The history of taxation dates back to 3000 BC. The Egyptians were the first people to adopt organized taxation, as mentioned in historical scripts such as the bible. Taxation was often used as a way to fund wars or provoke them. As well as build canals, irrigation among other projects.
Taxation now is no different as governments use taxes to fund public expenditures and projects. In Kenya, the Kenya Revenue Authority is the body that collects, assesses, and accounts for the revenue in Kenya on behalf of the states.
There are two types of taxes in Kenya:
Direct tax- these are the taxes you remit directly to the government as income tax.
Indirect Tax-Taxes that you pay when you purchase goods and services. These include value-added tax, excise duty, and customs duties.
The direct tax department deals with the collection and assessment of income taxes, this happens to be one of the important statutory taxes in Kenya. The income tax is divided into subcategories.
Pay as you earn
Collected from individuals engaged in gainful employment. Employers make a deduction monthly and this percentage is forwarded to KRA on a per month basis.PAYE applies to bonuses, weekly wages, monthly and annual salaries as well as director fees.
The tax credit is provided to every resident employee under PAYE. Insurance and mortgage interest deductions are also provided.
Under the Corporation Tax, companies in Kenya agree to pay a charge on their income to KRA. Local companies pay 30% while foreign companies with branches in Kenya pay 37.5 % of their taxable profits.
Value-added tax (VAT)
Value Added Tax (VAT) is a consumption tax charged on the supply of taxable goods and services made in Kenya and the importation of taxable goods or services made into Kenya.
VAT is levied under the VAT Act 2013 and the VAT regulations, 2017.
All traders with a Turnover of taxable supplies of 5 Million per annum and above are required to register for VAT. Voluntary registration is allowed for traders with taxable supplies below the 5 Million thresholds.
Types of supplies and the rates applicable;
Local taxable sales- 16%
Local supply of fuel- 8%
Zero-rated supplies and export- 0%
Exempt supplies- No rate applicable
Once a supplier is registered for VAT, he/she is mandated to file a return by the 20th of the month following the making of the supply. A return must be filed by a registered person irrespective of whether there is a sale or not.
The need for an ETR Machine
All sales whether vatable, zero-rated, or exempt shall be recorded in the register. This allows reconciliation of sales to actual tax returns that are filed with KRA.
In conclusion, as long as a person is registered for VAT obligation, even if he does not carry on any trading activities, he/she is required to file a return on or before the 20th of the following month. Failure to comply is an offense subject to a penalty of Ksh 10,000 for every tax period failure occurs.
The most common form of the transfer tax is the estate tax. Such a tax is levied on the taxable portion of the property of a deceased individual, including trusts and financial accounts. A gift tax is also another form wherein a certain amount is collected from people who are transferring
properties to another individual.
Property tax is charged on properties such as land and buildings and is used for maintaining public services such as police stations, fire stations, schools, and libraries, as well as roads.
For more information about taxes or ETR’S please contact us on
Tel: 0713 466 848