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Kenyan TAX System

Kenya’s Taxation system covers income tax, value-added tax, customs and excise duty. The regulations are governed by independent legislators that govern the taxation system, the main legislator, the Kenya Revenue Authority (KRA) has different sections that deal with the above taxes while also having the authority to undertake reviews on various companies and corporations. The main goal of the system is to limit corruption as it is a problem in a developing nation such as Kenya.

Income Tax

The Income Tax Act is the most important tax used in Kenya It is up to the employer to make sure that the taxes are deducted from the source and that employees pay taxes and that they obtain a PIN personal identification number with the KRA. There is a fine of 22$ for every payment made to an employee that does not have a PIN.The TAX rate is 30% for everyone but there are many exemptions from Tax that include; medical insurance for an employee and his all of his/ her dependents,The reimbursement of expenses made by employees while working and,there is a non cash benefit of up to 396$ per month to all employees.There is also a PAYE tax which is applicable to all employees that is calculated as follows.

Taxable Income

Taxable Income	Interest Rate %
0 USD - 1,467.46 USD	10
1,467.46 USD -- 2,849.9 4USD	15
2,849.94 USD- 4,233.56 USD	20
4,233.56 USD- 5,616.44 USD	25
5,616.44 USD and Above	30

Taxable income

VAT is chargeable to goods and services that are sold or imported into Kenya. The VAT rates are split into the following categories Standard Rate 16%- This Rate applies to all normal goods.

Exempt Goods and Services- According to the VAT act that is currently implemented; in schedule one of the act, there is a list of goods and services listed that pay 0% VAT. Those who pay for VAT on exempt goods are required to file a form for reimbursement within twelve months of the payment being made for full reimbursement to the KRA. Exports in Kenya pay a 0% rate of VAT.

TAX Penalties

A late payment or non-payment of taxes attract an Interest rate rate of 2% a month. However, if one files a late monthly payment on VAT, he/ she are required to pay 5% interest or 110$, whichever number is higher.

Corporate tax

The Corporate Tax Act was set up to deal with all corporate tax issues. All companies must register with the KRA for a PIN number. They must then register for all applicable Tax that they are eligible for which will usually include Income Tax, PAYE, VAT and Excise duty.The Corporate Tax rate is currently at a flat rate of 30%

Furthermore, they are required to register with the NHIF(http://www.nhif.or.ke/healthinsurance/) which was set up as a National Health cover. The rate of Tax due are calculated as follows;

Gross Income	Contribution
0>5999	150
6000 - 7999	300
8000 – 11999	400
12000 – 14999	500
15000 – 19999	600
20000 – 24999	750
25000 – 29999	850
30000 – 49999	1000
50000 – 99999	1500
<100000	2000
Self Employed	500

There is also the NSSF (National Social Security Fund) which is used to create a pension scheme, to collect and administer contributions in Kenya.

Residence in Kenya

For Tax purposes a resident of Kenya is defined as anyone who is present in Kenya for 183 days during a 12-month period. An individual that stays in Kenya for longer than 183 days is considered to be a resident from the day of arrival. After leaving, Kenyan tax liability of an individual ends. This is also the case if a person stays for over 122 days a year on average over a period of 2 or more years.Non-residents staying in Kenya for a period shorter than 183 days are subject to national income tax on any income. They are also subject to municipal income tax as well as residents.

Excise Duty

In 2015, the excise Duty act was amended by the president of Kenya. There is currently specific duty rates on all goods with exemptions to food supplements and the supply of services subject to excise which are currently charged at 10% of their value. Services that are eligible for Excise duty are defined as any fees, charges or commissions charged by financial institutions relating to their licensed financial institutions, but excludes interest on loan or return on loan or an insurance premium or premium based or related commissions.

The current excise tax is calculated currently take into account inflation which changes annually. The rate is calculated in an A x B format where A is the rate of excise duty from the previous day and B Is the adjustment factor on the day calculated as one plus annual average rate of inflation of the preceding financial year.

Customs Duty

Customs duties in Kenya include import duty, excise duty, VAT, import declaration fee and railway development levy. When goods are imported, the following charges are applied depending on the type of goods. There is an import declaration fee (IDF) which is 2.25% of the value of the good with a minimum of 5000KSH payable. There is a railway development levy of 1.5% also payable. There is also the usual charges that include import duty, excise duty, and VAT.

Trading Zones

Kenya is a member of the EAC (East African Community) and COMESA (Common Market for Eastern and Southern Africa) which have their on specific rates on imports and exports. There is currently free trade allowed in the 19 member states of COMESA..

^{Superscript text}/ref>https://www.export.gov/article?id=Kenya-import-requirements-and-documentation</ref↵<ref>http://www.ey.com/gl/en/services/tax/international-tax/alert--kenya-enacts-excise-duty-act--2015 ^{Superscript text}http://www.kenyalaw.org/kl/fileadmin/pdfdownloads/Acts/NationalHospitalInsuranceFundAct_No9of1998.pdf ^{Superscript text}http://www.pkf.com/media/1960320/kenya%20pkf%20tax%20guide%202013.pdf ^{Superscript text}http://www.kra.go.ke/ ^{Superscript text}http://www.kenyalaw.org/kl/fileadmin/pdfdownloads/Acts/NationalHospitalInsuranceFundAct_No9of1998.pdf</ref> ^{Superscript text}https://www.export.gov/article?id=Kenya-import-requirements-and-documentation</ref↵<ref>http://www.ey.com/gl/en/services/tax/international-tax/alert--kenya-enacts-excise-duty-act--2015