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Tax rates in Kenya

Tax Rates

Consumption Taxes

Nature of the Tax
Value Added Tax (VAT)
Tax Rate
16% (effective from 01 January 2021)
Reduced Tax Rate
A reduced rate of 8% applies to motor fuel; aviation fuel; gas oil; natural gas.
Zero-rated items include exportation of goods and taxable services; goods and services supplied to export-processing zones; international transportation of passengers; goods and services supplied to special economic zones; supplies to the Commonwealth; supplies to other governments; supplies to diplomats.
Several goods and services are exempt from VAT: unprocessed agricultural products; direction-finding compasses; passenger baggage; financial services; insurance; medical services; agricultural and horticultural services and animal husbandry; transportation of passengers by any means of conveyance, excluding international air transport or where the means of conveyance is hired or chartered; entry fees into national parks and national reserves; exported taxable services.
Other Consumption Taxes
Other taxes include: excise duties, tax on sugar and advance tax on motor vehicles.
An import declaration fee is levied on all imports into the country at 3.5% of the customs value of the goods (the rate is reduced to 1.5% for
raw materials, intermediate goods, and inputs for the construction of houses under the affordable housing scheme). A railway development levy is payable on all imports into the country at 2% on the customs value of the goods (1.5% in certain cases).
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20% excise duty applies on the amounts wagered or staked in betting activities. Moreover, lottery and gaming companies are subject to an additional 15% turnover tax.

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Corporate Taxes

Company Tax
30%
Tax Rate For Foreign Companies
Resident and non-resident companies are subject to tax on all income accruing in or derived from Kenya. The corporate income tax rate for branches of foreign companies and permanent establishments is 37.5%.
Capital Gains Taxation
Capital gains are taxed at 5% of the net gain (except the transfer of shares traded on any securities exchange licensed by the Capital Markets Authority, which are exempt).
Gains derived on the sale or transfer of property are also subject to a final tax of 5%.
Main Allowable Deductions and Tax Credits
Expenses incurred wholly and exclusively to generate taxable income are generally tax-deductible.
Accounting depreciation or impairment does not give rise to a deduction. However, capital allowances are granted at varying rates (10% to 50%) for certain assets uses for business purposes. Any other expense, that is capital in nature, including goodwill, is not deductible.
Start-up and interest expenses are generally deductible. Bad debt is deductible in the year in which it becomes apparent that the debt is not recoverable. Charitable contributions, including donations to the Kenya Red Cross, country governments or any other public institution that is in charge of disaster relief, are deductible.
Fines, penalties and taxes are not deductible.
Net operating losses can be carried forward indefinitely against income from the same source. Carryback of losses is not permitted, except in the case of petroleum companies, which are entitled to carry back their losses indefinitely.
Other Corporate Taxes
Other taxes include: excise duties, tax on sugar and advance tax on motor vehicles.
An import declaration fee is levied on all imports into the country at 3.5% of the customs value of the goods (the rate is reduced to 1.5% for
raw materials, intermediate goods, and inputs for the construction of houses under the affordable housing scheme). A railway development levy is payable on all imports into the country at 2% on the customs value of the goods (1.5% in certain cases).
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20% excise duty applies on the amounts wagered or staked in betting activities. Moreover, lottery and gaming companies are subject to an additional 15% turnover tax.
Other Domestic Resources
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Kenya Sub-Saharan Africa United States Germany
Number of Payments of Taxes per Year 24.0 36.6 10.6 9.0
Time Taken For Administrative Formalities (Hours) 179.5 284.8 175.0 218.0
Total Share of Taxes (% of Profit) 37.2 47.3 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Personal Income tax Progressive rate from 10% to 30%
On the first KES 288,000 10%
On the next KES 100,000 25%
On income over KES 388,000 30%
Residential rental income tax 10% of the gross proceeds in case of rental income between KES 288,000 and 15 million per year.

Taxpayers earning residential rental income exceeding KES 15 million per annum are taxed on a net income basis.
Allowable Deductions and Tax Credits
Mortgage interest expenses (up to KES 300,000 per year or KES 25,000 per month) are deductible. Contributions to a registered pension or provident fund in Kenya are deductible up to KES 240,000 per year (capped at 30% of the employee income). Every resident individual is entitled to an insurance relief of 15% of the amount of premiums paid for self, spouse or child. However, it shall not exceed KES 60,000 per annum.
A daily subsistence allowance up to KES 2,000 paid when working away from the normal place of duty is not taxable, same as for any expense incurred wholly and exclusively in the production of employment income.
Bonuses, overtime allowances, and retirement benefits paid to employees earning less than KES 147,580 per year are exempt from tax.
A credit against the tax liability equivalent to KES 28,800 per year applies to all individuals (KES 2,400 per month).
People with disability are granted a tax exemption on their income for the first KES 150,000 of their monthly income.
Special Expatriate Tax Regime
Kenyan residents are taxable on their worldwide employment income; non-residents are taxable only on Kenyan-source employment income.

Any amount paid to Non-Resident individuals in respect of any employment with or services rendered to an employer who is resident in Kenya or to a permanent establishment in Kenya is subject to income tax charged at the prevailing individual income tax rates. Non-Residents are however not entitled to any personal relief.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of Tax Conventions signed by Kenya
Withholding Taxes
Dividends: 0% (payable to resident companies that hold 12.5% or more of the shares of the paying company)/5% (residents)/15% (non-residents); Interests: 25% (bearer instruments)/15% (government bearer bonds - maturity ≥ 2 years)/15% (other); Royalties: 5% (resident)/20% (non-resident).

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Latest Update: July 2022