Do I need to have an auditor?
You should ensure that you get a certified auditor, to verify the records used to prepare your financial statements.
How to account for investment deductions.
Buildings (Including Hotels)
- Building plans and architect's certificates.
- Bills of quantities
- 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, certificates of occupation 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.
What is exempt from Withholding Tax?
- Dividends received by a company resident in Kenya from a local subsidiary or associated company in which it controls (directly or indirectly) 12.5% or more of the voting power.
- Marketing commissions and residue audit fees paid to foreign agents in respect of export of flowers, fruits and vegetables.
- Interest payments to banks and insurance companies.
- Payments made to tax exempt bodies.
- Local management and professional fees whose aggregate is below Ksh 24,000 in a month.
- Air travel commissions paid by local air operators to overseas agents.
How do I account for rental income where there is mixed use of property?
- Where the property has both residential and commercial tenants, the income will be treated as follows:
- Where the gross annual rental income is Kshs. 288,000 or less than Kshs. 15 million, all rental income is combined in the annual Income Tax return.
- Where the gross annual rental income is from the commercial tenants and or combined (residential & commercial) and is more than Kshs. 15 million, this part of the income is accounted for as the commercial rental income and taxed at either individual graduated scale or corporate rate of 30%. Remember withholding Tax on the Rental Income will also apply.
How do I claim expenses on Commercial Rental Income Tax?
Expenses being claimed under the commercial rental income portion should be apportioned in the same ratio as the income of the commercial rent pertains to the total income.
What does a taxpayer require to apply for addition of VAT obligation?
KRA has restricted the addition of VAT obligation and set the following conditions and mandatory documentary requirements for approval of the same;
- Original CR12 for companies and Identity documents for directors or individuals including National Identity cards, passports or Alien Identity Cards;
- Business permit from relevant bodies;
- Work permits for aliens;
- Tax Compliance Certificates for all directors;
- Letter of appointment of Tax Representative for non-resident companies and identity documents of directors for companies with non-resident directors;
- Contact details including physical address, verified telephone contacts, email addresses, utility meter numbers and documents, office rent agreements;
- The website(s) or uniform resource locators (URLs) of the supplier through which business is conducted, where applicable;
- Contract agreements and/or sample invoices;
A Taxpayer who meets the above requirements can proceed to make an application for addition of VAT obligation.
What is VAT Special Table?
It is a mechanism implemented in iTax to enhance VAT compliance where certain categories of VAT registered taxpayers are restricted from performing certain processes. The following are categories so far on boarded on the special table:
Nil filers and Non-filers – This refers to Taxpayers who have either not filed returns or have consecutively filed NIL returns for a specified period. Missing Traders – This refers to taxpayers who are filing and paying VAT but on investigation were found to be involved in VAT fraud relating to ‘missing trader’ schemes
What instruments are assessed for Stamp Duty?
- All land transactions involving change of ownership either through valuable consideration, gifts or partition of land attract stamp duty except where specifically stipulated by the law.
- Charges, Mortgages and debentures.
- Bonds, consultations, deeds, Easements, general and specific power of Attorney, Variation of a Document, Commissioner of Oaths, Deed of indemnity, Guarantee, instruments under the chattels Transfer Act i,.e Chattels Mortgage, R.L 19, R.L 7, R.L 57,Assents, Mining Contracts
- City Council Leases are assessed at 60 pounds.
- Deed of Partition is assessed at two (2) percent of the lower value. To convert the value to Kenya pounds its divided by 20.
- Partnership Deed is assessed at fifty (50) pounds.
- Agreements pursuant to a power of Attorney is assessed at five (5) pounds on the agreement and four (4) percent of the consideration on the power of attorney. To convert the value to Kenya pounds it?s divided by 20.
- Surrender, revocation of power, supplemental charge, and partial discharge is assessed at one (1) pound.
- Increase of nominal capital is assessed as 1 percent of the increased amount. To convert the value to pounds it?s divided by 20.
What instruments are not assessed for Stamp Duty?
Some instruments are not assessed for Stamp Duty.
- Court Orders
Can I get an exemption from Stamp Duty?
Stamp Duty exemption may be obtained for transactions, including but not limited to:
- Transfer of land to charitable organizations as gifts.
- Transfer of property between spouses.
- Transfer of family property to the members on demise of a family member in whose name the property was registered.
- Transfer of land from a Holding Company and its Subsidiaries where the holding company owns not less than ninety percent (90 %) of the shares of the subsidiary, etc.
- Transfer of family property to a company wholly owned by the same family (By virtue of Legal Notice Number 92 of 2007 issued pursuant to section 106 of the Stamp Duty Act).
How are loans to employees taxed?
This is a tax on loans to employees.
When an employer provides a loan to an employee and charges interest below the prescribed rate of interest, then the difference between the prescribed rate and the employer's loan rate is a benefit from employment, that the employee should pay tax for.
This is type of tax is called Fringe Benefit Tax
How to account for dividends and bonuses paid by a cooperative society as allowable deductions.
Dividends and bonuses are treated as allowable deductions, against total taxable income.
- A Society designated co-operative society, other than a designated primary society can pay 100% of total income as dividends to and bonuses to its members.
- The dividiends are subject to Withholding Tax at the rate of 15%, treated as Qualifying Dividends while bonuses would be subject to PAYE.
- If a Society dividends and 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% 100% of the society’s total income.
"designated co-operative society" means a co-operative society registered under the Co-operative Societies Act;
"primary society" means a co-operative society registered under the Co-operatives Societies Act whose membership of which is restricted to individual persons.
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.
What is iTax?
iTax is a system that has been developed by KRA to improve on efficiency.
How does iTax work?
iTax allows one to update their tax registration details, file tax returns, register all tax payments and make status enquiries with real-time monitoring of their ledger/account.
How do I access iTax?
To log on to iTax , visit itax.kra.go.ke and follow the prompts.
I am trying access the portal but I keep getting error ref. no. 148..... What do I do?
This happens when there is network fluctuation. Please be patient and keep trying.
Does KRA offer training on iTax?
Yes. Training is done free of charge every first two Thursdays of the month at the Convention Centre, 5th floor Times Tower.
How do I apply for Tax Compliance Certificate on iTax?
The taxpayer should apply for a TCC through their iTax profile under the CERTIFICATES tab, and an acknowledgement receipt generated. Successful applicants will receive email with the TCC attached within 5 working days, whereas unsuccessful applicants will be notified of the areas of non compliance.
What happens when my TCC application is rejected?
Contact the compliance manager at your tax station to have the issue resolved then reapply.
At what age does one obtain a KRA PIN?
A PIN is issued upon acquisition of valid identification documents (e.g ID card)