Introduction
These are various tax tips posts to enable corporate taxpayers to improve compliance, save on extra tax payments (fines, penalties and interests) and create wealth.
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(Photo by Waka)
Please, not that the Tips are updated frequently. The following are some tax tips.
Take advantage of extension of tax amnesty period – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (9/5/2017)
The Finance Act 2016 declared a tax amnesty whose operation is under the provisions of Section 37B of the Tax Procedures Act (2015) The tax amnesty is for all income earned from foreign investments by people whose tax base in Kenya. The income was not declared in Kenya. The tax amnesty covers all income earned for any year of income that ended on or before 31st December 2016.
The Cabinet Secretary (CS) to The National Treasury during his March 2017 budget speech extended the period for filing the tax returns and transfer of the declared funds to Kenya for re-investments from 31st December 2017 to 30th June 2018. The reason for this extension was to enable the taxpayers to transfer the money and reinvest it in Kenya. Please note that the amnesty period was not extended.
Kenya will sign international agreements on exchange of information for taxation purpose starting 2018. This means that information about Kenyan’s investments abroad should be forwarded to KRA. In case a taxpayer did not apply for the tax amnesty, they will be required to pay all the taxes, fines, penalties and interests according to the provisions of the Income Tax Act.
Pay Tax When You Receive Payments – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (10/4/2017)
Companies have a lot of need for money: for operations, paying taxes, loans etc. Money is simply never enough. Tax is not payable immediately but it is paid after some time. However, due to the many competing needs for money in a company, it is advisable to calculate the tax payable and make the tax payment immediately the company has received any payment from supplies (goods and services).
Paying tax due immediately a business is paid by clients or customers will ease tax payments and caution the company from defaulting on tax payments. It will also save the company from paying extra taxes in the form of fines, penalties and interests. I-Tax platform allows the making of tax payment without a tax return. Tax returns can be made later.
Know all the Tax Rates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (2/4/2017)
The following are the tax rates in Kenya as at the date of this post.
a) Employment income (PAYE)
The following is a table of the new PAYE bands.
Per Year (kshs) Tax rate
- On the first 147,580 10 %
- On the next 139,043 15 %
- On the next 139,043 20 %
- On the next 139,043 25 %
- Income over 564,709 30 %
In addition, personal tax relief is ksh 16,896 per year.
b) Turnover tax
Tax rate is 3 % of the gross amount (no deductible expenses).
c) Rental income
Residential
Annual rental income that is less than kshs 10 million – the tax rate is 10 % of gross rental income (no expenses are deductible). This tax is paid monthly.
Annual rental income more than kshs 10 million – tax paid at normal income tax rates. The tax rates are 30 % for residents and 37.5 % for non-residents. The tax is paid on an instalment basis.
- 1st instalment tax – 25 %.
- 2nd instalment tax – 25 %.
- 3rd instalment tax – 25 %.
- 4th instalment tax – 25 %.
- Balance of tax by 30th of 4th month after financial year-end.
Commercial
Landlords pay income tax at the normal income tax rate. The tax rate is 30 % for residents and 37.5 % for non-residents. The tax is paid on an instalment basis as follows:
- 1st instalment tax – 25 %.
- 2nd instalment tax – 25 %.
- 3rd instalment tax – 25 %.
- 4th instalment tax – 25 %.
- Balance of tax by 30th of 4th month after financial year-end.
Withholding income tax on rental income
- For resident landlords, withholding tax on rental income is at the rate of 10 %.
- For non-residents landlords, withholding tax on residential and commercial rental income from buildings is at the tax rate of 30 % of rental income.
d) Normal income tax
The tax rate for residents corporate organizations 30 % and 37.5 % for non-residents taxpayers. Some companies quoted at the Nairobi Securities Exchange (NSE) have preferred tax rates. Tax is paid on an instalment basis as follows:
- 1st instalment tax – 25 %.
- 2nd instalment tax – 25 %.
- 3rd instalment tax – 25 %.
- 4th instalment tax – 25 %.
- Balance of tax by 30th of 4th month after financial year-end.
e) Withholding income tax rates on supplies
Resident suppliers to the domestic market
- Resident suppliers of professional, management, technical and training services is 5 %.
- Resident suppliers of construction services the tax rate is 3 %.
Non-resident suppliers to the domestic market
- The withholding tax rates for the supply of the services by non-resident suppliers vary from 5 % to 30 %. However, the rates vary depending on whether there are double taxation agreements.
- The withholding tax rates on other fixed assets of non-residents such as aircraft, equipment leasing range from 5 % to 30 %.
Know all VAT Tax Rates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (2/4/2017)
a) VAT on domestic supplies
Currently, the VAT rates on domestic supplies of goods and services are as follows:
- Exempt
- Zero per cent (0 %)
- Standard rate of sixteen per cent (16 %).
b) Withholding VAT
For resident suppliers of goods and services, the withholding tax rate is at 6 %.
c) VAT on imported services
The tax rates are either:
- Exempt
- Zero per cent (0 %)
- Standard rate of sixteen per cent (16 %).
d) VAT on commercial rental properties
The VAT on commercial rental properties is at 16 %.
e) Withholding VAT on commercial rental income
Residents
The withholding VAT on commercial rental income for residents is at the rate of 6 %.
