LAW-F26-TAX-10 COMPREHENSIVE MOCK EXAM
PREDICTOR 2026
Under the Kenyan Income Tax Act, which of the following best describes
the principle of "source-based taxation"?
A. Tax is imposed based on the taxpayer's residence status only
B. Tax is imposed only on income accrued in or derived from Kenya
C. Tax is imposed on worldwide income for all persons regardless of
location
D. Tax is imposed based on the destination of goods and services
Correct Answer: B
Explanation: Kenya operates a source-based tax system where
income is only subject to tax if it accrued in or was derived from
Kenya. Residence-based taxation applies only to specific exceptions
like employment income for resident individuals earned outside
Kenya. Options A, C, and D misrepresent the source principle.
Effective 1 July 2023, what is the personal income tax rate applied to
annual taxable income between KES 288,000 and KES 388,000 for
resident individuals in Kenya?
A. 10%
B. 20%
C. 25%
D. 30%
Correct Answer: C
Explanation: The tax rate on the next KES 100,000 (after the first
288,000) is 25% per the revised tax brackets effective July 2023.
Option A applies to the first 288,000, Option D applies to income
above KES 388,000 up to KES 6,000,000.
Which of the following constitutes a "resident person" for income tax
purposes under the Kenyan Income Tax Act?
, A. An individual who spends 90 days in Kenya during a year of
assessment
B. A company incorporated in Kenya but managed from outside
Kenya
C. An individual with a home in Kenya who spends any part of the
year there
D. A company whose center of management and control in Kenya is
situated during the year of assessment
Correct Answer: D
Explanation: A company is resident if its center of management and
control is in Kenya during the year. For individuals, they must have
a home in Kenya AND spend any part of the year there, or spend
183+ days in Kenya. Option A is insufficient (needs 183+ days),
Option B is incorrect (incorporation alone doesn't determine
residence), Option C misses the "any part of year" requirement.
The residential rental income tax rate for eligible landlords in Kenya
(gross rental income ≤ KES 15 million) was reduced to what
percentage effective 1 January 2024?
A. 5%
B. 7.5%
C. 10%
D. 15%
Correct Answer: B
Explanation: Finance Act 2023 reduced the residential rental
income tax from the previous rate to 7.5% effective January 1, 2024.
This is a final tax on gross income with no deductible expenses.
Options A, C, and D are incorrect rates.
Under Section 16(2)(c) of the Income Tax Act, foreign tax paid on
income taxable in Kenya may be deducted to what extent?
A. Full deduction of all foreign tax paid regardless of Kenyan tax
liability
B. Only to the extent the foreign tax is payable and paid out of income
, deemed to accrue in or derive from Kenya
C. 50% of the foreign tax paid as a standard deduction
D. Foreign tax cannot be deducted but only credited against Kenyan
tax liability
Correct Answer: B
Explanation: Section 16(2)(c) allows deduction of foreign tax only to
the extent it is payable and paid out of income deemed to have
accrued in or been derived from Kenya. Option A is too broad,
Option C is incorrect (no 50% rule), Option D describes foreign tax
credit under DTA which is different.
What is the current Capital Gains Tax rate in Kenya effective from 1
January 2023 following the Finance Act 2022 amendment?
A. 5%
B. 10%
C. 15%
D. 30%
Correct Answer: C
Explanation: Finance Act 2022 amended CGT from 5% to 15%
effective January 1, 2023. The CGT is a final tax on net gains. Option
A was the old rate, Options B and D are incorrect.
In computing Capital Gains Tax, which formula correctly calculates the
Net Gain?
A. Sales Proceeds minus Acquisition Cost only
B. Transfer Value minus Incidental Costs on Transfer minus Adjusted
Cost
C. Transfer Value plus Incidental Costs on Acquisition minus
Enhancement Cost
D. Sales Proceeds minus Depreciation Claimed Previously
Correct Answer: B
Explanation: Net Gain = (Transfer Value - Incidental Costs on
Transfer) - Adjusted Cost, where Adjusted Cost includes acquisition
, cost, incidental costs on acquisition, and enhancement costs. Options
A, C, and D use incorrect formulas.
Which of the following dividends is exempt from Withholding Tax for
resident companies in Kenya?
A. All dividends received from any company
B. Dividends from a subsidiary where the company controls less than
12.5% voting power
C. Dividends received from a local subsidiary where the company
controls directly or indirectly 12.5% or more of voting power
D. Dividends received by non-resident companies from Kenyan
subsidiaries
Correct Answer: C
Explanation: Dividends received by a resident company from a local
subsidiary where it controls 12.5% or more voting power are exempt
from withholding tax. Option A is too broad, Option B is the opposite
(taxable), Option D applies 15% WHT for non-residents.
What is the Withholding Tax rate on dividends paid to non-resident
persons in Kenya (general rate, not oil and gas)?
A. 5%
B. 10%
C. 15%
D. 20%
Correct Answer: C
Explanation: The general WHT rate on dividends to non-residents is
15%. Option A (5%) applies to resident qualifying dividends, Option
B (10%) applies to dividends in oil and gas sector for non-residents,
Option D is incorrect.
