Taxes play an important role in the budget of any economy and one of the main reasons why the government imposes taxes is to generate income to manage the economy and redistribute resources. As well as paying tax in kenya, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge. Klrc has an additional mandate of preparing new legislation to give effect to the constitution. For example in january 1990, vat was introduced to replace sales tax that was in operation since 1973 kra, 2004. A recently passed law could make it easier for companies to dodge tax in kenya. Kenya imposes new income tax on residential rentals. Tax amnesty for income earned outside kenya the bill has proposed a tax amnesty relating to income earned outside kenya, provided the taxpayer has filed accounts for the year 2016 by 31 december 2017. Kenya hikes taxes and even the imf approves yussuf.
Many people will now be aware that kenya has embarked on its long overdue transition to modern company and insolvency laws with the recent enactment of the new companies act, 2015 and the insolvency act, 2015. Beyond its membership of the eac, kenya is part of trade schemes within the africa growth and opportunity act, the wto, comesa, and sadc soon to be a free trade area. In kenya, the government has regulations pertaining the eligibility of the businesses to remit taxes and how to do it. Instalment tax is administered under the income tax act cap 470, laws of kenya. Resident employees are taxed on worldwide earned income, in respect of any employment or services rendered in kenya or outside kenya. The income tax act provides for the payment of various taxes by resident corporations either in advance or through third parties. However, some procedures were left in the specific tax acts.
This act may be cited as the income tax amendment act 2014, and commences on the pt day of july 2014. This is a summary of the penalties and offences that officers of the companies will be liable under the new kenyan companies act 2015. New kenyan companies act 2015 passed cms daly inamdar. As shown above, the maximum rate of 30% will be charged on income in excess of kes 564,709 bonuses, overtime allowances, and retirement benefits paid to employees earning less than kes 147,580 per annum are now exempt from tax. Tax compliance in kenya has been at its lows since independence, as witnessed by the low tax revenues. See section 1 3 and 4 arrangement of sections section part ipreliminary i short title and commencement. One major change introduced is the exemption of capital gains arising from the transfer of shares traded on any securities exchange licensed by the capital markets authority. Tax amnesty for income earned outside kenya the bill has proposed a tax amnesty relating to income earned outside kenya, provided the taxpayer has. Kenya imposes new income tax on residential rentals ey. This includes income, valueadded tax vat, and other taxes collected by the national government. Introduction instalment tax is estimated income tax paid to kra periodically, four times a year to cover the total tax payable for the year of income. A citizens handbook on 6 taxation in kenya executive summary this handbook attempts to break down kenyas complex tax system into a user friendly form for consumption by the average person. Kenya has a broad taxation system covering income taxes, valueadded tax vat and customs and excise duty.
We are now part of one of the worlds most recognised international law firms, with 19 practice areas and sectors, operating in more than 40 countries and with over 4,800 lawyers. Factors influencing tax compliance among small and. One major change introduced is the exemption of capital gains arising from the transfer of shares traded on any securities. Under the income tax act, as amended by the finance act, 2015, sezs will be exempt from corporate taxation for the first ten years following commencement of. Kenya income tax rate for 20172018, 20162017, 20152016, 2014 kenya income tax rate 2017 w. Smes contribution to the gdp in kenya has increased from. The effect of taxpayer education on tax compliance in.
Revenue collected from taxes enables a country to provide services for its citizens and also development of its economy. Short title this act may be cited as the tax procedures act, 2015. Summary of the provisions of the companies act, 2015 that came into operation on 6th december 2015 the companies act, 2015 was assented by the president on 11th september 2015 with only section 2 of the act coming into operation on the date of gazettement on 15th september 2015. Shareable revenue does not include loans or grants. Types of taxes in kenya and rates,vat,custom duty,and stamp duty.
Know your taxes 2014 5 income tax corporations 20 2014 small business taxpayers turnover tax a resident taxpayer whose annual gross turnover does not exceed kshs 5 million will be taxed at the rate of 3%. The rate of tax is 5% of the net gain on the transfer of property. Post continues after photo photo by waka this is an act of parliament. Kenya is a gateway to continental africa, and benefits from numerous international trade relationships. Post continues after photo photo by waka business accounts are supposed to be audited by.
A legal notice issued by the cabinet secretary for finance on 14 january 2016 appointed 19 january 2016 as the date the act came into operation. The act has introduced amendments to the following laws. Home business types of taxes in kenya and rates,vat,custom duty,and stamp duty. Factors influencing tax compliance among small and medium. Corporate tax exemptions cost kenya sh114bn annually. Kenya imposes new income tax on residential rentals executive summary in light of the challenge in administration and collection of rental income, the kenya revenue authority kra has revisited its process for collecting taxes from rent particularly from the largely untapped lowend segment of the market. Different rates apply to resident and nonresident companies. The president of kenya assented to the new tax procedures act, 2015 the act on 18 december 2015. An individual present in kenya for at least 183 days in the tax year is resident, as is any person who has averaged 122 days in the country in the tax year and the previous two tax years. Nonresident employees are taxable only on their income earned from within kenya or derived from kenya. Vat is a tax on value addition and is accounted for using an inputoutput mechanism. X50732442012 research paper submitted in partial fulfillment of the requirements for the award of the degree of master of arts in economics of the university of nairobi. The first schedule to the excise duty act, 2015, is. This could increase the rate of illicit financial flows and, contrary to.
