Kenya Tax Guide
Navigating the taxation landscape of any nation
is a daunting task. We have prepared this guide
to ease the road to tax compliance in Kenya
Ace Taxation Services Limited
This guide has been prepared for general informational
purposes only and is not intended to be relied upon as
accounting, tax, or other professional advice. Please
refer to your advisors for specific advice in your specific
At a glance
Corporate Income Tax Resident Company 30 %
Corporate Income Tax Non-Resident Company 37.5%
Turnover Tax Rate 3 % (a)
Capital Gains Tax Rate 5%
Branch Tax Rate 37.5%
Dividends 10% (b)
Interest 15% (c)
Royalties 20% (d)
Commissions 20% (e)
Management, Professional and Training Fees 20% (f)
Sports and Entertainment Fees 20% (g)
Telecommunication Service Fees 5% (g)
Real Estate (Immovable Property) 30% (g)
Equipment 15% (h)
Winnings from Betting and Gaming 20% (i)
Sales of Property or Shares of Stock by
Companies in the Oil and Mining Sector 10% (j)
Natural Resource Income 20% (k)
Branch Remittance Tax 0%
Net Operating Losses Carry-forward 10 years
(a) Tax applies to taxpayers with annual gross turnover not exceeding KShs 5 million.
(b) This rate applies to dividends paid to non-residents. A 5% rate applies to
dividends paid to residents and citizens of other states in the East African
(c) This rate applies to payments to residents and non-residents. However, a 25%
withholding tax rate applies to interest arising from bearer instruments.
(d) This rate applies to payments to non-residents. A 5% withholding tax is imposed
on royalties paid to residents.
(e) This rate applies to payments to non-residents. For insurance commissions paid to
residents, a 5% withholding tax rate applies to payments to brokers and a 10% rate
applies to payments to others.
The following commissions are exempt from withholding tax:
• Commissions paid to non-resident agents with respect to flower, fruit or vegetable
• Commissions paid by resident air transport operators to non-resident agents to
secure tickets for international travel
(f) This rate applies to management, professional and training fees paid to non-
residents. However, for consultancy fees, payments to citizens of other East African
Community countries are subject to a reduced withholding tax rate of 15%.
For residents, management, professional and training fees are subject to a
withholding tax rate of 5%. The resident withholding tax rate for contractual fee
payments is 3%.
(g) This withholding tax applies only to payments to non-residents.
(h) This rate applies to rent paid to non-residents under leases of machinery and
equipment. Rent paid to residents under leases of machinery and equipment is
exempt from withholding tax.
(i) This rate applies to payments to residents and non-residents.
(j) This rate applies to payments made to residents. Effective from 1 January 2015,
the tax is imposed on the net gain. Payments to non-residents were removed from
the scope of the withholding tax, effective from 1 January 2014.
However, the licensee or contractor is required to account for tax at 20% of the net
(k) This rate applies to payments to non-residents. A 5% withholding tax is imposed
on natural resource royalties paid to residents.
(l) See Section C.
Taxes on corporate income and gains
Corporate income tax. Kenya income tax is payable by companies and by
unincorporated organizations and associations (excluding partnerships). Taxable
trading income consists of income arising or deemed to arise in Kenya.
Rates of corporate tax.
The corporate tax rate is 30% for resident companies and 37.5% for non-resident
companies and branches of non-resident companies. The corporate tax rate for
companies newly listed on a securities exchange approved under the Capital
Markets Act is reduced to 20% for a five-year period beginning with the tax year
following the year of the listing if the company’s listed capital is at least 40% of its
paid-up share capital.
Residential rental income tax at a rate of 10% of the Gross rent is the final tax for
landlords earning a rental income of Kshs 10 million and below. Optional and
Turnover tax is imposed on taxpayers with annual gross turnover not exceeding Kshs
5 million. The tax rate is 3% of annual gross turnover. The tax is a final tax. Turnover
tax does not apply to rental income, management or professional or training fees,
income of incorporated companies or income subject to a final withholding tax.
A company’s year of assessment (tax year) coincides with its financial accounting
year. A change in a financial accounting year must be approved by the Commissioner
of Income Tax.
Instalment tax (payable in advance)
A company must make payments, each equal to 25% of its estimated tax for the year,
by the 20th day of the 4th, 6th, 9th and 12th months of its financial accounting year.
The estimated tax must equal either 110% of the previous year’s tax or 100% of the
tax estimated to be due for the current year.
A company must file a self-assessment return within six months after the end of its
financial year. It must also file financial statements within six months after the end of
its financial year. Late filing of a return is subject to a penalty of 5% of the tax
balance. The minimum Penalty is Kshs10,000. The tax on the self- assessment, is
reduced by the instalment taxes paid, the balance is due within four months after a
company’s financial year-end. Late payments are subject to a penalty of 20% plus 2%
interest per month (or part of a month) of the tax balance.
Effective from 1 January 2015, capital gains tax applies to gains realized by
companies and individuals on the transfer of property located in Kenya, except for
listed shares on the Nairobi Securities Exchange. The general tax rate is 5%.
The gain equals the amount by which the transfer value exceeds the adjusted cost of
the property. The adjusted cost is the sum of the cost of acquisition of the property
and other costs incurred subsequently to enhance or preserve the property, provided
that such costs had not been previously allowed for tax purposes.
For listed company’s they shall pay a final tax based on 0.3 % of sale value, as a final
withholding tax. This is to be withheld by stock brokers.
Dividends paid by Kenya companies to resident companies are exempt if the
recipient controls at least 12.5% of the distributing company’s voting power. Taxable
dividend income is subject to a final withholding tax of 10% for non-residents and 5%
Compensating tax at the regular corporate rate is levied on dividends paid out of
Foreign tax relief.
Relief for foreign taxes paid is granted in accordance with tax treaties with other
countries. Foreign tax paid to a country that does not have a tax treaty with Kenya
does not qualify as a tax-deductible expense in Kenya.
Determination of trading income
Taxable income is accounting income adjusted for non-taxable income, such as
dividends and capital gains, and for non-deductible expenses such as depreciation.
Expenses are deductible if incurred wholly and exclusively in the production of
income. To encourage industrial growth and attract foreign investment, certain
special deductions are allowed.
