Accounting and tax

Kenya corporate tax

Corporate income tax regime

  • Companies registered in Kenya are subject to a standard corporate income tax rate of 30% on taxable income;
  • Branches of foreign companies registered in Kenya are however subject to a higher corporate tax rate of 37.5%;
  • The Value Added Tax (VAT) is levied at a standard rate of 16% on goods and services unless incorporated within an EPZ, in which case the VAT rate is reduced to 0% indefinitely;
  • Capital gains in Kenya are considered as ordinary corporate income and is taxable at a standard final rate of 5%;
  • EPZ companies are exempt from corporate tax for the first 10 years, while paying a reduced corporate tax rate of 25% for every year after;

Withholding tax and tax treaties

  • A 5% withholding tax is applicable on dividends paid to non-resident entities. Hover the same is exempt from withholding tax if the resident recipient company holds more that 12.5% capital in the paying entity;
  • A 5% to 25% withholding tax is applicable on interests paid to resident and non-resident entities and varies based on the business activity and whether the company is established in the mainland or EPZ;
  • A 5% withholding tax is levied on technical services fee and royalties paid to companies based within Special Economic Zones. A higher rate of 20% is applicable for non-resident entities;
  • Kenya signed up to 14 double taxation avoidance treaties with global jurisdictions including Denmark, Germany, Canada, India, Norway, United Kingdom and South Africa, among other countries;

Personal income tax

  • Resident employees are taxed on both local and international income either from their employer or independent services rendered locally or internationally;
  • Employers must withhold 5% tax on employee gross remuneration (Pay As You Earn – PAYE) and submit the same to the National Social Security Fund (NSFF);
  • The personal income tax is levied at progress rates of 10% of the first US$1,500, 15% on the next US$1,400, 20% on the next US$1,400, 25% on the next US$1,400 and 30% on the next US$5,650;
  • Every taxable individual must file personal returns with the Kenya Revenue Authority (KRA) by 30th June every financial year through an electronic filing system via iTAX;

Accounting and audit regulations

  • A company must keep proper accounting records since its inception. Each officer of a defaulting company will be considered to have committed a crime and is liable to either i) a fine not exceeding US$10,000 or ii) imprisonment of not more than 2 years;
  • Each Kenyan company with i) an annual turnover exceeding KSH50m (US$500,000) or ii)
  • A company can be exempt from audit if it has remained dormant since formation or since the end of the preceding fiscal year. This exemption does not apply to financial services and insurance companies;
  • The director of an audit-mandatory company must ensure the company’s annual financial statement are duly audited and submitted to the Kenya Revenue Authority (KRA) every fiscal year;

Other compliance and tax considerations

  • The tax year is the calendar year; however, companies are free to adopt their own fiscal year end. All companies must file their annual tax returns within 6 months following the end of the calendar/adopted accounting year;
  • Every trading company must file monthly VAT returns within 20 days of the following month. Late payment of VAT will attract a Government penalty of 5% on the outstanding tax;
  • The taxable income for a Kenya company is calculated on the audited accounting profit, as adjusted for tax purposes, for the accounting year ending in the preceding calendar year;
  • It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfil those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.

Legal and compliance

  1. According to the Companies Act, to register a company in Kenya, you must have at least one director above 18 years of age;
  2. To form a Kenyan company you must have at least one shareholder who must be above 18 years and according to the revised companies act of 2017, the Kenyan company no longer requires to appoint at least one Kenyan (citizen by birth) to hold at least 30% stake for the company to be incorporated or registered;
  3. Shareholders who wish to travel to Kenya to do business will be required to prove that US$100,000 in capital has been set aside for the Kenya business setup, as a requirement of a successful entrepreneur work permit application. This does not apply to shareholders who do not plan on travelling to Kenya;
  4. Each company must have a registered office in Kenya. Healy Consultants can provide this for monthly fee of US$1,450;
  5. Each time a change occurs in the particulars of the Kenya business or to its officers, the change must be lodged with the Kenyan Companies Registry;
  6. A Kenyan company must file Annual Return with Company Registrar and Annual Tax Return with Revenue Authority to meet the legal requirements of the Kenya Companies Act;
  7. Foreign ownership is restricted in the aviation, insurance, telecommunications and agricultural industries, with listed companies also facing restrictions;
  8. The process of de-registering a company is dictated by the Government. This process will take a minimum of 6 months. Healy Consultants fee to project manage company de-registration is US$1450. During this 6 month period it is mandatory to maintain a resident company secretary and a legal registered office in Kenya.
  • Recruitment in Kenya

    1. Recruitment of foreign labour requires the employer to justify the hiring of the foreign worker in place of a Kenyan. The foreign employee is expected, but not required, to have professional and educational qualifications relevant to the position;
    2. Citizens of the East African Community (Uganda, Rwanda, Burundi, Tanzania) can be hired more easily than employees from other countries, with a simplified application process for a special Class B work permit following Kenya company registration;
    3. When employing local or foreign workers, employers must make sure to stay compliant with the 2007 Employment Act and the 2007 Labour Relations act, which are the two main laws governing labour in Kenya. The new labour laws most resemble the English system of labour laws, in terms of employer responsibilities.
  • Licensing in Kenya

    1. To complete Kenya company formation, firms will be required to apply for a license for Kenya business setup. Read more about Kenya business setup licenses;
    2. Any Kenya business setup registered within an EPZ is exempt from all licensing requirements, with only a single EPZ business license required to conduct business.

Contact us

For additional information on our accounting and legal services in Kenya, please contact our in-house country expert, Mr. Kunal Fabiani, directly:
client relationship officer - Kunal