These are tax incentives offered for capital expenditures.
They include wear and tear allowances, industrial building deduction, investment deduction and farm-works deductions.
Wear and tear allowances
The wear and tear allowances are charged on capital expenditure on machinery and equipment where they are classified into five classes all of which are offered the allowances at different rates.
This is an allowance granted to an investor who incurs capital expenditure on a building used as an industrial building at the rate of 10% of the cost (net of investment deduction, if any)
Expenditures of a capital nature incurred in that year of income (with the prior approval by the Minister) by the person on the construction of a public school, hospital, road or any similar infrastructure will be an allowable deduction.
An investor in the telecoms industry who incurs capital expenditure on telecommunications equipment purchased and used by him in business is entitled to a straight line deduction at the rate of 20% of such cost.
An investor who incurs capital expenditure on the purchase of the right to use a computer software used by him in business is entitled to a straight line deduction at the rate of 20% of such cost.
This deduction is a capital allowance granted to a farmer who incurs capital expenditure on the construction of farm works at the rate of 100% of the cost.
A farm work is any structure constructed to enhance the operations of a farm.
Capital expenditure on buildings and machinery for use in a Special Economic Zone shall be entitled to Investment deduction equal to one hundred percent of the capital expenditure.
Corporate taxation at rate of
Withholding tax rates on payments made to non-residents (royalties, interest, management fees) ? 5%; Dividends paid to non- residents by the SEZ entity, exempt from tax.
For newly listed companies, there are preferential corporate tax rates dependent on the percentage of listed shares as follows-
Where there are negotiated Double tax agreement between Kenya and any other state, there are usually concessionary tax rates on various categories of payments. For information on these, reference to be made to the individual agreements through this link?.
In the case of a full time employee including whole time service directors, the value of medical services provided by the employer or medical insurance provided by an insurance provider approved by the Commissioner and paid for by the employer on behalf of a full time employee.
Any person who borrows money from a registered financial institution to purchase a home or to improve a home as long as he/she occupies the home, will be entitled to a interest deduction of up to a maximum of KShs 300,000/= per annum of interest paid to the approved and registered financial institutions.
An individual will be entitled to relief/deductions on funds deposited under a registered Home Ownership Savings Plan subject to a maximum of KShs 8,000/= per month or KShs 96,000/= per year for 10 years. Any interest income earned by a depositor on deposits of up to a maximum of KShs 3 million shall be exempt from tax.
Housing bonds
Any individual who purchases housing bonds will be granted tax exemption on interest accruing on housing bonds up to a maximum of KShs 300,000/=.
Contributions in to a a registered retirement benefits scheme is tax deductible to a maximum of ksh 20000 pm or ksh 240000 pa. First ksh 600000 of lumpsum upon withdrawal of benefits and ksh 25000 monthly pension received from such scheme is tax free.
Collective investment schemes (Unit Trusts, Real Estate Investment Trusts, Employee Share Ownership Plans)
Collective Investment schemes registered with Commissioner are exempt from tax on their incomes except for payment of withholding tax on dividends or interest paid to unit holders who are not tax exempt.
This is granted to Donor Funded project upon recommendation by National Treasury, Diplomats (DA 1s) upon recommendation by CS for Foreign affairs, and privileged persons e.g. KDF