Doing Business in Kenya - RSM International

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The current Personal Income Tax rates are as follows:Taxable Income Rate Cumulative TaxShillings p.a. % Shillings p.a.0 to 121,968 10 12,196121,969 to 236,880 15 29,432236,881 to 351,792 20 52,414351,793 to 466,704 25 81,142Over 466,704 304.3.3 Personal and Other ReliefsPersonal relief represents the amount which can be deducted by an eligible personfrom the tax payable by him. The personal relief is Shs 13,944. The relief is apportionedproportionately in a year of income in the case of death or in the case of an individualwho arrives in Kenya or leaves Kenya permanently.Other reliefs granted as a deduction against employment income include:• Life, health and education insurance relief - 15% of premium subject to amaximum of Shs 60,000 p.a. Where a policy is surrendered before its maturity,the tax on the relief granted to the policy holder is refundable.• Mortgage interest relief on owner occupied property (purchase or improvement)subject to a maximum of Shs 150,000 p.a.• Home ownership savings plan - a maximum of Shs 48,000 p.a. for a maximumperiod of 10 years. Interest earned on deposits of up to Shs 3,000,000 overthe ten year period is also exempt. The money shall be held with an approvedinstitution (bank, insurance company or a building society). Any withdrawalfrom the plan will be subject to tax at the individual rates of tax in the year ofwithdrawal.4.3.4 Taxation of BenefitsAs a general rule, all non-cash benefits exceeding Shs 36,000 p.a. in aggregate aretaxable at the higher of cost to the employer of providing the benefit or their fairmarket value.Tax Free Benefits• Medical benefits provided to a full-time employee and a whole-time servicedirector (who spends substantially all of his time on company business and doesnot own or control more than 5% of the company shares or voting power),including their beneficiaries.• Medical benefits provided to a director other than a whole-time service director,partners and sole proprietors including their beneficiaries subject to a maximumvalue of Shs 1,000,000 p.a.34DOING BUSINESS IN KENYA
• Amounts paid by an employer into a registered pension scheme subject toa maximum of Shs 240,000 p.a. However, employees of organisations notchargeable to tax will be taxed on contributions that the employer makes toan unregistered fund or on the excess contribution made to a registered fund.• Payment by an employer not exceeding Shs 240,000 p.a. of gratuity or similarpayment which is paid into a registered pension scheme.• International passage cost for non-citizen employees recruited outside Kenya.• Education fees of an employee’s dependants or relatives, if taxed on theemployer.• Education fees paid by an educational institution for low income employee’sdependants attending the institution. A low income employee is an employeewhose taxable income is not subject to tax at the rate of more than 20%.• Meals provided at employer’s canteen to low income employees.• The first Shs 150,000 p.m. of total income, and deduction of up to Shs 50,000p.m. for drugs treatment and home care services for disabled persons registeredwith the National Council for Persons with Disabilities, and approved by theCommissioner.• A deduction of one-third of employment income claimed by a non-citizenresident employee of a non-resident company or a partnership trading for profitapproved by the Commissioner, who is absent from Kenya for an aggregate of120 days or more in a year of income and whose employment income is notdeductible in ascertaining the employer’s income chargeable to tax.Taxable Employment Benefitsa) Motor Vehicles• Where a company car is provided to an employee, the benefit is taxed at thehigher of 2% p.m. of the initial cost of the vehicle and the value prescribedby the Commissioner.• Leased and hired vehicles provided to an employee are taxed at the cost ofhiring or leasing the vehicle.• Where the employee has restricted use of the car, the Commissioner mayupon application determine a lower rate based on usage.b) Domestic Benefits• Benefits including staff meals (except to low income employees), clubsubscriptions, house helps, water, security, electricity etc. are taxable atthe higher of cost or fair market value.• The Commissioner has prescribed the value of benefits where the cost tothe employer is difficult to ascertain. The prescribed rates are:• Telephone (incl. mobile) - 30% of cost to employer• Furniture - 1% p.m. of cost to employerDOING BUSINESS IN KENYA35
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 28 and 29: • Unrealised foreign exchange los
Page 30 and 31: 4.2.6 Business with Non-Resident Pe
Page 32 and 33: Installments Due Date RateNon-Agric
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
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9.3 Foreign Ownership of Shares and
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Contact Details - RSM AshvirRSM Ash
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Appendix of Acronyms used in the Bo
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Notes90DOING BUSINESS IN KENYA
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