Summary of the companies act 2015 commencement summary of the provisions of the companies act, 2015 that came into operation on 6 th december 2015 the companies act, 2015 was assented by the president on 11 th september 2015 with only section 2 of the act coming into operation on the date of gazettement on 15 th september 2015. Procedures act, 2015 the tpa the bill has proposed various changes to the tpa, which are highlighted below. In kenya, rental income currently is taxable under section 32aiii of the income tax act ita, cap 470 laws of kenya. Over the years, the kenya government has undertaken various revenue administration reforms aimed at enhancing revenue collection masinde and makau, 2010. Following the eacs establishment in 1999, kenya, tanzania and uganda created a customs union a dutyfree trade area with a common. The political economy of postcolonial taxation in kenya. Kenya tax rates for 20162017, 20152016, 20142015 kenya. With effect from january 1, 2015, however, cgt was reintroduced on the transfer of property situated in kenya, whether or. According to the income tax bill 2018, kenya revenue authority kra will deduct 10 percent on the first sh147,580 and 15 percent on the next sh9,043 from your payslip. Kenya imposes new income tax on residential rentals ey global. There are four types of supplies that attract different vat rates. It among other issues discusses design of various tax heads, their purposes and differences and also how they are administered. The vat act defines services exported outside kenya to be services provided for use or.
Interp retati on act 18 of 1986 2 1 in this act, unless the context otherwise requires. Kenyas recent tax changes and regulations kenya 2016. Procedures in all tax acts in kenya were consolidated into this one act. Shareable revenue in 201718 is projected to be ksh 1. Tax in kenya contractor taxation, tax rate in kenya.
Section i on 15th september, 2015 all other provisions. The purpose of this article is to highlight some of the main changes and challenges that will come with the new. See section 1 3 and 4 arrangement of sections section part ipreliminary. In such a case, the taxpayer will not be required to register for vat.
The finance bill 2015 proposes new measures which the government hopes will boost the revenues earned from this sector. Section compliance requirement timelines penalty on failure to comply 24 filing a copy of the amended articles of association to be filed to the registrar from. Penalties and offences under the new companies act, 2015. So you are excused for finding it a bit on the confusing side than helpful. An individual present in kenya for at least 183 days in the tax year is resident, as is any person who has averaged 122 days in the country in. We are pleased to announce that daly inamdar has joined cms. It is a final tax and cannot be offset against other income taxes. Republic of kenya kenya gazette supplement acts, 2015 nairobi, 15th september, 2015. This relieves the employee from paying taxes at the end of the year and shifts the responsibility to the employers. Kenya payroll and tax information and resources activpayroll. Every individual who receives income is granted a tax credit or. The income tax guide availed by kra is a technical, 57page document, written in court lingo.
Power to impose taxes and charges kenya law reform. It among other issues discusses design of various tax heads, their purposes and. The measure expenditure incurred in a particular year of income on donations to the kenya red cross, county governments or any other institution responsible. Jan 23, 2015 kenya hikes taxes and even the imf approves. Capital gains tax cgt was reintroduced with effect from 1 january 2015. However, kenya does not collect as much revenue as it should. Wealth tax the supplementary finance act for 2015 introduced a wealth tax, calculated as follows. An act of parliament to amend and consolidate the laws relating to insurance and to regulate the business of insurance and for connected purposes. These are governed by independent legislations that make provisions for the charge, assessment and collection of the respective taxes. The act was enacted for purposes of harmonizing and consolidating procedural. Summary of the companies act 2015 commencement capita. One of the most consistently challenging aspects of contracting in kenya is complying with the countrys tax system. Finance act 2015 insight 3 preamble the finance act 2015 was signed by the president and gazetted on 15 september 2015.
Section 15 of the income tax act is to be amended to include a provision allowing a deduction in respect of donations made towards alleviation of a national disaster declared by the president. Residents are also taxed on any other income that has accrued in or is derived from kenya. An act of parliament to provide for the establishment of the kenya maritime authority. Excise taxes all tobacco products are subject to excise tax. Smes in particular have the potential of generating a lot of revenue for the government but this is not the case. According to the vat act, chapter 476 laws of kenya, smes and large enterprises need to be aware. The taxfree amount is based on the employment income before the bonus, overtime allowances, and retirement benefits. Types of taxes in kenya and rates,vat,custom duty,and. An individual is resident in kenya if heshe has a permanent home in kenya and is present in kenya for any time during the year. Property taxes an annual property tax is levied on real estates in algeria. Tax procedures act, 2015 tpa was assented to on 15th december 2015 and commenced operations on 19th january 2016. Kenya imposes new income tax on residential rentals executive summary in light of the challenge in administration and collection of rental income, the kenya revenue authority kra has revisited its process for collecting taxes from rent particularly from the largely untapped lowend segment of.
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