Direct taxes

The Income Tax Act constitutes the principal legislation

Corporate income tax

Corporate income tax (CIT) is defined at the national level (no county or provincial taxes on income). The corporate tax year is based on the calendar year (Gregorian calendar).

Kenya Revenue Authority has set-up a department dedicated to large taxpayers (the Large Taxpayer Office).

The following table presents CIT rates according to the entity status.

Type of rate Entity CIT rate      (%) Comments
General rate Resident company 30 Includes subsidiary of foreign parent companies
Branch of foreign companies and permanent establishments 37.5 Only profits attributable to the Kenyan permanent establishment are taken into account
Special rate Newly publicly listed company ≥ 40% of shares are listed 20 The special rate applies only for the first five years after listing
Newly publicly listed company ≥ 30% of shares are listed 25 The special rate applies only for the first five years after listing
Newly publicly listed company ≥ 20% of shares are listed 27 The special rate applies only for the first three years after listing
Company listed on securities exchange 25 The special rate applies only for the first five years
Local motor vehicle assembly company 15 The special rate applies for the first five years. Subject to conditions, it is possible to extent the special rate to an another five-year period
Special rate for economic zones Export processing zone enterprise 0
25
0%: first ten years
25%: succeeding ten years
Special economic zone enterprise, developer, and operator 10
15
10%: first ten years
15%: succeeding ten years

Note: last update: 2018.
Sources: Kenya Revenue Authority, PricewaterhouseCoopers.

Corporate withholding taxes

General taxation

Type of payment Resident rate (%) Non-resident rate (%)
Dividends 0 if >12.5% voting power

5 otherwise

0 if paid by SEZ enterprises, developers or operators to any nonresident

10 otherwise

Interest on government beared bonds with two years and above maturity 15 15
Interest on government bearer bonds with ten year and above maturity 10 N/A
Interest on other bearer instruments 25 25
Management, technical or professional fees 5 20

5 if paid by a SEZ enterprise

Royalties 5 20

5 if paid by a SEZ enterprise

Note: last update: 2018.
Sources: Kenya Revenue Authority, PricewaterhouseCoopers, IGuide Kenya.

Oil and gas sector

The oil and gas sector is subject to specific withholding rates. Payments to non-residents in the oil and gas sector are subject to the following rates

Type of payment Witholding rate (%)
Dividend 10
Interest 15
Management or professional fees 12.5
Natural resource income 20
Sale of property or shares in oil, mining, or mineral prospecting companies 10 if resident
20 if non-resident

Note: last update: 2018.
Sources: Kenya Revenue Authority, PricewaterhouseCoopers.

Indirect taxes

Value added tax

Value added tax is a tax on consumption. Compared to a sales tax, VAT is fiscally neutral for businesses. Therefore, VAT is not a direct final cost for companies.

Legislation

The principal legislation is contained in the VAT Act (2013). The Value Added Tax Regulations (2017) provides guidelines as regards as the implementation of the legislation.

VAT rate

The normal VAT rate is set at 16% (2017 Finance Act).

In order to foster local production (manufacturing activities and agriculture), a number of inputs (including raw materials) and capital goods benefit from a zero VAT rate. Furthermore, the supply of locally assembled tourist vehicles is now VAT-exempted.

Customs duties

General customs tariffs

As a member of the East African Community (EAC) customs union, Kenya applies the EAC Common External Tariff (2017).

Summary of the EAC customs tariff

Type of goods Tariff (%)
Raw materials 0
Capital goods 0
Intermediate goods 10
Finished goods 25

Note: last update: July 2018.
Sources: Kenya Revenue Authority, PricewaterhouseCoopers, IGuide Kenya.

Preferential tariffs

To discover preferential tariffs, click here.

Excise taxes

The consumption of some commodities and services is subject to an excise tax. Excisable goods include items such as beverages (bottled water, soft drinks, alcohol), tobacco, petroleum products, motor vehicles, cosmetics, jewellery. Excisable services include cell phone airtime, fees charged for money transfer services, and other fees charged by financial institutions.

Double taxation treaties

Kenya has tax treaties with a number of countries. Double taxation agreements usually specify reduced rates for non-residents. The tax treaty with China is not yet in force.

Tax treaties with the following countries are currently in force

Treaty partners Treaty rate Agreement
Dividends Interest Royalties
Canada 15 if  10% voting shares
25 otherwise
15 15
Denmark 20 if 25% voting shares
30 otherwise
20 20
France 10 12 10
Germany 15 15 15
India 10 10 10
Iran 5 10 10
Korea (KOR) 8 if 25% capital
10 otherwise
12 10
Norway 15 if dividend paid to a company owning  25% voting shares during the last six-months
25 otherwise
20 20
Qatar 5 if  ≥ 10% capital
10 otherwise
10 10
South Africa 10 10 10
Sweden 15 if dividend paid to a company owning 25% voting shares during the last six-months
25 otherwise
15 20
United Arab Emirates 5 10 10
United Kingdom 0 if recipient of dividend ≥ 10% of the class of shares (presence of additional conditions)
15 otherwise
0 (may be applied at the discretion of the competent authority of Kenya)
15 otherwise
15
Zambia No Kenya tax is due if subject to tax in Zambia No Kenya tax is due if subject to tax in Zambia No Kenya tax is due
if subject to tax in Zambia

Note: last update: July 2018.
Sources: Kenya Revenue Authority, Deloitte.

Tax treaties with the following countries were signed but not yet in force

 

Burundi China Italy Kuwait
Mauritius Netherlands Rwanda Seychelles
Singapore Tanzania Thailand Uganda

Note: last update: July 2018.
Sources: Kenya Revenue Authority, Deloitte.