The normal accounting basis of the lower of cost or net realizable value is generally
accepted for tax purposes. In certain circumstances, obsolescence provisions may be
Provisions included in computing financial accounting income are generally not
deductible for tax purposes.
Depreciation charged in the financial statements is not deductible for tax purposes. It
is replaced by the following tax depreciation allowances.
Asset class (%) Method applied
Heavy machinery such as tractors and combines 37.5(a) Reducing balance
Vehicles such as automobiles, trucks and airplanes 25 Reducing balance
All other machinery including ships 12.5 Reducing balance
Specified office equipment such as computers 30 Reducing balance
Other office equipment 12.5 Reducing balance
Telecommunication equipment 30 Reducing balance
Computer software 20 Straight- line
Irrevocable right to use fiber optic cable 5 Straight- line
Industrial buildings 10 (b) Straight- line
Hotel buildings 10 (b) Straight- line
Hostel, educational and training buildings 50 (b) Straight- line
Commercial and rental residential buildings 25 (b) Straight- line
Farming operations 100 Straight- line
(a) Effective from 1 January 2015, petroleum pipelines are subject to an allowance at
a rate of 37.5%.
(b) The rate for the buildings is applied to the capital cost, which is the lower of the
construction cost or the purchase price, unless purchased from the business entity
that constructed the building. To qualify for the above deduction, commercial and
rental residential buildings must be provided with roads, power, water sewers and
other social infrastructure. The rental residential buildings must be constructed in a
planned developed area approved by the Cabinet Secretary responsible for matters
relating to housing.
Deduction on capital expenditure incurred under concessionaire arrangements is
claimed in equal proportions over the period of the concession.
100% investment allowance is granted for capital expenditure on industrial buildings
and hotels and on machinery installed on such structures. This investment deduction
may be claimed at a rate of 150% if the investment is made outside the cities of
Nairobi, Mombasa or Kisumu and the investment value is over Kshs 200 million.
Licensed local film producers also qualify for a 100% investment allowance with
respect to the purchase of film equipment.
Capital allowances are subject to recapture on the sale of an asset to the extent the
sales proceeds exceed the tax value after wear & tear. Amounts recaptured are
treated as ordinary income, subject to tax at the regular corporate income tax rate.
Relief for losses.
Tax deficits (losses) are allowable deductions in the year in which they arise and in
the following four years of income. However, companies operating in the extractive
industry may carry forward losses indefinitely.
Profits and losses arising from specified sources (rental income, income from
agriculture and similar activities, and other profits from business) are computed and
taxed separately. If a company has a loss in a year from one of the specified sources,
the loss may be offset only against subsequent profits derived from the same
Groups of companies. The income tax law does not permit consolidated returns
combining the profits and losses of affiliated companies or the transfer of losses from
loss companies to profitable members of the same group of companies.
Other significant taxes
The following summarizes other significant taxes.
Nature of tax Rate (%)
Value-added tax, on the supply of goods and services in Kenya and on
Imported goods and services 0/16
Railway Development Levy; imposed on the import value of all imported
goods; import value is the Cost, Insurance and Freight value 1.5
Contributions to the National Social Security Fund (NSSF);
(NB: expatriates who are members of social security schemes in their Home countries
and those expected to be in Kenya for not more than three years are exempt)
Contributions are payable monthly by :
Employer (maximum contribution of Kshs 200)
Employee (maximum contribution of Kshs 200)
NB: A new NSSF Act was enacted on 24 December 2013. Under the new act, both the
employer and employee are required to contribute 6% of the employee’s monthly
pensionable pay subject to an upper earnings limit based on the national average
earnings provided by the Kenya Bureau of Statistics. The contributions are categorized
into Tier I and Tier II contributions. Tier I contributions must be remitted to the NSSF,
while Tier II contributions may be remitted to a contracted-out (private) scheme.
However, these contributions are not yet operational because of an Industrial Court
ruling blocking the implementation of the new act.
Foreign-exchange controls. The Central Bank of Kenya imposes certain foreign-
Transfer pricing. The transfer-pricing rules include measures regarding the following
• Entities and transactions to which the rules apply
Records regarding transactions that must be maintained.
• Methods that may be used to determine arm’s-length prices. The methods for
determining arm’s-length prices are consistent with those approved by the
Organisation for Economic Co-operation and Development (OECD).
Debt-to-equity rules. The deductibility of interest on loans and foreign-exchange
losses is restricted for a foreign-controlled company with a debt-to-equity ratio
exceeding 3:1 (except for companies operating in the extractive industry for which
the ratio is 2:1). For purposes of the ratio, debt includes any form of indebtedness for
which the company is incurring interest, a financial charge, a discount or a premium.
Interest-free loans provided or secured by non-residents are deemed to accrue
interest at a rate equal to the average 91-day Treasury Bill rate.
F. Treaty withholding tax rates
Payee resident in
Canada 15 15 15
Denmark 20 20 (a) 20
France 10 12 0 (f)
Germany 15 15 (a) 15
India 15 15 20 (d)
Mauritius (g) 5 (h) 10 0 (f)
Norway 15 20 (a) 20
Sweden 15 15 20
United Kingdom 15 15 (a) 15 (b)
Zambia 0 (c) 15 20
Non-treaty countries 10 15 20 (e)
(a) Interest paid by the government and the Central Bank of Kenya is tax-exempt.
(b) The rate is 12.5% for management and professional fees.
(c) No Kenya tax is due if the dividend is subject to tax in Zambia.
(d) The rate is 17.5% for management and professional fees.
(e) The withholding tax rate is 15% for consultancy fees paid to residents of other
East African Community countries.
(f) The rate is 10% for royalties.
(g) The Mauritius treaty is expected to enter into force on 1 January 2015.
(h) This rate applies if the beneficial recipient of the dividend owns at least 10%
of the share capital in the Kenyan company. The rate is 10% in all other cases.
Personal Tax and Individual Residency Rules
Individuals are subject to income tax on employment earnings if they meet either of
the following conditions:
• They are resident during the time of employment, regardless of whether their duties
are performed within or outside Kenya.
