EXEMPTIONS :
PART I- INCOME ACCRUED IN, DERIVED FROM OR RECEIVED IN KENYA WHICH IS EXEMPT FROM TAX
1. So much of the income of a person as is expressly exempted from income tax by or under the provisions of any Act for the time being in force, to the extent provided by that Act.
2. The income of a person who, or organization which, is exempt from income tax by or under any Act for the time being in force, to the extent provided by that Act.
3. Deleted by Finance Act 2012 15 June 2012That part of the income of the President derived from salary, duty allowance and entertainment allowance paid or payable to him from public funds in respect of or by virtue of his office as President.
4.* The income of -
The Tea Board of Kenya,
The Pyrethrum Board of Kenya,
The Sisal Board of Kenya,
The Kenya Dairy Board,
The Canning Crops Board,
The Central Agricultural Board,
The Pig Industry Board,
The Pineapple Development Authority,
The Horticultural Crops Development Authority,
The National Irrigation Board,
The Mombasa Pipeline Board,
The Settlement Fund Trustees,
The Kenya Post Office Savings Bank,
The Cotton Board of Kenya.Deleted by (TaxLAA-No1-2020 wef-25April2020*)
2. The income of a person who, or organization which, is exempt from income tax by or under any Act for the time being in force, to the extent provided by that Act.
3. Deleted by Finance Act 2012 15 June 2012
4.*
The Tea Board of Kenya,
The Pyrethrum Board of Kenya,
The Sisal Board of Kenya,
The Kenya Dairy Board,
The Canning Crops Board,
The Central Agricultural Board,
The Pig Industry Board,
The Pineapple Development Authority,
The Horticultural Crops Development Authority,
The National Irrigation Board,
The Mombasa Pipeline Board,
The Settlement Fund Trustees,
The Kenya Post Office Savings Bank,
The Cotton Board of Kenya.
5. Deleted by 13 of 1984, s.21.
6. The income, other than income from investments, of an amateur sporting association, that is to say, an association –
Profits or gains of an agricultural society accrued in or derived from Kenya from any exhibition or show held for the purposes of the society which are applied solely to those purposes, and the interest on investments of that society.
8. The income of anylocal authority county government Finance Act, 2014 effective 13 June 2014
6. The income, other than income from investments, of an amateur sporting association, that is to say, an association –
- (a) whose sole or main object is to foster and control any outdoor sport; and
- (b) whose members consist only of amateurs or affiliated associations the members of which consist only of amateurs; and
- (c) whose memorandum of association or by-laws have provisions defining an amateur or a professional and providing that no person may be or continue to be a member of that association if that person is not an amateur.
8. The income of any
9. Deleted by (TaxLAA-No1-2020 wef-25April2020) Interest on tax reserve certificates which may be issued by authority of the Government.
10.
Subject to section 26, the income of an institution, body of persons, or irrevocable trust, of a public character established solely for the purposes of the relief of the poverty or distress of the public, or for the advancement of religion or education:-
11.The income of a person from a management or professional fee, royalty or interest when the Minister certifies that it is required to be paid free of tax by the terms of an agreement to which the Government is a party either as principal or guarantor and that it is in the public interest that the income shall be exempt from tax.
12. The income of a registered pension scheme.
13. The income of a registered trust scheme.
14. The income of a registered pension fund.
15. The income of a registered provident fund.
16. The income from the investment of an annuity fund, as defined in section 19, of an insurance company.
17. Pensions or gratuities granted in respect of wounds or disabilities caused in war and suffered by the recipients of those pensions or gratuities.
18. Deleted by (TaxLAA-No1-2020 wef-25April2020) A payment in respect of disturbance, not exceeding three months’ salary, made in connection with a change in the constitution of the government of a Partner State or the Community to a person who, before the change, was employed in the public service of any of those governments or of the Community
- (a) established in Kenya; or
- (b) whose regional headquarters is situated in Kenya,
- (i) the business is carried on in the course of the actual execution of those purposes; or
- (ii) the work in connection with the business is mainly carried on by beneficiaries under those purposes; or
- (iii) the gains or profits consist of rents (including premiums or similar consideration in the nature of rent) received from the leasing or letting of land and chattels leased or let therewith.
- (A) shall be valid for a period of five years but may be revoked by the Commissioner for any just cause; and
- (B) shall, where an applicant has complied with all the requirements of this paragraph, be issued within sixty days of the lodging of the application.
