University of Nairobi
School of Business
Finance
1
, IMPOSITION OF INCOME TAX:TAXATION OF SPECIALIZED
ACTIVITIES
Taxation of companies, including holding company,
subsidiaries, branches and related parties
Incomplete records pertaining to limited companies
Shortfall tax computation
Taxation of dividends
Case law on taxation of limited companies
Rental income, including residential rent income,
Commercial rent income and Real estate investment trus
(REITS)
, Taxation of companies, including holding company,
subsidiaries, branches and related parties
Taxation of a company involves the process of assessing and
imposing taxes on various aspects of its operations and income.
One of the primary taxes levied on companies is corporate
income tax. This tax is typically applied to the profits earned by
the company after deducting allowable expenses from its gross
income.
Companies operating in Kenya are subject to Corporate Income
Tax on their worldwide income.
The standard corporate tax rate is 30% for resident companies.
Non-resident companies are taxed at a rate of 37.5% on income
derived from Kenya.
Certain industries or special economic zones may have
preferential tax rates or tax holidays
3
, Allowable expenses/deductions from business income (section 15 of the
income tax act)
Section 15(1) of the ITA generally allows expenses that
are wholly and exclusively incurred in the production of
income.
Allowable expenses/deductions are usually normal
commercial expenses of a business such as wages,
salaries, purchases, transport, rent, water etc.
For example, allowable deductions for a hotelier would be
expenses on foodstuff, electricity bills, salaries to waiters,
etc.
4
School of Business
Finance
1
, IMPOSITION OF INCOME TAX:TAXATION OF SPECIALIZED
ACTIVITIES
Taxation of companies, including holding company,
subsidiaries, branches and related parties
Incomplete records pertaining to limited companies
Shortfall tax computation
Taxation of dividends
Case law on taxation of limited companies
Rental income, including residential rent income,
Commercial rent income and Real estate investment trus
(REITS)
, Taxation of companies, including holding company,
subsidiaries, branches and related parties
Taxation of a company involves the process of assessing and
imposing taxes on various aspects of its operations and income.
One of the primary taxes levied on companies is corporate
income tax. This tax is typically applied to the profits earned by
the company after deducting allowable expenses from its gross
income.
Companies operating in Kenya are subject to Corporate Income
Tax on their worldwide income.
The standard corporate tax rate is 30% for resident companies.
Non-resident companies are taxed at a rate of 37.5% on income
derived from Kenya.
Certain industries or special economic zones may have
preferential tax rates or tax holidays
3
, Allowable expenses/deductions from business income (section 15 of the
income tax act)
Section 15(1) of the ITA generally allows expenses that
are wholly and exclusively incurred in the production of
income.
Allowable expenses/deductions are usually normal
commercial expenses of a business such as wages,
salaries, purchases, transport, rent, water etc.
For example, allowable deductions for a hotelier would be
expenses on foodstuff, electricity bills, salaries to waiters,
etc.
4