• For non=residents, their employer is resident or has a permanent establishment in
Who is liable. An individual is considered resident in Kenya if he or she does not have a
permanent home in Kenya but is present in Kenya for 183 days or more during a fiscal
year or for an average of more than 122 days in that year and in the two preceding
years. If an individual has a permanent home in Kenya and spends time in Kenya, he or
she qualifies as resident. It is irrelevant for tax purposes where an employment
contract is signed or remuneration is paid.
Income subject to tax
Employment income includes directors’ fees and almost all cash and non-cash
remuneration, allowances and benefits arising from employment. Taxable benefits
arising from employment include the following:
The taxable benefit from employer-provided housing equals the higher of rent paid by
the employer or 15% of employment income excluding the value of housing premises.
If the premises are provided under an agreement with a third party
that is not at arm’s length, the benefit is valued at the higher of the fair market rental
value of the premises or the rent paid by the employer. If the employer owns the
premises, the benefit is taxed at the fair market rental value of the premises.
Education fees paid by employers to their local or expatriate employees’ relatives are
taxable for income tax purposes if the employer has claimed the fees as a tax
• Motor vehicles.
The value of the benefit of an employer provided motor vehicle is the higher of 2% per
month of the initial capital expenditure by the employer on the car or the actual cost
to the employer. If an employee is provided with a leased or hired car, the taxable
benefit is the cost of lease or hire of the vehicle.
For employees who have restricted use of motor vehicles, the Commissioner of
Income Tax determines a lower rate of the benefit depending on the usage of the
motor vehicle, if the Commissioner is satisfied based on proof provided by the
employer that use of the motor vehicle is restricted.
Preferential Interest Rate Employee Loans.
The benefit from employer loans is taxable to the employer as fringe benefit tax for
loans granted after 11 June 1998 and for loans granted before that date if the terms
or conditions of the loan have been changed since 11 June 1998. The tax is imposed
on the benefit at the resident corporate tax rate of 30% and is payable by the 10th day
of the month following the imposition of the tax. For loans granted on or before 11
June 1998, the benefit is taxable to the employee as a low interest rate benefit. The
benefit is valued at the difference between the interest rate on the employer’s loan
and the rate prescribed by the Commissioner of Income Tax.
Employer-provided stock options. The value of the benefit from employer-provided
stock options under a scheme that is registered with the Commissioner of Income Tax
as a collective investment scheme, as defined by the Capital Markets Authority Act, is
the difference between the market value per share and the offer price per share on
the date on which the option is granted by the employer. The benefit is deemed to
accrue to the employee at the end of the vesting period. If the equity scheme
is not registered, the taxable benefit is the higher of the cost to the employer or the
fair market value.
Specific exemptions from Taxable Employee Benefits:
• The cost of medical services or medical insurance borne by the employer on behalf
of full-time employees or their beneficiaries. Medical insurance should be provided
through an insurance company approved by the Commissioner of Insurance in Kenya.
• Employer contributions to accredited pension or provident fund schemes if the
employer is subject to tax in Kenya.
• Withdrawal benefits from a pension or provident fund. The limit is Kshs 60,000 for
each year worked, up to a maximum of Kshs 600,000.
• The first Kshs 300,000 of annual pension income.
• Refunds of National Social Security Fund contributions plus interest. The limit is Kshs
60,000 for each year worked, up to a maximum of Kshs 600,000.
• For non-citizens recruited outside Kenya and their families, the cost of passage on
joining the company, for annual leave and for departure.
• The first Kshs 2,000 paid to an employee per day as an allowance while on official
duty. This amount is deemed to be a reimbursement and, consequently, not taxable.
• Non-cash benefits, up to a maximum of Kshs 36,000 per year.
• Employee Meals served in canteens and cafeterias operated by an employer or
provided by a third party that is a registered taxpayer (regardless of whether the
meals are in the employer’s or the third party’s premises) if the value of the meals
does not exceed Kshs 48,000 per employee per year.
Persons with Disabilities
Up to Kshs 50,000 per month of costs relating to health care services and
facilities for persons with disabilities are not taxable benefits.
The minimum taxable income for persons with disabilities is Kshs 150,000 per
Self-employment and business income.
All income accrued in or derived from Kenya is subject to income tax. For a resident,
this includes profits from a business carried on both inside and outside Kenya.
Business income includes income derived from any trade, profession or vocation, as
well as from manufacturing or related operations. A partnership is transparent for tax
purposes, with the individual partners taxed on their shares of partnership profits.
Business profits and losses are determined using normal commercial methods,
matching expenses with income from similar activities and using the accrual method
of accounting. Initially, a business may select any accounting period, but generally
must continue using the same accounting date thereafter. The Domestic Taxes
Department must be notified of a change in the accounting date.
All individuals and unincorporated businesses must have a 31 December year-end.
Dividends and interest income from investments in Kenya are subject to a withholding
tax in the year received. For residents, the tax rates are 5% on dividends and 15% on
The principal sources of exempt investment income are the following:
• Interest derived from savings accounts held with the Post Office Savings Bank
• For each individual, up to Kshs 300,000 of gross interest derived from investments in
housing bonds, except for a 10% withholding tax deducted at source
• Interest and dividend income accruing to a resident from investments outside Kenya
• Interest that is earned on deposits of up to Kshs 3 million with a registered Home
Ownership Savings Plan (HOSP)
Rental profits are aggregated with profits from other sources and taxed at the rates
set forth in Rates (below).
Effective from 1 January 2015, Capital Gains Tax applies to gains realized by
companies and individuals on the transfer of property located in Kenya, except for
listed company shares on the Nairobi Securities Exchange. The general tax rate is 5%.
For listed company’s they shall pay a final tax based on 0.3 % of sale value, as a final
The gain equals the amount by which the transfer value exceeds the adjusted cost of
the property. The adjusted cost equals the sum of the acquisition cost of the property
and other costs incurred subsequently to enhance or preserve the property, if such
costs had not been previously allowed for tax purposes.
Property transfers are subject to stamp duties at a rate of 4% on urban property and a
rate of 2% on rural property.
Residential rental income tax at a rate of 10% of the Gross rent is the final tax for
landlords earning a rental income of Kshs 10 million and below. This is optional and
certain criteria has to be met.
Deductions and reliefs.
An individual not resident in Kenya for tax purposes is not entitled to any tax relief.
