Doing Business in Kenya - RSM International

• Unrealised foreign exchange losses;• Restricted interest and foreign exchange losses and withholding tax paid ondeemed interest calculated in accordance with the thin capitalisation rulesapplicable to foreign controlled companies (Section 3.2.3); and• Depreciation and amortisation.4.2.5 Capital AllowancesWhile depreciation on property, plant and equipment and amortisation on pre-paidoperating lease rentals and computer software are specifically disallowed expenses,the Income Tax Act prescribes the following capital allowances.Wear and Tear AllowanceWhere during a year of income, machinery owned by a person is used by him forthe purposes of his business, there shall be made in computing his gains or profitsfor that year of income a deduction referred to as a “wear and tear deduction”. Thededuction is calculated on cost, net of any investment deduction allowance and inputVAT claimed, on a reducing balance basis.NatureClass I: Tractors, combine harvesters, heavy earth-moving equipmentand similar heavy self-propelling machines (lorries over 3 tonnesincluded by practice)Class II: Computer hardware, calculators, copiers and duplicatingmachinesClass III: Motor vehicles (if not commercial, limited to a cost of US$20,000 per vehicle) and aircraftsClass IV: All other machinery including ships (by practice, also includesfurniture, fittings and office equipment)Telecommunications equipment purchased and used by a telecomsoperator - straight lineAny implement, utensil or similar article, not being machinery or plant,employed in the production of gains or profitsRate37.5%30%25%12.5%20%What is considered bythe Commissioner to bejust and reasonable28DOING BUSINESS IN KENYA