First of all, calm down; the taxes referred to are not the personal income tax that’s deducted from your pay-check. These are alternative forms of tax that fall under the income tax category but have small charges associated with them, enough to earn anyone a tidy profit.

Capital Gains Tax:

Capital gains tax is charged on the profits realized from the sale of an asset on the assumption that it is sold at a higher price than what it was purchased for, i.e. at a profit. It is a form of income tax that operates in a manner completely beneficial to the mwananchi (citizen). If you sold a piece of land and made a profit of KES 10 Million, then the tax payable on that profit to the government is KES 0.00 - this is not a typing error. The same applies for shares in the NSE. A gain in a stock’s value, as in the case of British American Tobacco from KES 88 to KES 430, attracts no tax. The reason for this; while there is capital gains legislation, it has been put on hold since 1985. There was an attempt to re-introduce it in 2006/07 to charge properties but information from the Kenya Revenue Authority site indicates that there is no such tax.

Withholding Tax:

This is the amount deducted from an individual’s income and paid straight to the government provided the sources of income are dividends, rent, interest, professional fees or pension. Using the same example of BAT shares, the withholding tax charged would be 5% if you own less than 12.5% of the company. If the company announced a dividend of KES 27.00 per share, as they did earlier this year, for the 1000 shares you owned you would receive KES 25,650 instead of KES 27,000. However, if your stake in the company happens to be greater than 12.5%, you pay no taxes.

Going back to the personal tax, one would pay as follows:

[caption id="attachment_21972" align="aligncenter" width="618"] Image source: "www.pkf.com/media/387119/kenya_2012.pdf"[/caption]

Anyone earning a monthly salary above KES 38,000 (approximately) is liable to pay tax of 30%. This is to say that if your salary is KES 10 Million, you’ll part with KES 3 Million. If, on the other hand, you have dividends of the same amount you would be paying KES 0.5 Million. Capital gains in Kenya wouldn't even be taxed at all. Have a look at the tax guide. There's lots of ways explicitly mentioned for avoiding high tax. The numbers speak for themselves.