Expatriate employees of accredited regional offices of foreign corporations who spend
at least 120 days during the fiscal year working outside Kenya may deduct one-third of
their total income.
Deductible expenses. Individuals may deduct the following expenses in computing
• Contributions to a registered pension/provident fund, up to Kshs 240,000 per year
• Interest, up to Kshs 150,000, on borrowings to finance the purchase of owner-
occupied residential property.
• Contributions to home ownership savings plan, up to of Kshs 48,000 p.a.
Resident taxpayers are granted the following reliefs against tax payable:
• Personal relief in the amount of Kshs 13,944 per year
• Insurance relief (including education and health insurance) in the amount of 15% of
premiums paid, up to a maximum relief of Kshs 60,000 per year
In general, expenses and losses are not deductible unless incurred wholly and
exclusively to produce taxable income.
Accounting depreciation is not deductible, but capital allowances are available. A first-
year investment deduction of 100% of qualifying expenditure on the following is
• Manufacturing premises
• Electric power generating projects with capacity to supply the national grid or to
transform and distribute electricity through the national grid
• Hotel buildings
• Farm works
The investment deduction is increased to a rate of 150% for an investment for
manufacturing purposes that is made outside the city of Nairobi, Kisumu and
Mombasa and that has an investment value of Kshs 200 million or more.
Capital Allowance on a straight-line basis for other industrial buildings and hotels, on
the amount remaining after the investment deductions, at a rate of 10%,
Commercial Buildings and Rental Residential Buildings constructed in a planned
developed area approved by the minister responsible for housing, 25%
Hotel buildings - 10%
Hostels and buildings used for educational and training purposes - 50%
A first-year deduction of 100% applies to capital expenditure on farm works.
The rates for plant and machinery are 12.5%, 25%, 30% or 37.5%, according to the
type, using the reducing balance method.
The qualifying cost of a non-commercial vehicle is restricted to Kshs 2 million.
The rate for software and telecommunication equipment is 20%.
The rate for the irrevocable right to use fiber optic cable is 5%.
A deduction may be claimed with respect to concessionary arrangements on a
straight-line basis over the period of the concession.
Other deductible capital expenditure includes expenses incurred for scientific research
and development, the prevention of soil erosion by a farmer, the development of
agricultural land and structural alterations to rental premises.
Realized foreign-exchange losses on capital borrowings are also deductible.
Deductions are allowed for employer and employee contributions to registered
pension and provident funds, with certain restrictions.
Following tax rates apply to employment, self-employment and business income
Taxable income Tax rate Tax due Cumulative tax due
Kshs % Kshs Kshs (cumulative)
First 121,968 10 12,196 12,196
Next 114,912 15 17,236 29,432
Next 114,912 20 22,982 52,414
Next 114,912 25 28,728 81,142
Above 466,704 30 — —
Tax is withheld from payments to non-residents at the following rates.
Income category Rate (%)
Management & professional fees, training fees, royalties & performance fees 20
Use of immovable property 30
Use of other property 15
Pensions and retirement annuities 5
Telecommunication service fees 5
Disposal of interest in a person derived from immovable property 20 *
Natural resource income 20
* This ordinarily refers to the sale of equity in companies operating in the extractive
(mining or petroleum) industry. The amount of taxable gain is usually based on the
value of immovable property held by the company.
These rates normally constitute the final liability for Kenyan income tax.
Relief for losses. Tax-adjusted profits and losses from the following specified sources
must be categorized separately:
• Agricultural activities
• Rental or other use of immovable property
• Services rendered (including employment)
• A wife’s employment and professional income (including self-employment, rent,
dividend and interest income)
• Other business activities
Profits are aggregated. Losses may be carried forward to offset future profits from the
same specified source without monetary limits. They may be used in the income year
in which they arise and in the following four years. Losses may not be carried back.
The national government in Kenya does not levy property tax, however these are
levied by County governments. These rates vary from County to County.
Social Security Payroll deduction
The only social security payroll deduction levied in Kenya is the National Social Security
Fund (NSSF). The NSSF is a statutory savings scheme to provide for retirement. The
rate of contribution is 5% of an employee’s salary, with employers and employees
each required to pay up to a maximum monthly amount of Kshs 200.
A New NSSF legislation (the NSSF Act 2013) was enacted on 24 December 2013 to
replace the NSSF Act Cap 258. The new legislation was scheduled to take effect on 31
May 2014, but the effective date for the legislation was delayed. The employer and
the employee will each be required to contribute 6% of the employee’s monthly
pensionable earnings, subject to defined limits. Contributions into the scheme are
divided into Tier I and Tier II categories. All Tier I contributions will be remitted to
NSSF while Tier II contributions will be made to either the NSSF or a registered private
pension scheme of which the employee is a valid member. A transitional arrangement
will be in place in the lead-up to the full implementation of the Tier 1 contributions.
Before 1 April 2015, individuals earning more than Kshs1,000 per month were
required to contribute to the National Hospital Insurance Fund (NHIF). Monthly
contributions depended on the level of income and ranged from Kshs 30 per month to
Kshs 320. Effective from 1 April 2015, individuals are required to contribute NHIF at
rates on a graduated scale with the lowest contribution being Kshs 150 and the
highest contribution being Kshs 1,700.
Tax filing and payment procedures
Employee withholding. For employees, tax is withheld at source under the Pay-As-You-
Earn (PAYE) system.
Instalment tax. Individuals must pay estimated tax in four equal instalments during the
financial year. The payments are due on the 20th day of the fourth, sixth, ninth and
twelfth months. Individuals with no income other than employment income that
is taxed at source are not required to pay instalment tax. Individuals whose total
annual tax payable does not exceed Kshs 40,000 are also exempt from paying
instalment tax, but are required pay the tax balance.
Final returns. Individuals subject to employment tax in Kenya are required to file a self-
assessment return by 30 June following the end of the preceding calendar year.
Assessment. A taxpayer may be assessed further after a self-assessment return is filed.
However, for most taxpayers, the self-assessment is final.
Married couples. Married women have an option to file self-assessment returns with
respect to their income from all sources or to aggregate their income with the income
of their husbands.
Double tax relief and tax treaties
Foreign taxes are deductible from taxable income as an expense.
