Comparative Guides
Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.
Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.
Start by selecting your Topic of interest below. Then choose your Regions and finally refine the exact Subjects you are seeking clarity on to view detailed analysis provided by our carefully selected internationally recognised experts.
Results: 4 Answers
Corporate Tax
1.
Basic framework
1.1
Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?
 
Kenya
Kenya has a multi-level tax regime. The Constitution of Kenya creates two levels of government (national and county government), which can raise revenue through taxes, levies and duties. The national government is empowered to impose income tax, value added tax, customs duties and excise duty. County governments are empowered to impose property rates and entertainment taxes.

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.2
What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?
 
Kenya
The current corporate tax rate applicable to corporations resident in Kenya is 30% on taxable income. Non-resident companies with a permanent establishment in Kenya are taxed at the rate of 37.5% on the taxable income attributable to the Kenyan permanent establishment.

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.3
Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?
 
Kenya
Taxation is based on profits after the deduction of allowable expenses. Profits are taxed on an accrual basis for each year of income. Taxable profits are based on adjusted accounting profits, having added back non-deductible expenses and having deducted allowable expenses and capital allowances. Generally, expenses such as capital expenditure, restricted loan interest due to thin capitalisation, personal expenses, unrealised foreign exchange losses and depreciation are disallowed for tax purposes. On the other hand, capital allowances ranging from 12.5% to 37.5% are allowed against taxable income for equipment used in the production of income.

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.4
Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?
 
Kenya
Yes. Kenya has seven ‘specified sources’ of income which are computed and taxed separately when a person is in a tax loss position (ie, where respective profits or losses from one specified source of income cannot be offset or aggregated with profits or losses from another specified source of income). These specified sources of income are:

  • rights granted to other persons for the use or occupation of immovable property;
  • employment of personal services for wages, salary, commissions or similar rewards (not under an independent contract of service);
  • agricultural, pastoral, horticultural, forestry or similar activities;
  • surplus funds withdrawn by or refunded to an employer in respect of registered pension or registered provident fund;
  • income from mining rights;
  • investment income; and
  • business income.
For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.5
Is the regime a worldwide or territorial regime, or a mixture?
 
Kenya
Kenya applies a territorial (source-based) taxation system and therefore only income accrued or derived from Kenya is subject to tax in Kenya. However, employment income and business income earned partly in Kenya and partly outside Kenya are wholly taxable in Kenya.

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.6
Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?
 
Kenya
Effective 1 January 2016, tax losses are deductible in the year in which they are incurred and can be carried forward for the subsequent nine years. If the losses are not exhausted within this period, an application can be made to the Commissioner of Domestic Taxes to extend the period for claiming the tax losses beyond this total 10-year period. The cabinet secretary for the National Treasury and Planning has powers to extend the tax loss utilisation period indefinitely. Kenya is in the process of enacting a new Income Tax Act and has published a draft Income Tax Bill. Under the bill, the extension can be granted only for a further period of two years.

For companies in the mining, oil and gas industries, any losses incurred in a year of income can be carried forward indefinitely. These companies are also allowed to carry back tax losses for a period of three years, from the year of income in which the loss arose and operations ceased. However, the licensee or contractor must apply to the Commissioner of Domestic Taxes to allow the tax loss carry-back. Tax losses can only be used domestically.

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.7
Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?
 
Kenya
There is no concept of beneficial ownership of taxable income in Kenya and only the legal owner of the income can be taxed.

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.8
Do the rates change depending on the income or balance-sheet size of the taxpayer?
 
Kenya
No. All companies are taxed at the corporate rate of 30%. However, the bill proposes to introduce a new tax rate of 35% for companies that have taxable income in excess of KES 500 million (approximately $5 million).

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna
1.9
Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?
 
Kenya
No. Partnerships are considered to be tax transparent, with the income of the partnership being taxed in the hands of the partners at individual income tax rates and in accordance with whether such partner is resident or non-resident in Kenya. Trustees in a trust are responsible for accounting for corporate tax, if any, due on the income of the trust.

For more information about this answer please contact: Daniel Ngumy from Anjarwalla & Khanna