Various types of taxes in Kenya such as corporate income tax, pay as you earn (PAYE), withholding tax (WHT), advance tax, rental income tax, and value added tax (VAT) form a key part of the country’s taxation landscape.
Other key types of taxes in Kenya include excise duty, capital gains tax (CGT), stamp duty, betting lottery and gaming taxes, and turnover turnover tax.
Import/customs duty, fringe benefit tax (FBT), significant economic presence tax (SEPT), and minimum top-up tax among also form critical elements of the Kenya tax system.
This summary guide outlines the key types of taxes in Kenya.
Corporate Income Tax (CIT)
Corporate Income Tax in Kenya is levied on corporate bodies such as limited companies, trusts, and co-operatives, on their annual income. Resident companies are taxable in Kenya on income accrued or derived from Kenya. Resident companies with business activities outside Kenya are also taxed on income derived from business activities outside of Kenya.
Pay As You Earn (PAYE)
This is a method of collecting tax at source from individuals in gainful employment. Resident employees are taxed on income earned from across the globe, for any employment or services provided both in and out of Kenya.
Resident individuals are also taxed on any other income that has accrued in/ derived from Kenya. Tax to non-resident employees is only applied on their income earned/derived from Kenya.
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, commissions, pensions, rent received by non-residents and other payments specified.
Advance Tax
This is a tax paid in advance before a public service or a commercial vehicle goes for the annual inspection. Advance tax payable annual rates vary based on the motor vehicles and can be credited against any Corporate Income Tax payable for the year.
Rental Income Tax
This is a tax payable on rental income received from renting out property. Taxation of rental income is based on how the rented property was used; for residential or commercial purposes. Residential income tax is payable by any resident person who accrues/ derives income from the use/ occupation of residential property in Kenya
Value Added Tax (VAT)
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. VAT is essentially a tax on value; it is accounted for via the input-output mechanism
Excise Duty
Excise duty is charged on the local manufacture, importation or local supply of certain goods and services.
Capital Gains Tax (CGT)
This is a tax payable on the whole of a gain which accrues to a company or an individual upon transfer of property situated in Kenya.
Stamp Duty
Stamp duty is a tax charged on transfer of properties, leases, and securities.
Betting, Lottery & Gaming Taxes
Various taxes on betting, lottery & gaming activities such as excise duty on the amounts wagered or staked in betting activities, turnover tax on lottery and gaming,
Turnover Tax (TOT)
Turnover Tax is a tax charged on businesses whose gross turnover is more than KES 1M but does not exceed or is not expected to exceed KES25M during any year of Income.
Import/ Customs Duty
Import duty is charged on importation of goods as provided for under the East African Community Customs Management Act. Imported goods are generally subjected to import/customs duty at various rates.
Fringe Benefit Tax (FBT)
Fringe Benefit Tax is payable by an employer on low/free interest loans granted to employees, company directors, or their relatives. FBT is due notwithstanding whether the employer is exempt from tax.
Significant Economic Tax (SEPT)
SEPT is applicable to all income that is derived by non-residents from services provided via the internet or any electronic network.
Minimum Top-up Tax
Domestic minimum top-up tax, allows Kenya to charge an additional tax amount on profits of entities that form part of an in-scope multinational group.
The diverse types of taxes in Kenya ranging from corporate income tax and PAYE to VAT, excise duty, CGT, and emerging taxes like SEPT and minimum top-up tax form a comprehensive fiscal structure.
Corporates and individuals must remain vigilant about updates to these taxes in Kenya, to mitigate compliance risks.
Consulting with tax professionals is recommended to navigate this evolving landscape effectively.
Reach out to FNJ & Associates tax team for tailored tax solutions and professional advisory.