Kenyan citizens working outside Kenya are allowed a tax credit for foreign tax paid on
the following types of income earned outside Kenya:
• Income from employment
• Income earned by artists and sportsmen
Kenya has entered into double tax treaties with the following countries. Canada,
Germany, Sweden, Denmark, India, United Kingdom, France, Norway, Zambia.
Mauritius, In general, the treaties above provide that foreign income taxes may be
offset against equivalent Kenyan taxes payable on the same income.
Temporary visas and passes
All visitors other than East African citizens must have visas to enter Kenya, unless they
are from a country for which visa requirements have been eliminated. These countries
include most of the British Commonwealth countries, Eritrea, Ethiopia, Ghana,
Guyana, India, Namibia, New Zealand, Nigeria, Pakistan, San Marino, Sri Lanka, Turkey
and Uruguay. Visitors from these countries are issued visitors’ passes at the point of
In addition, visas are not required for holders of a re-entry pass to Kenya as well as
transit passengers continuing their journey by the same or first connecting aircraft if
they hold valid onward or return documentation and do not leave the airport.
Visas are obtained at the point of entry into Kenya. Foreign nationals wishing to visit
Kenya are advised to confirm the entry requirements before departing from their
Visas are usually granted without delay. They are issued for a maximum period of
three months and may be extended for an additional three months on application. A
foreign national wishing to stay in Kenya for longer than six months must have an
entry permit (see Section G).
The types of temporary visas and passes issued by the government of Kenya are
Visas. The following types of visas are issued:
• Transit visa, which is issued to individuals in transit whose nationalities require visas
to enter Kenya. It is valid for a maximum of three days. A fee of USD20 is payable on
• Ordinary visa, which is issued for single or multiple entries to persons whose
nationalities require visas to enter Kenya for visits or residence. A fee of USD50 is
payable for a single journey visa and USD100 for a multiple journey visa.
• Diplomatic visa, which is issued free of charge to holders of diplomatic passports on
• Courtesy/Official visa, which is issued free of charge to holders of official or service
passports on official visits.
• East Africa Tourist visa, which is a joint tourist visa entitling holders multiple entries
to and between Kenya, Rwanda and Uganda for the purpose of tourism. It is valid for
90 days. A fee of USD100 is payable on application.
Passes. The following types of passes are issued:
• Visitors’ pass, which is issued to foreign nationals who wish to enter Kenya for the
purpose of holiday, visit or other temporary purpose as may be approved by the
• Dependents’ pass, which is issued to family members of foreign
nationals with entry permits.
• Students’ pass, which is issued to foreign students who wish to study in Kenya.
• Internship or research pass, which is issued to individuals seeking to enter or remain
in Kenya for the purposes of internship or academic research.
• Prohibited immigrants’ pass, which is issued to foreign nationals who do not have
valid entry documents or to foreign nationals who have contravened certain
immigration rules. These individuals must make an application before arriving at the
point of entry.
• Transit pass, which is issued to individuals who enter Kenya for the purpose of
traveling to a destination outside Kenya.
• Re-entry pass, which is issued to dependent pass holders to allow them multiple
entries into the country.
• Special pass, which is issued to foreign nationals wishing to work in Kenya on a short-
term assignment. A special pass is valid for three months and may be extended once.
Work permits and self-employment
Certain classes of entry permits allow foreign nationals to work in Kenya and are
usually referred to as work permits. An entry permit that allows a foreign national to
work in Kenya is obtained by an employer on behalf of a foreign national. Employers
are required to justify employment of a foreign national instead of a Kenyan. If the
foreign national changes employment, his or her new employer is responsible for
obtaining a new work permit.
Individuals requiring entry permits may enter Kenya on visas or visitors’ passes while
their applications for the permits are being processed. Foreign nationals who are over
18 years of age and stay in the country for more than 90 days must register as aliens.
Different classes of entry permits are issued in Kenya including permits for the
following categories of expatriates:
• Class A, which is issued to a person engaged in prospecting for minerals and mining
• Class B, which is issued to a person who intends to engage, alone or in partnership,
in the business of agriculture or animal husbandry in Kenya.
• Class C, which is issued to a member of a prescribed profession who intends to
practice that profession in Kenya, alone or in partnership.
• Class D, which is issued to a person who is offered specific employment by a specific
• Class F, which is issued to a person who intends to engage, alone or in partnership,
in specific manufacturing in Kenya.
• Class G, which is issued to a person who intends to engage, alone or in partnership,
in a specific trade, business or profession (other than a prescribed profession)
• Class I, which is issued to a person who intends to engage, alone or in partnership, in
approved religious and charitable activities.
• Class K, which is issued to a person satisfying all of the following
— He or she is at least 21 years of age.
— He or she has in his or her own right an assured annual income.
— He or she will not accept paid employment of any kind if he or she is granted an
entry permit of this class.
• Class M, which is issued to a refugee recognized by the government of Kenya.
These permits are issued only to persons whose employment, business or presence
will benefit the country. A foreign national wishing to carry out business in Kenya must
obtain the necessary licenses and registrations required and must have sufficient
capital or resources for investment.
Foreign nationals wishing to reside permanently in Kenya must have permanent
residence permits. To obtain permanent residence, foreign nationals must satisfy the
requirements contained in the Kenya Citizenship and Immigration Act. The Permanent
Residence section of the Kenya Department of Immigration issues residence permits.
Family and personal considerations
Vaccinations. Individuals entering Kenya must have International Immunization
Family members. Family members of entry permit holders are entitled to dependents’
passes. Any dependent wishing to take up employment must obtain a separate work
or entry permit.
Marital property regime. Kenyan law does not provide for a community property or a
similar marital property regime.
Driver’s permits. Foreign nationals with international driver’s licenses or driver’s
licenses issued in a British Commonwealth country may drive in Kenya for a maximum
period of 90 days.
Foreign nationals living in Kenya for longer than 90 days must obtain Kenyan driver’s
Holders of international driver’s licenses or licenses issued in British Commonwealth
countries may obtain Kenyan driver’s licenses on application. These foreign nationals
must take a driving test that includes both verbal and physical examinations.
