Among the key successes of Kenya Revenue Authority’s 7th Corporate Plan is increased tax and customs compliance through implementation of simplified tax payment processes as well as effective and efficient tax administration measures. The above measures among others, have led to increased customer satisfaction levels for both local and diaspora taxpayers. 

This article focuses on persons earning income from foreign sources subject to tax in Kenya for purposes of guiding them, with a view to ensuring their compliance to tax laws in Kenya.  

Kenya operates a source-based tax system, meaning that income is only subject to tax in Kenya if it is sourced in or from Kenya. Foreign income therefore is income earned outside Kenya by person’s resident and taxable
in Kenya.

In Kenya, resident persons are taxed on their worldwide income. An example is employment income earned outside Kenya by a resident individual, which is required to be declared for taxation in Kenya. Another scenario is income of a business carried on partly in Kenya and partly outside Kenya. In these two scenarios, the person is required to declare the income earned outside Kenya together with any income earned in Kenya and file their return via iTax, on or before last of the 6th month following the end of the accounting period.  Kenyan citizens who are chargeable to tax in Kenya are entitled to a set-off of tax paid on employment income accrued in a foreign country against tax payable in Kenya on the same income.

Where there is a Double Tax Agreement (DTA) between Kenya and other countries, the provision of the DTA shall apply. DTAs are agreements between two tax jurisdictions, which allocate taxing rights to incomes earned by resident individuals or enterprises of one state operating in either of the two jurisdictions. The DTAs set out terms and rules of how income or profits of cross border transactions are to be treated by the two countries, with an aim of avoiding double taxation. Where there are no DTA, income earned in one jurisdiction by a person who is a resident of the other jurisdiction may suffer double taxation in that other jurisdiction.

Filing of a tax return and payment of tax due is done through the iTax portal, which can be accessed by taxpayers across the world. To log in, the taxpayer must have a Personal Identification Number (PIN) and a password. Most functions are enabled self-services, which affords convenience and timeliness to taxpayers when transacting through the system.

Further insights on taxation of foreign income can be obtained through the following link: https://www.kra.go.ke/en/helping-tax-payers/faqs/taxation-of-foreign-income

Cynthiah Kerubo Oigara

KRA Tax Education.