, with exemptions for primary residences and small agricultural land.
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TAXATION OF COMPANIES
Corporate entities operating in the country are subject to corporate income tax, which is governed by Income Tax Cap 470 of the laws of Kenya.1
How are companies taxed?
Pay As You Earn
This is a method of collecting tax from individuals, both residents and non-resident, in gainful employment .As an employer you are required to deduct PAYE from your employees’ salaries and wages at the prevailing rates and remit the same to KRA on or before the 9th of the following month.2PAYE applies to both residents and non residents in gainful employment.3
What rates are applied in levying PAYE
Following the assent of the Tax Laws Amendment Bill 2020, new tax rates for Kenyan PAYE came to effect from April 2020.4
The rates include:
Monthly Taxable Pay(ksh) Annual Taxable Pay(Ksh) Rate of Tax (%)
Up to 24,000 Up to 288,000 10 24,001-40,667 288,001 – 488,000 15 40,668 – 57,333 488,001 – 688,000 20 Above 57,333 Above 688,000 25
Excise Duty
2 https://www.kra.go.ke< accessed on August 4, 2020> 3 Ibid (https://www.kra.go.ke ) <accessed on 4th August 2020> 4 https://www.aren.co.ke <accessed on August 4,2020> This is a tax charged on specific goods and services manufactured locally or imported, on varying rates.5
A percentage levied on manufacture, sale, or use of locally produced goods (such as alcoholic drinks or tobacco products). A percentage tax levied on a company’s revenue, instead of the company’s income.6
All manufacturers, providers and importers of excisable goods and services are required to pay excise duty.
Rates
The Business Laws Amendment Act made an amendment to paragraph 1 part 1 of the first schedule to the Excise Duty Act that prescribes the rates of excise duty on excisable goods. The amendment included imported glass bottles (excluding those for packaging of pharmaceutical products) in the list of excisable goods at an excise duty rate of 25%.7
Capital Gains
Capital gains tax came into force on January2015 and as per the guidelines will be due on the 20th day of the month following the transfer of property.8
This is a tax levied on the transfer of property such as land and buildings situated in Kenya, acquired on or before January 2015.It is declared and paid by the party transferring the property.9
There are types of capital gain tax;
I. Short term capital gains tax, is a tax on profits from the sale of an asset held for one year or less. The short-term capital gains tax rates equal your ordinary income tax rates.
5 Victor Mochere, Excise Duty Rates in Kenya 2020, https://victor-mochere.com <accessed on August 5, 2020> 6 https://www.businessdictionary.com <accessed on August 4, 2020> 7 https://www.ey.com <accessed on August 4, 2020> 8 Deloitte, Capital Gains Tax: New Guidelines, https://www2.deloitte.com <accessed on August 5, 2020> 9 Ibid (https://www.kra.go.ke )<accessed on August 5,2020> II. Long term capital gains, is a tax on profits from the sale of an asset held more than a year. The long-term capital gains tax rate is at 0%, 15% or 20% depending on your taxable income and filing status.
RATES
The rate of tax is either at 5% of the net gain. It is a final tax i.e. the Capital Gain is not subject to further taxation after payment of the 5% rate of tax.10
There are exemptions on Capital Gains Tax
Capital Gains Tax exemptions are provided for under the first and Eighth Schedules of the income tax.
1. Sale of a private residence. Previously, where the owner had lived in the property for 3 years prior to its disposal. 2. Land whose value is not more than three million shillings. 3. Agricultural property having an area of less than 50 acres. 4. Sale of property for purpose of administering the estate of a deceased person. 5. Land adjudicated under the land consolidation Act or the Land Adjudication Act registered under the Registered Land Act and transferred from the first time.11
10 Ibid (https://www.kra.go.ke ) <accessed on August 5, 2020> 11 Income Tax Amendments-the tax laws(amendments) Act 2020, https://www.rsm.global <accessed on August 5,2020)