Value Added Tax (VAT) in Kenya
Since the enactment of a new VAT Act, which took effect 2 September 2013, VAT
applies to the following transactions:
• The supply of goods and services in Kenya by a taxable person
• Taxable imported services received by a taxable person in Kenya to the extent that
they relate to exempt supplies
• The importation of goods from outside Kenya, regardless of the status of the
importer (unless the importer is listed as zero-rated in Part B of the Second Schedule
to the VAT Act)
The exportation of goods and taxable services is zero-rated if, subject to the
satisfaction of the Commissioner of Domestic Taxes, the supply takes place in the
course of a registered person’s business.
Who is liable
VAT is paid by consumers of taxable goods and services. It is collected by registered
taxpayers (traders) that act as the agents of the government. VAT on imported goods
is collected by the Commissioner of Customs Services Department, while the
Commissioner of Domestic Taxes collects local VAT and VAT on imported services.
VAT registration is dependent on the attainment of a turnover threshold of Kshs 5
million with respect to all taxable supplies.
Businesses that do not attain this turnover threshold are subject to turnover tax at a
rate of 3% of their turnover up to a maximum turnover of Kshs 5 million. After
reaching this threshold, they must register for VAT. Within 30 days after becoming a
taxable person, a person should apply to the Commissioner of Domestic Taxes to be
registered in the prescribed manner. Businesses whose turnover is less than the
registration threshold can voluntarily apply to the commissioner for registration.
The registration process involves a person making an online application for a
Personal Identification Number (PIN). During this process, an entity is required to
state its tax obligations including VAT.
Registration for all taxes is currently done online via the Kenya Revenue Authority
(KRA) i-Tax portal (https://itax.kra.go.ke/KRA-Portal/). On average, tax registration
can take one to five days depending on the availability of information required for
The Kenyan VAT Act allows group registration. However, in practice, group
registration is allowed only under special circumstances.
A “non-established business” is a business that has no fixed establishment in Kenya.
A foreign business that meets the registration requirements in Kenya and does not
have a fixed place of business in Kenya is required to appoint a tax representative. A
permanent establishment of a foreign business must register for VAT if it makes
taxable supplies of goods or services.
Other non-established businesses are not required to register for VAT. Instead, the
person importing goods or services from a non-resident must pay Kenyan VAT due.
A person who is required to apply for VAT registration but who does not have a fixed
place of business in Kenya should appoint a tax representative. The registration of
the tax representative shall be in the name of the non-resident person being
represented. The tax representative of a non-resident person shall:
• Be a person normally residing in Kenya
• Have the responsibility for doing all things required of the non-resident and
• With the non-resident person, be jointly and severally liable for the payment of all
taxes, fines, penalties and interest imposed.
Reverse charge. Reverse-charge VAT is applicable on imported services. Registered
persons are only required to account for reverse-charge VAT to the extent it relates
to exempt supplies.
Digital economy. Taxation of electronic services is provided for in the VAT Act of
2013. “Electronic services” means any of the following services, when provided or
delivered on or through a telecommunications network:
• Websites, web-hosting or remote maintenance of programs and equipment
• Software and the updating of software
• Images, text, and information
• Access to databases
• Self-education packages
• Music, films and games, including games of chance
• Political, cultural, artistic, sporting, scientific and other broadcasts and events,
including broadcast television
A supply of electronic services is made in Kenya if the place of business of the
supplier from which the services are supplied is in Kenya. If the place of business of
the supplier is not in Kenya, the supply of the services shall be deemed to be made in
Kenya if the recipient of the supply is not a registered person and the electronic
services are delivered to a person in Kenya at the time of supply.
A penalty of Kshs 200,000 or imprisonment for a period not exceeding two years (or
both) is imposed in the event of late registration by traders who meet the turnover
threshold. Penalties apply to a range of other VAT offenses (see Section I).
A registered person may apply to the commissioner for deregistration under the
• If the registered person ceases to make taxable supplies
• If the registered person’s annual value of taxable supplies no longer exceeds the
The commissioner shall, by notice in writing, cancel the registration of a person in the
• The person has applied for cancellation and the commissioner is satisfied that the
person has ceased to make taxable supplies.
• The person has not applied for cancellation but the commissioner is satisfied that
the person has ceased to make taxable supplies and is not otherwise required to be
The commissioner may cancel the registration of a person who is no longer required
to be registered under the following circumstances:
• If the commissioner is satisfied that the person has failed to keep proper tax
• If the commissioner is satisfied that the person has failed to furnish regular and
• If the commissioner is satisfied that the person has failed to comply with
obligations under other revenue laws
• If there are reasonable grounds to believe that the person will not keep proper
records or furnish regular and reliable returns
The term “taxable supplies” refers to supplies of goods and services that are not
included in the First Schedule to the VAT Act, which specifies exempt supplies.
The following are the VAT rates in Kenya:
• Standard rate: 16%
• Zero rate: 0%
Supplies listed in the Second Schedule to the VAT Act are zero-rated, which means no
VAT is charged on the sale, but input tax incurred in making the sale is deducted
against output tax. All other goods and services are subject to VAT at the standard
rate of 16%.
Examples of zero-rated supplies
• Exportation of taxable goods and services
• Goods and services supplied to export-processing zones
• International transportation of passengers
Zero-rated supplies to specific persons
• Supplies to the Commonwealth
• Supplies to other governments
• Supplies to diplomats
• Passenger baggage
The term “exempt supplies” refers to supplies of goods and services that are not
liable to tax. Persons that make exempt supplies are not entitled to input tax
deduction (see below).
Examples of exempt goods
• Unprocessed agricultural products
• Airplanes and other aircraft
Examples of exempt goods in transition
• Motor fuel (regular and premium gasoline)
• Aviation fuel
• Gas oil
• Natural gas
Examples of exempt services
• Financial services
• Medical services
• Agricultural and horticultural services and animal husbandry
• Transportation of passengers (excluding transportation for hire)
Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” In
Kenya, the tax point is the earliest of the following events:
• The goods or services are supplied.
• A certificate is issued by an architect,
Imports. The time of the supply for imported goods is either the date of importation,
or the date on which the goods leave a duty suspension regime.
