Resident companies are taxable in Kenya on income accrued or derived from Kenya. Resident companies with business activities outside Kenya are also taxed on income derived from business activities outside of Kenya.
Non-resident companies are subject to Kenya corporate income tax (CIT) only on the trading profits attributable to a Kenyan PE.
The rate of CIT for resident companies, including subsidiary companies of foreign parent companies, is 30%. The CIT rate for branches of foreign companies and PEs is 30%.
The Finance Act, 2023 introduced an income tax on the repatriated income for branches of foreign companies and PEs at a rate of 15%. Accordingly, the effective tax rate for PEs and branches will now be 40.5%, which is the same as that of an incorporated Kenyan company with non-resident shareholders.
Special rates
There are special rates for certain resident and non-resident companies as set out below.
| Entity | CIT rate (%) |
| Export processing zone (EPZ) enterprises: | |
| First ten years | 0 |
| Next ten years | 25 |
| Thereafter | 30 |
| Registered unit trusts/Collective investment schemes | Exempt (subject to conditions) |
| Companies listed on securities exchange | 25 (first five years) |
| Special economic zone (SEZ) enterprises, developers, and operators | 10 (first ten years);
15 (succeeding ten years) |
| Local motor vehicle assembly companies | 15 (first five years);
15 (succeeding five years, subject to conditions) |
| Company operating a carbon market exchange or emission trading system that is certified by the Nairobi International Financial Centre Authority | 15 (first ten years from the year of commencement of its operations) |
Company operating shipping businesses | 15 (first ten years from the year of commencement of its operations) |
| Rates on gross income of non-residents derived from Kenya: | |
| Transmission of messages | 5 |
| Ownership or operation of ships and aircraft | 2.5 |
| Demurrage charges | 2.5 |
Local income taxes
There are no county or provincial taxes on income, as all taxes are collected by the national government. However, county governments are empowered by the Constitution to impose property and entertainment taxes at the county level.
FAQs
Corporate Income Tax Rate
What is corporate income tax in Kenya? ›
Corporation Tax What is the Corporation Tax rate? Resident Companies are taxed at a rate of 30%. Non-resident companies are taxed at a rate of 37.5%.
Do corporations pay income tax on corporate earnings? ›
The federal corporate tax rate in the United States is 21%, and it applies to a corporation's profits. The taxes are paid on a company's taxable income, which includes revenue minus expenses.
How much do companies pay for tax in Kenya? ›
Income tax rate for Resident companies is 30% of the taxable income while non-residents are taxed at 37.5% of their taxable income after adjusting for allowable and disallowable expenses for both.
What is the income tax in Kenya? ›
PAYE Calculator (Based on Finance Act 2023)
| Monthly Bands of Taxable Income (KES) | Tax Rate |
|---|
| 0 – 24,000 | 10% |
| On the next 8,333 | 25% |
| On the next 467,667 | 30% |
| On the next 300,000 | 32.5% |
3 more rowsBasic Tax Reduction Strategies in Kenya
- Choose an Accounting Method. ...
- Accelerate Expenses at the End of Each Year. ...
- Find and Utilize Tax Credits. ...
- Business Structuring. ...
- Tax Payment. ...
- Cash Management.
The Persons with Disabilities Act 2003 and The Persons with Disabilities (Income Tax Deductions and Exemptions) Order 2010, forms the legal basis for granting of Income Tax Exemption for persons with disability.
Who actually pays corporate income tax? ›
Who bears the burden of the corporate income tax? The burden is shared among stockholders, workers, and all investors. Shareholders bear most of the corporate income tax burden, but they aren't the only ones. Over time, others bear some of the burden because of a chain reaction that begins with the shareholders.
How is corporate income tax calculated? ›
Corporate Tax Base
The CIT generally taxes a business' profits, which are revenues (what a business makes in sales) minus costs (the cost of doing business). However, costs of capital investments—such as equipment, machinery, and buildings—cannot be deducted when they incur.
What big corporations don't pay taxes? ›
The analysis names 35 corporations, including Tesla, Netflix and Ford, that each reportedly spent more on compensation to their five highest-paid executives than they paid in federal income taxes over five years.
Is foreign income taxable in Kenya? Kenya operates a source based tax system, meaning that income is only subject to tax in Kenya if it accrued in or was derived from Kenya. However, there are a few exceptions to this rule such that income earned outside Kenya is taxable in Kenya.
Who pays turnover tax in Kenya? ›
Turnover Tax is a tax charged on businesses whose gross turnover is more than Kshs. 1,000,000 but does not exceed or is not expected to exceed Kshs. 25, 000,000 during any year of Income. TOT is chargeable under Section 12 (C) of the Income Tax Act (CAP 470).
What are the tax obligations in Kenya? ›
A tax obligation is a duty to account and pay applicable taxes. Tax obligations that are applicable under tax PINs in Kenya include: Income Tax Resident Individual, • Income Tax Non-Resident Individual, • Income Tax Company, • Value Added Tax (VAT), • Turnover Tax, • Pay as You Earn (PAYE), and • Excise Tax.
How is corporate tax calculated in Kenya? ›
What is the Corporation Tax rate? Resident Companies are taxed at a rate of 30%. Non-resident companies are taxed at a rate of 37.5%.
How do you calculate taxable income in Kenya? ›
Gross Income = Basic salary + allowances + commissions. Step 2. Taxable Income = Gross Income - all deductions/exemptions allowed by law e.g. NSSF, private pension.
What are the new tax laws in Kenya? ›
Various new tax rates and levies have been introduced as a result of the Finance Act, 2023, including a housing levy chargeable on personal emoluments. Further, the value-added tax (VAT) rate on fuel has been standardised to 16%, while the rate of capital gains tax (CGT) has been increased to 15%.
Who is subject to corporate income tax? ›
You must file California Corporation Franchise or Income Tax Return (Form 100) if the corporation is: Incorporated in California. Doing business in California. Registered to do business in California with the Secretary of State.
What is the minimum corporate income tax? ›
MCIT is computed at 2% of the gross income of the corporation as of the end of the taxable year, beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations.
What are examples of corporate tax? ›
Examples of corporate taxation include the income tax and taxes based on employees: The corporate income tax rate of 21% is subject to taxable income. Assuming a company has revenue of $100,000 and taxable expenses of $50,000, the result is a taxable profit of $50,000.
Do foreigners pay tax in Kenya? ›
The tax rate for foreigners is identical to that for residents. Any income you generate from work inside the country will be taxed using the above tax brackets if you do not meet residency requirements under Kenyan tax law.
