*People who complain about taxes can be classified into two, Men and Women (Anonymous)
Following last week you may need to know the various types/categories of tax that are payable in Kenya. The Kenyan tax system features corporate and personal income tax, value added tax on goods and services, customs and excise duties, and stamp duty. However, here’s a more precise breakdown:
1. COMPANY TAX
Company tax is based on computed tax profits and it’s as follows:
- Turnover tax – its paid at a rate of 3% of turnover (with effect from 1 January 2007 for turnover of up to KES 5,000,000)
- Resident companies pay 30% of turnover
- Non-resident companies pay 37.5% of turnover
2. CAPITAL GAINS TAX
Presently, this is suspended in Kenya and thus not applicable.
3. SALES TAXES/VALUE ADDED TAX (VAT)
The tax rate is 16% and 0%. Exports zero rated and there is a lower rate of 12% for industrial fuel and electricity. Some goods and services such as unprocessed agricultural products and financial services are exempt. (However currently there is a pending VAT Bill)
4. FRINGE AND EMPLOYMENT BENEFITS TAX
Generally, non-cash benefits are taxable on the higher of the cost incurred by the employer and the fair market value. The taxable value is added to the emoluments for tax purposes. Exempt if aggregate total does not exceed KES 36,000 per annum.
5. MOTOR VEHICLES
The benefit is the higher of 2% per month of the initial cost of the vehicle and prescribed rates. For leased vehicles the benefit is the cost of leasing.
6. HOUSING
For non-executive directors the benefit is the higher of 15% of total income
(Emoluments – for a full time service director), market value and rent paid. For agricultural employees it is 10% of emoluments. For other employees it is the higher of rent paid and 15% of emoluments.
7. LOANS TO EMPLOYEES
These are taxed at corporate tax rate on difference between the interest rate prescribed by the Commissioner and the actual rate paid by an employee.
8. BRANCH PROFITS TAX
This is paid by a branch of a foreign entity and it is 37.5%.
OTHER TAXABLE BENEFITS
The taxable benefit of furniture is 1% of cost per month, telephone 30% of cost per month, employee share ownership plan (ESOPs) the difference between the market price of shares and offer price at date option is granted.
LOCAL TAXES
Employment income is taxed on a withholding tax basis known as Pay As You Earn (PAYE) at a graduating scale of 10%-30%.
OTHER TAXES
LAND RATES
Land rates are based on the percentage of the site value.
NATIONAL SOCIAL SECURITY FUND (NSSF)
Contributions are set at 5% of monthly income up to a maximum of KES 400 per month, half paid by the employer and the balance by the employee.
NATIONAL HOSPITAL INSURANCE FUND (NHIF)
Payments are set at graduated scale rates starting at KES 150 per month to a maximum of KES 2, 000 per month depending with employee income.
SINGLE BUSINESS PERMIT
Depending on the type of business this costs a minimum of KES 2,000 to a Maximum of KES 100, 000.
Reference Source: PKF
Tax Matters I – here
Tax Matters III-Next Week