What Corporation Tax incentives do newly listed companies enjoy?

Newly listed companies get preferential rates, which serves as incentives, for corporation tax.

The rates range from 20% to 27% for a period ranging from three to five years, depending on the proportion of listed shares.

  • 20% rate, if 40% of issued share capital is listed ? (for 5 year period).
  • 25% rate, if 30% of issued share capital is listed ? (for 5 year period).
  • 27% rate, if 20% of issued share capital is listed ? (for 3 year period).

Are EPZ exempt from Corporation Tax?

Yes.

Export Processing Zones (EPZ) are exempt from corporation tax for the first 10 years of operation.

After the 10th year, they are subject to corporation tax at a rate of 25%.

Non-Resident entities are taxed through withholding tax regime.

Do Partnerships pay Corporation Tax?

No.

Partnerships do not pay corporation tax.

Their profit is distributed to the individual partners in the ratio of their ownership.

The profit then forms part of each individual's income, from where it is taxed.

Partnerships declare their profit through the Income Tax ? Partnership Return (IT2P).

Do self-employed people pay Corporation Tax?

No.

Self-employed people and Sole proprietorships are not subject to corporation tax.

Their profit forms part of their consolidated annual income which they declare in their Individual Income Tax Return.

Can I claim my company expenses?

Yes.

Where an employee enjoys a benefit, advantage or facility of whatsoever nature in connection with employment or services rendered; the value of such benefit should be included in the employee?s earnings and charged to tax.

When filing your Corporation Tax Return (also referred to as Income Tax - Company Return) you are only allowed to claim expenses that have been wholly and exclusively incurred in the production of your income.

What if I had incurred losses?

A company is allowed to carry forward its losses that will be offset against future taxable income.

Carrying forward of losses is subject to a 10-year limit.

However, losses cannot be transferred to a different entity.

Companies in the mining, oil and gas industries, are only allowed to carry their losses forward for a period of three years, from the year of income in which the loss arose.

Do I need to have an auditor?

Yes.

You should ensure that you get a certified auditor, to certify books of accounts.

How to account for investment deductions.

Buildings (Including Hotels)

  • Building plans and architect?s certificates.
  • Local authority occupation certificates.
  • Factory layout sketches showing the location of machinery.
  • Other supporting documents to support the expenditure incurred e.g. suppliers? invoices, contract documents etc.

Plant and Machinery

  • Suppliers invoices and vouchers.
  • Customs documents where machinery is imported.
  • Clearing and forwarding documents.
  • Documents to support foreign currency transactions.
  • Documents to support cost of installation of machinery.

NOTE: To make it easier for us to examine the documents, prepare a breakdown of the costs and the relevant supporting documents.

How to account for dividends and bonuses as allowable deductions.

Dividends and bonuses are treated as allowable deductions, against total taxable income.

  • A Society can pay 100% of total income as dividends to bonuses subject to Withholding Tax at the rate of 15%, treated as Qualifying Dividends.
  • If a Society dividends bonuses do not comprise 100% of total taxable income, then the remaining amount is subjected to 30% corporate tax
  • The dividends and bonuses payable cannot exceed 80% of the society?s total income.

Deducting dividends and bonuses from adjusted income only happens if;

  • Payment is made in cash or by cheque to the members.
  • Payment is approved at the AGM by the members of the primary co-op society.
  • Payment is approved by the commissioner of co-op societies.