*Provided further that in this paragraph, “institution, body of persons or irrevocable trust, of a public character” means an entity established to benefit the public in a transparent and accountable manner without restriction or discrimination regardless of the level of charges or fees levied for services rendered, and which utilises its assets or income exclusively to carry out the purpose for which the entity was established without conferring a private benefit to an individual. (Finance Act 2023 wef 1st-July-2023 s24*)
12. The income of a registered pension scheme.
13. The income of a registered trust scheme.
14. The income of a registered pension fund.
15. The income of a registered provident fund.
16. The income from the investment of an annuity fund, as defined in section 19, of an insurance company.
17. Pensions or gratuities granted in respect of wounds or disabilities caused in war and suffered by the recipients of those pensions or gratuities.
18. Deleted by (TaxLAA-No1-2020 wef-25April2020)
19. (Deleted by 8 of 1978, s. 9)
20. (Deleted by 8 of 1978, s. 9)
21. (Deleted by 8 of 1978, s. 9)
22. That part of the income of an officer of the Government or of the Community accrued in or derived from Kenya which consists of foreign allowances paid to that officer from public funds in respect of his office:
20. (Deleted by 8 of 1978, s. 9)
21. (Deleted by 8 of 1978, s. 9)
22. That part of the income of an officer of the Government or of the Community accrued in or derived from Kenya which consists of foreign allowances paid to that officer from public funds in respect of his office:
- Provided that, where a person to whom all allowance is paid is granted a deduction under section 15 in respect of expenditure incurred in relation to an activity for which the allowance is paid, then the exemption conferred by this paragraph shall not apply to so much of that allowance as is equal to the amount of that deduction.
24. (Deleted by 8 of 1978, s. 9)
25. Deleted by (TaxLAA-No1-2020 wef-25April2020)
26. The emoluments -
27. The emoluments payable out of foreign sources in respect of duties performed in Kenya in connection with a technical assistance or other agreement for development services or purpose to which the Government is a party to a non-resident person or to a person who is resident solely for the purposes of performing those duties, in any case where the agreement provides for the exemption of those emoluments.
28.Deleted by(TaxLAA-No1-2020 wef-25April2020)
Any education grant paid by the Government of the United Kingdom under an agreement between that government and the Government of Kenya received by a person who is employed in the public service of Kenya or by the Community.
- (a)
of members of the armed forces of a country to which section 95 of the Constitution applies;.Deleted by Finance Act, 2013 effective 1st Jan 2014 (sec 22) - (b) of a person in the public service of the government of that country in respect of his office under that government where that person is resident in Kenya solely for the purpose of performing the duties of his office,
27. The emoluments payable out of foreign sources in respect of duties performed in Kenya in connection with a technical assistance or other agreement for development services or purpose to which the Government is a party to a non-resident person or to a person who is resident solely for the purposes of performing those duties, in any case where the agreement provides for the exemption of those emoluments.
28.Deleted by(TaxLAA-No1-2020 wef-25April2020)
29. Deleted by(TaxLAA-No1-2020 wef-25April2020)
The income received by way of remuneration under a contract which was entered into consequent upon financial assistance being received from the International Co-operation Administration for the enterprise in respect of which the contract was entered into and which provides that income shall be exempt from tax.
30. Deleted by(TaxLAA-No1-2020 wef-25April2020)
The income received by virtue of their employment by citizens of the United States of America who are employed by the Department of Agriculture of the United States of America on research work in co-operation with the Government.
31. Deleted by(TaxLAA-No1-2020 wef-25April2020)
Gains or profits resultant from a reward paid by the United Kingdom Atomic Energy Authority for the discovery of uranium ore in Kenya, except to the extent that the reward is liable to income tax in a country outside Kenya and there is, between that country and Kenya, provision for any form of double taxation relief.
32. Deleted by(TaxLAA-No1-2020 wef-25April2020)
All income of a non-resident person not having a permanent establishment in Kenya accrued in or derived from Kenya after 17th June, 1971, and which consists of interest or management and professional fees paid by the Tana River Development Company Limited or its successors in title.
33. Deleted by(TaxLAA-No1-2020 wef-25April2020)
Such part of the income of the East Africa Power and Lighting Company accrued in or derived from Kenya as is certified from time to time by the Minister to have been expended (whether before or after the date of commencement of this Act) at the request of the Government either
34. Deleted by(TaxLAA-No1-2020 wef-25April2020)
The income of the General Superintendence Company Limited, a company incorporated in Switzerland, accrued in or derived from Kenya under an agreement dated 18th October, 1972, between that company and the Central Bank of Kenya.
35.
Interest on a savings account held with the Kenya Post Office Savings Bank.
36. Such part of the income of an individual, chargeable to tax under section 3(2)(f) as consists of a gain derived from the transfer of -
All allowances payable to the Speaker, Deputy Speaker, Vice-President, Ministers, Assistant Ministers, and all other Members of Parliament are exempt from income tax under section 5 of the National Assembly Remuneration Act.
