How Revenue Authorities Categorize Business Taxes in Kenya

Legal compliance is one of the business risks you face when you start and operate a business. Taxes in Kenya are a major part of legal compliance. It is important to pay taxes to be able to protect various aspects of your business including your business license, business operations and more. 

The business tax categories the Kenya Revenue Authority has set out include income tax, Rent Income Tax, Value Added Tax, Excise Duty, Capital Gains Tax and Agency Revenue. Which of these taxes does your business qualify for if you want to base your business in Kenya?

Categories Of Business Taxes In Kenya

1. Income tax

This is tax levied on Kenyan residents and non-residents for income you derive from or accrue in Kenya. You will pay income tax for:

• Rent Income
• Employment Income
• Dividends and Interests
• Business Income of any profession
• Natural resources income
• Digital marketplace income and more

There are 5 major methods in which the revenue authorities levy taxes based on a partnership’s or company’s source of income.

2. Corporation tax

Corporate bodies like trusts, cooperatives, and limited companies pay corporate tax based on their annual income. Multinational companies operating in Kenya will pay corporate tax based on the income they have gained in Kenya. 

3. Pay As You Earn (PAYE)

PAYE is a tax collection method for those with gainful employment. Businesses, partnerships, and companies help with this. You should deduct it from your employees’ salary and forward it to the Kenya Revenue Authority before the 9th of each month. 

4. Withholding Tax

Withholding tax is a tax levied on income from the following sources:

• Royalties
• Interests
• Dividends
• Pensions
• Commissions
• Professional fees or management
• Rent for non-residents
• Other specified payments

If your company is liable for any withholding tax, you should deduct and remit them to the office of the Commissioner of Domestic Taxes. 

5. Advance Tax

If your business has a commercial or public service vehicle, you are expected to pay the advance tax on it before you take it to the annual inspection.

6. Installment tax

 If you have a tax payable of more than Ksh. 40, 000 for any year, the revenue authority levies the installment tax.

7. Rent Income Tax

The revenue authority expects you to pay Rent Income tax if you rent out any of your premises for commercial or residential purposes. You will pay a percentage of your gross rent income. The KRA appoints agents to facilitate compliance for withholding and paying these taxes.

8. Value Added Tax

If you import or supply goods or services that are provided or made in Kenya, you are eligible to pay the value-added tax. VAT may be optional for most companies but is a must for those with an annual turnover of more than Ksh. 5 million.

KRA agents also facilitate compliance for VAT as they withhold and pay it for a taxable supply of goods and services. 

9. Excise Duty

Partnerships and companies that deal in excisable goods through:

• Manufacture of these goods and services in Kenya
• Import of such goods and services into Kenya

The laws of Kenya specify excisable goods and services to be:

• Opaque beer
• Mineral Water
• Soft drinks and juice
• Mobile cellular services
• Beer made from malt
• Money transfer fees
• Cosmetics

10. Capital Gains Tax

Starting from January 1st, 2015, you are required to pay excise duty if you gain from transfer of property in Kenya. 

11. Agency Revenue

These are taxes collected by the Kenya Revenue Authority for other revenue collection agencies. The law has provided two forms of agency revenues: 

12. Stamp Duty

The revenue authority will levy stamp duty if you transfer stocks, shares, and properties in Kenya. Also, the ministry of Land helps the Kenya Revenue Authority to collect Stamp Duty especially in the transfer of properties. 

13. Pool and Betting tax

A book maker’s Gross Gaming Revenue is used to levy the betting tax at a 15% rate. Furthermore, winnings from gaming, lottery and betting businesses are taxed at a rate of 20%. Excise duty is also levied on the amount staked at a 20% rate. 

Conclusion

Once you have established the taxes you will be liable to pay, you will have an easier time filing and paying your business taxes. You will reduce costs associated with fines and legal fees when you have to make up for tax evasions. There are also various tax incentives and exemptions that could reduce your tax fees. 

 Furthermore, the correct payment of taxes makes it easier to audit your business performance. The Kenya Revenue Authority has advanced with its iTax platform which makes it easier to file 

and pay your taxes.