Non-residents
For non-residents, withholding VAT tax on commercial rental income is at the tax rate of 30 %.
Know Capital Gains Tax Rates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (2/4/2017)
a) Land, Buildings and Securities
Transfer of land, buildings and securities (with exceptions) attracts tax at the rate of 5 %.
b) Extractive industry
Transfers in the extractive industry (mining and petroleum industry) also attract tax at the rate of 30 % for residents and 37.5 % for non- residents with permanent establishments in Kenya.
Know all Domestic Excise Duty – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (2/4/2017)
a) Specific duty rate
Tax charged per unit of measure – ranges from 5 % to 130 %.
b) Advalorem duty rate
Tax charged as a per cent rate on excisable goods – ranges from kshs 3 to kshs 2,500.
Know Standards Levy Tax Rates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (2/4/2017)
a. The tax rate is at 0.02 % of ex-factory price.
b. The rate is subject to a minimum of kshs 1,000 per month and a maximum of kshs 400,000 per annum.
Know Sugar Development Levy – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (2/4/2017)
a. The tax rates for local production is 7 % ex-factory price at the mills.
b. The tax rate for imported sugar is 7 % on cost, insurance and freight (CIF) value.
Take Note of Income Tax Due Dates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (29/3/2017)
Every corporate taxpayer must take note of the following tax due dates:
a. PAYE – by 9th day of the following month.
b. Turnover tax – by 20th day of the following month.
c. Rental income tax (commercial and residential) on turnover less than kshs 10 million – by 20th day of the following month.
d. Rental income tax (commercial and residential) on turnover more than kshs 10 million – a payment on instalments basis:
- 1st instalment tax – by 20th of 4th month.
- 2nd instalment tax – by 20th of 6th month.
- 3rd instalment tax – by 20th of 9th month.
- 4th instalment tax – by 20th of 12th month.
- Balance of tax by 30th of the 4th month after year-end.
e. Withholding rental income – by 20th day of the following month.
f. Normal income tax
- 1st instalment tax – by 20th of 4th month.
- 2nd instalment tax – by 20th of 6th month.
- 3rd instalment tax – by 20th of 9th month.
- 4th instalment tax – by 20th of 12th month.
- Balance of tax by 30th of the 4th month after year-end.
g. Capital gains tax – by 20th day of the following month.
Take Note of VAT Due Dates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (29/3/2017)
a. Normal VAT – by 20th day of the following month.
b. Withholding VAT
- Normal VAT – by 20th day of the following month.
- The VAT on commercial rental income – by 20th day of the following month.
c. The VAT on imported services – by 20th day of the following month.
Take Note of Excise Duty Due Dates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (29/3/2017)
- On imports – at the port of entry.
- Domestic – by 20th day of the following month.
Take Note of Standards Levy Due Dates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (29/3/2017)
This is a payment to Kenya Bureau of Standards (KEBS) – by 20th day of the following month.
Take Note of Sugar Development Levy Due Dates – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (29/3/2017)
Paid by 20th day of following month.
Learn to Use i-Tax Platform – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (28/3/2017)
All taxpayers must make an effort to learn how to use i-Tax platform. The taxpayers should stop relying on other people to make tax returns for them. The reason is that in case the tax returns are not made correctly or on time, and there will be fines, penalties and interests to pay, it is the taxpayer who will pay not their agent.
Register or Migrate to i-Tax Platform – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (26/3/2017)
From July 2017, KRA ceased taking any manual tax returns. All taxpayers corporate taxpayers included should register in i-Tax platform. If the taxpayer was already registered in the previous ITMS platform in KRA, they should migrate all their tax details into the i-Tax platform.
All tax credits in the ITMS platform for various tax types (VAT, income tax, domestic excise tax etc.) must be captured on registration or migration to i-Tax platform. If the tax credits are not captured on registration or migration, the taxpayer may lose the tax credit.
Employees/Directors Personal Identification Numbers – Dr. Wakaguyu Wa Kiburi & taxkenya.com Team (26/3/2017)
All employees must have personal identification numbers (PIN). Employing an employee or a director without a PIN attracts kshs 2,000 per month. It is also an offence to make any payment without deducting tax where applicable.
Feel free to send us questions or topics on tax and investments in Kenya that you would wish to be covered in this Website.
Disclaimer
This post is for general overview and guidance and does not in any way amount to professional advice. Consequently, www.taxkenya.com, it’s owner or associates do not take any responsibility for results of any action taken on the basis of the information in this post or for any errors or omissions. Kenyan taxpayers must always rely on the most current information from KRA. Tax industry in Kenya is very dynamic.
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