Doing Business in Kenya - RSM International

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• 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
Investment DeductionsNatureRateComputer software (calculated on cost) - straight line 20%Indefeasible rights to use fiber optic cable - straight line 20%Concessionary arrangements (on purchase of machinery or construction ofroads, bridges or similar infrastructure)Equally over theconcessionaryperiodIndustrial building allowance (calculated on cost, net of investment deduction,on a straight-line basis):Industrial building including staff welfare buildings, but excluding officebuildings, retail shops and dwelling houses except prescribed dwellinghouses e.g. quarters for employees. Where the disallowed proportion is lessthan 10% of the total cost, the entire cost qualifies. Land does not qualify.10%Hotel 10%Hostel, an educational building and a building in use for training certified by 50%the CommissionerRental residential building in a planned development area approved by the 5%Minister of Housing;and with stipulated infrastructure provided by the developer25%Commercial building with stipulated infrastructure provided by the25%developerFarm works allowance on structures excluding machinery necessary for proper 100%operation of a farm including farm buildings, fences, dips, drains, water andelectricity works, windbreaks and farmhouses (only 1/3 of the cost of farmhousemay be claimed)Investment deduction on eligible cost of building and machinery used for 100%manufacturing (including manufacturing under bond), workshop machineryused for factory maintenance, hotel buildings, filming equipment, andelectricity generation for national grid. Design, storage, show rooms, transportor administration units do not quality unless their cost does not exceed 10% ofthe total cost. Land does not qualify.Investment deduction on construction of buildings or purchase and installation 150%of machinery exceeding Shs 200 million outside Nairobi, Mombasa or KisumuShipping investment deduction on first use of a newly purchased, or the 40%purchase and re-fitting of a used power-driven ship of more than 495 tonnesMining Allowance on capital expenditure incurred in mining designatedminerals excluding specified minerals - straight line:Year 1 40%Year 2-7 10%Specified minerals 100%DOING BUSINESS IN KENYA29
Page 7: 2.0 General2.1 IntroductionKenya li
Page 13 and 14: Kenya Tanzania Uganda Rwanda Burund
Page 15 and 16: A huge chunk of the Act regulates m
Page 17 and 18: • Stamping of the Memorandum of A
Page 19 and 20: the Registrar within a statutory pe
Page 21: 3.2.3 Thin CapitalisationThin capit
Page 24 and 25: Where a business is carried on or e
Page 26 and 27: territory or domestic market. Motor
Page 30 and 31: 4.2.6 Business with Non-Resident Pe
Page 32 and 33: Installments Due Date RateNon-Agric
Page 34 and 35: The current Personal Income Tax rat
Page 36 and 37: c) Housing• The higher of market
Page 38 and 39: partnership in which the husband or
Page 40 and 41: (1) East African Community partner
Page 42 and 43: Where the taxpayer still disputes w
Page 44 and 45: The VAT rates applicable in Kenya a
Page 46 and 47: 4.8.4 De-registration and Disposal
Page 48 and 49: • Payment is received for all or
Page 50 and 51: 4.8.7 Records, Invoices, Credit and
Page 52 and 53: A credit note should be serially nu
Page 54 and 55: However, where a motor vehicle or o
Page 56 and 57: Where there is no tax payable a ‘
Page 58 and 59: granted or is partly granted, the b
Page 60 and 61: • Airtime on cellular mobile phon
Page 62 and 63: Transit VisasThese are visas requir
Page 64 and 65: Class K is for persons who have an
Page 66 and 67: 5.3.2 WagesAlthough the Employment
Page 68 and 69: NSSF provides the employee with a l
Page 70 and 71: 6.0 ACCOUNTING6.1 Statutory Framewo
Page 72 and 73: 7.0 INTELLECTUAL PROPERTYRIGHTSKeny
Page 74 and 75: Years 1 Shs 1,000Year 2 Shs 1,500Ye
Page 76 and 77: 8.0 Listing Rules8.1 The Capital Ma
Page 78 and 79:
• At the date of application, the
Page 80 and 81:
8.3 Payable FeesCompanies pay an in
Page 82 and 83:
9.0 Investing in Kenya9.1 General I
Page 84 and 85:
9.3 Foreign Ownership of Shares and
Page 86 and 87:
Contact Details - RSM AshvirRSM Ash
Page 88 and 89:
Appendix of Acronyms used in the Bo
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Notes90DOING BUSINESS IN KENYA
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Doing Business in Kenya - RSM International

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