PREDICTOR 2026
Under the Kenyan Income Tax Act, which of the following best describes
the principle of "source-based taxation"?
A. Tax is imposed based on the taxpayer's residence status only
B. Tax is imposed only on income accrued in or derived from Kenya
C. Tax is imposed on worldwide income for all persons regardless of
location
D. Tax is imposed based on the destination of goods and services
Correct Answer: B
Explanation: Kenya operates a source-based tax system where
income is only subject to tax if it accrued in or was derived from
Kenya. Residence-based taxation applies only to specific exceptions
like employment income for resident individuals earned outside
Kenya. Options A, C, and D misrepresent the source principle.
Effective 1 July 2023, what is the personal income tax rate applied to
annual taxable income between KES 288,000 and KES 388,000 for
resident individuals in Kenya?
A. 10%
B. 20%
C. 25%
D. 30%
Correct Answer: C
Explanation: The tax rate on the next KES 100,000 (after the first
288,000) is 25% per the revised tax brackets effective July 2023.
Option A applies to the first 288,000, Option D applies to income
above KES 388,000 up to KES 6,000,000.
Which of the following constitutes a "resident person" for income tax
purposes under the Kenyan Income Tax Act?
, A. An individual who spends 90 days in Kenya during a year of
assessment
B. A company incorporated in Kenya but managed from outside
Kenya
C. An individual with a home in Kenya who spends any part of the
year there
D. A company whose center of management and control in Kenya is
situated during the year of assessment
Correct Answer: D
Explanation: A company is resident if its center of management and
control is in Kenya during the year. For individuals, they must have
a home in Kenya AND spend any part of the year there, or spend
183+ days in Kenya. Option A is insufficient (needs 183+ days),
Option B is incorrect (incorporation alone doesn't determine
residence), Option C misses the "any part of year" requirement.
The residential rental income tax rate for eligible landlords in Kenya
(gross rental income ≤ KES 15 million) was reduced to what
percentage effective 1 January 2024?
A. 5%
B. 7.5%
C. 10%
D. 15%
Correct Answer: B
Explanation: Finance Act 2023 reduced the residential rental
income tax from the previous rate to 7.5% effective January 1, 2024.
This is a final tax on gross income with no deductible expenses.
Options A, C, and D are incorrect rates.
Under Section 16(2)(c) of the Income Tax Act, foreign tax paid on
income taxable in Kenya may be deducted to what extent?
A. Full deduction of all foreign tax paid regardless of Kenyan tax
liability
B. Only to the extent the foreign tax is payable and paid out of income
, deemed to accrue in or derive from Kenya
C. 50% of the foreign tax paid as a standard deduction
D. Foreign tax cannot be deducted but only credited against Kenyan
tax liability
Correct Answer: B
Explanation: Section 16(2)(c) allows deduction of foreign tax only to
the extent it is payable and paid out of income deemed to have
accrued in or been derived from Kenya. Option A is too broad,
Option C is incorrect (no 50% rule), Option D describes foreign tax
credit under DTA which is different.
What is the current Capital Gains Tax rate in Kenya effective from 1
January 2023 following the Finance Act 2022 amendment?
A. 5%
B. 10%
C. 15%
D. 30%
Correct Answer: C
Explanation: Finance Act 2022 amended CGT from 5% to 15%
effective January 1, 2023. The CGT is a final tax on net gains. Option
A was the old rate, Options B and D are incorrect.
In computing Capital Gains Tax, which formula correctly calculates the
Net Gain?
A. Sales Proceeds minus Acquisition Cost only
B. Transfer Value minus Incidental Costs on Transfer minus Adjusted
Cost
C. Transfer Value plus Incidental Costs on Acquisition minus
Enhancement Cost
D. Sales Proceeds minus Depreciation Claimed Previously
Correct Answer: B
Explanation: Net Gain = (Transfer Value - Incidental Costs on
Transfer) - Adjusted Cost, where Adjusted Cost includes acquisition
, cost, incidental costs on acquisition, and enhancement costs. Options
A, C, and D use incorrect formulas.
Which of the following dividends is exempt from Withholding Tax for
resident companies in Kenya?
A. All dividends received from any company
B. Dividends from a subsidiary where the company controls less than
12.5% voting power
C. Dividends received from a local subsidiary where the company
controls directly or indirectly 12.5% or more of voting power
D. Dividends received by non-resident companies from Kenyan
subsidiaries
Correct Answer: C
Explanation: Dividends received by a resident company from a local
subsidiary where it controls 12.5% or more voting power are exempt
from withholding tax. Option A is too broad, Option B is the opposite
(taxable), Option D applies 15% WHT for non-residents.
What is the Withholding Tax rate on dividends paid to non-resident
persons in Kenya (general rate, not oil and gas)?
A. 5%
B. 10%
C. 15%
D. 20%
Correct Answer: C
Explanation: The general WHT rate on dividends to non-residents is
15%. Option A (5%) applies to resident qualifying dividends, Option
B (10%) applies to dividends in oil and gas sector for non-residents,
Option D is incorrect.