Recovery of VAT by taxable persons
A taxable person may recover input tax, which is VAT charged on goods and services
supplied to it for business purposes. Input tax is claimed by deducting it from output
tax, which is VAT charged on supplies made. Taxable persons must claim input tax
within six months after incurring the expense.
Input tax includes VAT charged on goods and services purchased in Kenya and VAT
paid on imports of goods.
Examples of items for which input tax is deductible (if related to a taxable business
• Professional fees
• Utility costs
Non-deductible input tax. VAT may not be recovered on purchases of goods and
services that are not used for business purposes (for example, goods acquired for
private use by an entrepreneur). In addition, input tax may not be recovered on
certain business expenses. Input tax is restricted with respect to business expenses
incurred on the following items:
• Passenger cars or minibuses and the repair and maintenance thereof, including
spare parts, unless the passenger cars and minibuses are acquired by the registered
person exclusively for the purpose of making a taxable supply in the ordinary course
of a continuous and regular business of selling and dealing in or hiring of passenger
cars and minibuses
• Entertainment, restaurant and accommodation services unless:
— The services are provided in the ordinary course of the business carried on by the
person to provide the services, and the services are not supplied to an associate or
— The services are provided while the recipient is away from home for the purposes
of the business of the recipient or the recipient’s employer
VAT directly related to making exempt supplies is not recoverable. A registered
person who makes both exempt and taxable supplies cannot recover VAT tax in full.
This situation is referred to as “partial exemption.”
Under the VAT Act, if a taxable person supplies both taxable and exempt goods and
services, only input tax attributable to taxable supplies may be recovered. The
following are the attribution rules:
• Input tax directly attributable to taxable goods purchased and sold in the same
condition is deductible in full.
• Input tax directly attributable to exempt outputs may not be deducted.
• Attributable to both taxable and exempt supplies is partially deductible. The
recoverable amount is calculated using a simple pro-rata method based on the value
of taxable and exempt supplies made.
If the exempt supplies are less than 10% of the total supplies, the input tax may be
claimed in full. Where the exempt supplies constitute more than 90%, the registered
person shall not be allowed any input tax attributable to taxable supplies.
Refunds. A taxable person may claim a refund of input tax in excess of output tax if
the Commissioner General is satisfied that the excess arises from making zero-rated
supplies. Claims in excess of Kshs 1 million must be accompanied by an auditors’
certificate. However, in practice, the VAT Department requires an auditors’
certificate for refunds in excess of Kshs 200,000 to facilitate speedy processing.
The commissioner may refund tax where the tax has been paid in error. A claim for
tax paid in error must be filed within a period of one year after the date on which the
tax was paid. VAT on bad debts accounted for and paid by a registered person can be
claimed after a period of three years from the date of such supply or it can be
claimed if the person liable to pay the tax has become legally insolvent. However, it
must be claimed no later than five years after the date of the supply. If legal
insolvency does not apply, evidence of the effort to recover the tax is required to
support such claims.
Preregistration costs. On the date a person is registered, and for the next three
months, the taxable person may recover preregistration input VAT paid on taxable
supplies intended for use in making taxable supplies, provided that those purchases
of taxable supplies were completed no more than 24 months before the date of
Recovery of VAT by non-residents
Kenya does not refund VAT incurred by a foreign business, unless the foreign
business has a permanent establishment and it is registered for VAT in Kenya.
VAT invoices and credit notes. A supplier of taxable goods and services must issue a
tax invoice to the purchaser at the time of supply. Simplified tax invoices may be
used if the sales to any one person in a day do not exceed Kshs 500. A credit note
may be used to reduce the VAT charged on a supply of goods or services. Credit
notes must show the same information as a tax invoice.
Proof of exports. Goods and taxable services exported from Kenya are zero-rated.
However, to qualify for zero rating, exports of goods must be supported by evidence
that proves the goods left Kenya. Suitable evidence includes the following
• A sales invoice
• A bill of lading, road manifest or airway bill
• A certified (endorsed) export entry (Form C17)
• For sugar and other excisable goods, a certificate of exportation signed by the
Commissioner of Customs and Excise.
A service exported out of Kenya means a service provided for use or consumption
outside Kenya. However, to qualify for zero rating, exports of services must be
supported by a copy of the invoice showing the sale of the services to the purchaser.
Foreign-currency invoices. Foreign-currency invoices are dealt with in the same way
as invoices in local currency. The tax authorities do not require a standard exchange
rate to be used to convert the value of foreign invoices into Kenyan shillings (Kshs).
In practice, they accept the rate used by the taxable person, if the rate used is within
the prevailing market exchange rates.
Electronic invoices. Registered persons must keep records, including copies of tax
invoices in an electronic manner or otherwise. Invoices may be generated manually
or electronically, provided it meets the prescribed conditions of a valid tax invoice.
VAT returns and payment
VAT returns. VAT tax period is one month. Returns must be filed by the 20th day
after the end of the tax period. Payment is due in full by the same date. A “nil” return
must be filed if no VAT is payable (either because the taxable person has made no
supplies or because input tax exceeds output tax in the period). If the normal filing
date falls on a public holiday or on a weekend, the VAT return must be submitted on
the last working day before that day. VAT returns are now being submitted online. A
person may apply to the commissioner before the due date for submission of return
for an extension of time to submit a return.
Electronic filing and archiving. VAT returns can be filed electronically via the Kenya
Revenue Authority (KRA) i-Tax portal. Every registered person is required to keep
records either electronically or otherwise for a period of five years.
Annual returns. VAT returns are filed monthly. There is no annual VAT returns.
The late submission of a return is subject to a penalty of Kshs 10,000 or 5% of tax
due, whichever is higher, plus late payment interest charged at a rate of 2% per
month, compounded. Other penalties for VAT offenses include the following:
• Failure to comply with a notice to pay money owed to a taxable person: penalty of
Kshs100,000 or a maximum sentence of six months’ imprisonment, or both, and
payment to the commissioner of any liability so discharged.
