Answer ... Value added tax (VAT) is a consumption tax accounted for using the input-output mechanism. Different types of supplies attract VAT at different rates, as follows:
- 16% for local taxable supplies;
- 8% for local supply of fuel (with effect from September 2018); and
- 0% for zero-rated supplies and exports and exempt supplies (which are outside the ambit of VAT).
VAT registration is required for persons making or expecting to make taxable supplies of over KES 5 million ($50,000) in a 12-month period. In determining the registration threshold, the sale of capital assets is excluded.
Excise duty is imposed on the local manufacture or import of certain commodities and services. Excisable commodities include bottled water, soft drinks, sugar confectionaries (chocolates and chewing gum), cigarettes, alcohol, fuels and motor vehicles. Excisable services include mobile cellular phone services, internet data services, fees charged for money transfer services and other fees charged by financial institutions.
Import (customs) duty is levied under the East African Community (EAC) Customs Management Act. Imported goods are generally subject to import duty at varied rates, including:
- 0% for raw materials and capital goods;
- 10% for intermediate goods; and
- 25% for finished goods in accordance with the EAC Common External Tariff.
However, a different rate of duty can be prescribed by the Council of Ministers of the EAC partner states.
Answer ... Capital gains tax (CGT) is chargeable on the transfer of property, including marketable securities such as shares in a company. CGT is payable on the net gain realised on the disposal of shares at the rate of 5%. This tax is borne by the sellers to which the capital gain accrues. Except for entities operating in the extractive sector, the indirect change of control of a Kenyan company (by sale of shares in a foreign company) does not trigger any CGT liability in Kenya.