1. Income Tax

Income tax is a tax charged for each year of income, upon all the income of a person whether resident or non-resident, which is accrued in or was derived from Kenya.

Income Tax is imposed on;

• Business income from any trade or profession
• Employment income
• Rent income
• Dividend and Interests
• Pension income
• Income from a Digital Marketplace
• Natural resource income among others

There are different methods of collecting income tax from companies & partnerships, based on their sources of income.

These methods include:

a. Corporation Tax

This is a form of Income Tax that is levied on corporate bodies such as Limited companies, Trusts, and Co-operatives, on their annual income.

Companies that are based outside Kenya but operate in Kenya or have a branch in Kenya pay Corporation Tax on income accrued within Kenya only.

Do partnerships pay corporation tax?

b. Pay As You Earn (PAYE)

This is a method of collecting tax at source from individuals in gainful employment.

Companies and Partnerships with employees are required to deduct tax according to the prevailing tax rates from their employees' salaries or wages on each payday for a month and remit the same to KRA on or before the 9th of the following month.

c. 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 (including consultancy, agency or contractual fees)
• Commissions
• Pensions
• Rent received by non-residents
• Other payments specified

Companies and partnerships making the payment, are responsible for deducting and remitting the tax to the Commissioner of Domestic Taxes.

d. Advance Tax

This is a tax paid in advance before a public service vehicle or a commercial vehicle goes for the annual inspection.

e. Installment Tax

Installment tax is paid by persons who have tax payable for any year that amounts to Kshs. 40,000 and above.

2. Rental Income Tax

This is a tax charged on rental income received from renting out property. Taxation of rental income depends on how the rented property was used for residential or commercial purposes.

All persons individuals, partnerships and companies that rent out property to other persons for either residential or commercial use are required to pay income tax on rent received

To facilitate compliance, KRA appoints agents to withhold and pay, a percentage of the gross rent as tax. These agents can be verified via the agent checker on iTax.

3. 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.

While companies & partnerships can voluntarily register for VAT they MUST register if their annual revenue exceeds Kshs. 5,000, 000.

To facilitate compliance, KRA appoints agents to withhold and pay, VAT on supplies made. These agents can be verified via the agent checker on iTax.

4. Excise Duty

This is a duty of excise imposed on;

• goods manufactured in Kenya, or;
• imported into Kenya and specified in the 1st schedule to Excise Duty Act, 2015.

Companies and Partnerships dealing in excisable good and services are required to pay excise duty.

The List and types of Excisable goods and services are listed in the 5th Schedule as read together with Section 117 (1) (d) of the Customs and Excise Act, CAP 472 Laws of Kenya.

They includes;

• Mineral water
• Juices, soft drinks
• Cosmetics and Preparations for use on hair
• Other beer made from malt
• Opaque beer
• Mobile cellular phone services
• Fees charged for money transfer among others

5. Capital Gains Tax (CGT)

This is a tax chargeable on the whole of a gain which accrues to a company or an individual upon transfer of property situated in Kenya, whether or not the property was acquired before 1st January, 2015.

It took effect on 1st January 2015.

6. Agency Revenue

This is a type of payment that KRA collects on behalf of various revenue collection agencies in Kenya.

The two types of Agency Revenue include;

• Stamp Duty
• Betting and Pool Tax

a. Stamp Duty

Stamp duty is a tax charged on transfer of properties, shares and stock.

It is collected by the Ministry of Lands, which has seconded the function to Kenya Revenue Authority (KRA).

b. Betting Tax

Betting Tax is chargeable on the gross gaming revenue (GGR) of a bookmaker at the rate of 15% as provided by Section 29A of the Betting, Lotteries and Gaming Act, 1966.

Betting, gaming and Lottery businesses are required to withold as tax and remit to KRA 20% of the winnings being paid out to winners.

Excise Duty on Betting is chargeable at the rate of 20% of the amount wagered or staked, commencing 7th November, 2019.

6. Turnover Tax

• Turnover Tax is a tax charged on businesses whose gross turnover is more than Kshs. 1,000,000 but does not exceed or is not expected to exceed Kshs. 25, 000,000 during any year of Income.
• TOT is chargeable under Section 12 (C) of the Income Tax Act (CAP 470)

Eligibility for Turnover Tax

• Any resident person or corporate whose gross / expected turnover is more than Kshs. 1,000,000 but does not exceed or expected to exceed Kshs. 25,000,000 in any year of income is eligible for Turnover Tax. However, a person may elect, by notice in writing to the Commissioner, not to be taxable under TOT in which case the other provisions of the Income Tax Act shall apply to such a person.
• A Turnover Tax registered taxpayer dealing in vatable supplies and has a turnover of Kshs. 5,000,000 and above is required to register for VAT as well.

Exemptions under Turnover Tax regime
Turn over tax shall not apply to-:
a. Rental income
b. Management or professional or training fees; and
c. Any income which is subject to a final withholding tax under the Income Tax Act such as qualifying dividends or qualifying interests
Additionally, Turnover tax does not apply to non-resident taxpayers.

Benefits of Turnover Tax
• Reduced record keeping expenses because TOT registered taxpayers are only required to keep daily gross sales records and daily purchase records.
• Simplified filing and payment processes including payment through mobile phones – M-Service App
• Reduced time for filing and paying taxes
• Turnover Tax is a final tax
• One is not required to file end of year Income Tax return on income subject to TOT

What is the rate for Turnover Tax (TOT)?

• Turnover Tax is charged at the rate of 1% on gross monthly sales. 
• Expenses are not deductible.
• This is a final tax.

Registration for Turnover Tax

Registration is done online through the iTax platform
• Login to iTax using your PIN and password via https://itax.kra.go.ke
• Click on Registration module, select ‘amend PIN details’
• Under section ‘A’ basic information click on yes under question ‘Do you want to register for TOT?’
• Under section ‘B’ Obligation details, select the date of registration of TOT and submit the application.

Due date for filling and paying of TOT
A person subject to turnover tax under this section shall submit a return and pay the tax due to the Commissioner on or before the twentieth day of the month following the end of the tax period.
• Login to iTax,
• Under the returns menu, select file return, then turnover tax and download the excel return,
• Complete the return and submit,
• After filing the return, go to the payment menu, select “payment”, select the amount payable, and generate a payment slip,
Make the payment at a KRA partner bank or through M-PESA using the Government Pay bill number 222222, the Account Number is the Payment Registration number quoted at the top right corner of the generated payment slip.

You can now also file and pay your TOT using the new KRA M-service App.

Penalty and Interest for Turnover Tax
• Late filing of TOT return attracts a penalty of KShs. 1,000.
• Late payment penalty is 5% of the tax due.
• Interest on unpaid tax is 1% of the tax due per month or part of a month.