• Failure to produce books or information required by an authorized agent: penalty
of Kshs 100,000 or a maximum sentence of three years’ imprisonment, or both
• Failure to display registration certificate: a fine of up to Kshs 200,000 or a maximum
sentence of two years’ imprisonment, or both
• Failure to apply for registration or deregistration: penalty of Kshs 200,000 or a
maximum sentence of two years’ imprisonment, or both
• Making a fraudulent claim for a refund of tax: two times the amount of claim
• Unauthorized access to or improper use of tax computerized system: maximum of
Kshs 400,000 or a maximum sentence of two years’ imprisonment, or both
• Interference with tax computerized system: maximum of Kshs 800,000 or a
maximum sentence of three years’ imprisonment, or both
• Other offenses: maximum fine of Kshs 1,000,000 or a maximum sentence of three
Excise duty in Kenya is governed by The Excise Duty Act No. 23 of 2015
Open market value
The open market value of excisable goods or services Is the price that the goods or
services would reasonably be expected to fetch in an arm’s length transaction at that
time at the wholesale level. If the open market value of excisable goods or services at
a particular time cannot be determined, the open market value shall be the price
which is an objective approximation of the price of the goods or services according to
the Fourth Schedule of the East African Community Customs Management Act.
Imposition of excise duty
Excise duty, shall be charged in accordance with the provisions of this Act on –
(a) excisable goods manufactured in Kenya by a licensed manufacturer;
(b) excisable services supplied in Kenya by a licensed person; or
(c) excisable goods imported into Kenya.
Excise duty shall be charged at the rate specified in the First Schedule for the
excisable goods or services in force at the time the liability arises for excise duty
The specific rates of excise duty on excisable goods specified in this Schedule shall be
adjusted for inflation at the beginning of every financial year in accordance with this
paragraph. Each rate of excise duty specified in column 3 of the table shall be
replaced by the rate of excise duty computed by reference to the following formula –
A x B where –
A is the rate of excise duty on the day immediately before the adjustment day; and
B is the adjustment factor for the adjustment day, calculated as the average rate of
monthly inflation of the preceding financial year.
1. Mobile cellular phone services shall be charged excise duty at the rate of ten
percent of their excisable value.
2. Other wireless telephone services shall be charged excise duty at the rate of ten
percent of their excisable value.
3. Excise duty on fees charged for money transfer services by cellular phone service
providers, banks, money transfers agencies and other financial service providers shall
be ten percent of their excisable value.
4. Excise duty on other fees charged by financial institutions shall be ten percent of
their excisable value
FIRST SCHEDULE - RATES OF EXCISE DUTY
Tariff Code Description Rate or Kshs
2709.00.10 Condensates per 1000l @ 20degC 6,225.00
2710.12.10 Motor Spirit (gasoline) regular per 1000l @ 20degC 19,505.00
2710.12.20 Motor Spirit (gasoline) premium per 1000l @ 20degC 19,895.00
2710.12.30 Aviation Spirit per 1000l @ 20degC 19,895.00
2710.12.40 Spirit type Jet Fuel per 1000l @ 20degC 19,895.00
2710.12.50 Special boiling point spirit and white spirit per 1000l @ 20degC 8,500.00
2710.12.90 Other light oils and preparations Per 1000l @ 20degC 8,500.00
2710.19.10 Partly refined (including topped crude) per 1000l @ 20degC 1,450.00
2710.19.21 Kerosene type Jet Fuel Per 1000l @ 20degC 5,755.00
2710.19.29 Other medium oils and preparations per 1000l @ 20degC 5,300.00
2710.19.31 Gas oil (automotive, light, amber for high speed engines) per 1000l @ 20degC 10,305.00
2710.19.32 Diesel oil (industrial heavy, black, for low speed marine and stationery
engines) per 1000l @ 20degC
2710.19.39 Other gas oils per 1000l @ 20degC 6,300.00
2710.19.41 Residual fuel oils(marine, furnace and similar fuel oils) of a Kinematic viscosity
of 125 centistokes per 1000l @ 20degC
2710.19.42 Residual fuel oils (marine, furnace and similar fuel oils) of a Kinematic
viscosity of 180 centistokes Per 1000l @ 20degC
2710.19.43 Residual fuel oils (marine, furnace and similar fuel oils) of a Kinematic
viscosity of 280 centistokes per 1000l @ 20degC
2710.19.49 Other residual fuels oils per 1000l @ 20degC 600.00
Fruit juices (including grape must), and vegetable juices, unfermented and not
containing added spirit, whether or not containing added sugar or other
10 per litre
Food supplements 10%
Waters and other non-alcoholic beverages not
including fruit or vegetable juices.
5 per litre
Beer, Cider, Perry, Mead, Opaque beer and mixtures of fermented beverages
with non-alcoholic beverages and spirituous beverages of alcoholic strength
not exceeding 10%
100 per litre
Powdered beer 100 per kg
Wines including fortified wines, and other alcoholic beverages obtained by
fermentation of fruits
150 per litre
Spirits of undenatured ethyl alcohol; spirits liqueurs and other spirituous
beverages of alcoholic strength exceeding 10%
175 per litre
Cigars, cheroots, cigarillos, containing tobacco or tobacco substitutes 10,000 per kg
Electronic cigarettes 3,000 per unit
Cartridge for use in electronic cigarettes 2,000 per unit
Cigarettes containing tobacco or tobacco substitutes 2,500 per mille
Other manufactured tobacco and manufactured tobacco substitutes;
“homogenous” and “reconstituted tobacco”; tobacco extracts and
7,000 per kg
Tariff Code Description Rate or Kshs
Motor vehicles of tariff heading 87.02, 87.03 and 87.04 Less than three
years old from
the date of first
150,000 per unit
Over three years
old from the
date of first
200,000 per unit
87.11 Motor cycles of tariff 87.11 other than motor
10,000 per unit
Plastic shopping bags 120 per kg
Our Office Contacts
Ace Associates – Certified Public Accountants
A Member firm of McMillan Woods Global
Rashid Ahmed Lootah Road,
Off Jomo Kenyatta Avenue
P. O. Box 16916-80100
Tel: 041-24191515 / 0727 399199
High Park Building,
2nd Floor, Unit No. 6C,
1st Parklands Avenue, Limuru Road,
Tel: 0721 524680 or 0707 688699
CPA Ahmed M Y Salyani
CPA Mohamed Ebrahim
National Director Tax
Director - Nairobi Office
Accounting & Tax Supervisor - Nairobi
Director Accounting - Mombasa