Understanding Your Tax Obligations in Kenya

Navigating the tax landscape in Kenya is a critical aspect of running a successful business. The Kenya Revenue Authority (KRA) mandates several tax obligations depending on the nature and size of your business. Non-compliance can lead to hefty penalties and legal issues.

Key Tax Obligations

• Corporate Income Tax (CIT): Companies resident in Kenya are taxed on their worldwide income. The current rate is 30% for resident companies and 37.5% for non-resident companies (branches).
• Value Added Tax (VAT): VAT is charged on the supply of taxable goods and services made in Kenya and on the importation of taxable goods. The standard rate is 16%. Businesses with an annual turnover of KES 5 million or more must register for VAT.
• Pay As You Earn (PAYE): Employers are required to deduct tax from their employees' salaries and remit it to KRA. This applies to all employees earning above the taxable threshold.
• Turnover Tax (TOT): Small businesses with a turnover between KES 1 million and KES 50 million may opt for Turnover Tax at a rate of 1% of gross sales, which is simpler to administer than income tax.

The Role of iTax

KRA has digitized tax administration through the iTax platform. All tax returns (VAT, PAYE, Income Tax) must be filed online. Late filing or non-filing attracts automatic penalties generated by the system.

Tax Dispute Resolution

Disputes with KRA can arise from audits or assessments. The Tax Procedures Act provides mechanisms for objecting to tax decisions, including lodging an objection with the Commissioner and appealing to the Tax Appeals Tribunal (TAT).

Larpei & Company Advocates advises businesses on tax planning, compliance, and represents clients in tax disputes before the Tribunal and courts. We help you stay compliant while optimizing your tax position.