36. Such part of the income of an individual, chargeable to tax under section 3(2)(f) as consists of a gain derived from the transfer of -
- (a)
shares in the stock or funds of the Government, the High Commission or the Authority established under the Organization or the Community;Deleted by (TaxLAA-No1-2020 wef-25April2020) - (b)
shares of a local authority;Deleted by (TaxLAA-No1-2020 wef-25April2020) - (c) a private residence if the individual owner has occupied the residence continuously for the three year period immediately prior to the transfer concerned;
- Provided that -
- (i) in determining whether or not a person has occupied a residence continuously for three years, any period during which he was temporarily absent from the residence shall be ignored;
- (ii) references to a private residence include the immediately surrounding land utilized exclusively for personal purposes as an adjunct to the residence and not for the production of income, but does not include any part of the residence and land utilized for business purposes;
- (iii) no individual may claim or be taken to have used more than one residence as his residence at the same time for the purposes of this Act;
- (iv) no individual may claim or be taken to have used more than one residence as their residence for the purposes of this Act at any time when they were husband and wife living together;
- (v) no individual shall claim or be taken to have used a residence as a residence at any time when he was dependant of either or both of his parents;
- (vi) where a residence is used in part for business purposes, or is transferred in a single transaction together with land and other property used for the production of income, the taxable value of that property used for residential purposes shall be separately determined from that used for business purposes or for the production of income;
- (d) property (being land) transferred by an individual where -
-
(i) the transfer value is not more than
thirty thousand shillingsthree million shillings; or (Finance Act, 2015 effective 1st Jan 2016)
-
(ii) agricultural property having an area of less than
one hundred acresfifty acres where that property is situated outside a municipality, gazetted township or an area that is declared by the Minister, by notice in the Gazette, to be an urban area for the purposes of this Act; Finance Act, 2015 effective 1st Jan 2016
- (e)
land which has been adjudicated under the Land Consolidation Act or the Land Adjudication Act when the title to that land has been registered under the Registered Land Act and transferred for the first time;(Deleted by TaxLAA-No1-2020 wef-25April2020) - (f) property (including investment shares) which is transferred or sold for the purpose of administering the estate of a deceased person where the transfer or sale is completed within two years of the death of the deceased or within such extended time as the Commissioner may allow in writing.
- Provided that where there is a court case regarding such estate the period of the transfer or sale under this paragraph shall be two years from the date of the finalization of such court case. Finance Act, 2015 effective 1st Jan 2016
- (g) property, including investment shares, which is transferred or sold for the purpose of
transferring the title or the proceeds into a registered family trust. (Finance Act 2021- wef-01July2021)
38. (Deleted by 10 of 1987 s. 36)
39. (Deleted by 10 of 1987 s. 36)
40. Deleted by (TaxLAA-No1-2020 wef-25April2020)
40.Interest earned on contributions paid into the Deposit Protection Fund established under the Banking Act.
Interest paid on loans granted by the Local Government Loans Authority established by section 3 of the Local Government Loans Act.
42. The income of a non-resident person who carries on the business of aircraft owner, charterer or air transport operator, from such business where the country in which such non-resident person is resident extends a similar exemption to aircraft owners, charterers or air transport operators who are not resident in such country but who are resident in Kenya.
43. The income of a registered individual retirement fund.
44.Deleted by FA2020, wef01January2021
The income of a registered home ownership savings plan.
45. Income of the National Social Security Fund provided that the fund complies with such conditions as may be prescribed.
45A*. The income of the National Hospital Insurance Fund established under the National Hospital Insurance Fund Act 1998 consisting of —
Finance Act, 2015 effective 1st Jan 2016 (TaxLAA-No1-2020 wef-25April2020)
46.Dividends received by a registered venture capital company, special economic zone enterprises, developers and operators licensed under the Special Economic Zones Act
47. Deleted by (TaxLAA-No1-2020 wef-25April2020)47.Gains arising from trade in shares of a venture company earned by a registered venture capital company within the first ten years from the date of first investment in that venture company by the venture capital company: Provided that the venture company has not been listed in any securities Exchange operating in Kenya for a period of more than two years.
39. (Deleted by 10 of 1987 s. 36)
40. Deleted by (TaxLAA-No1-2020 wef-25April2020)
42. The income of a non-resident person who carries on the business of aircraft owner, charterer or air transport operator, from such business where the country in which such non-resident person is resident extends a similar exemption to aircraft owners, charterers or air transport operators who are not resident in such country but who are resident in Kenya.
43. The income of a registered individual retirement fund.
44.Deleted by FA2020, wef01January2021
45. Income of the National Social Security Fund provided that the fund complies with such conditions as may be prescribed.
45A*. The income of the National Hospital Insurance Fund established under the National Hospital Insurance Fund Act 1998 consisting of —
- (a) all contributions and other payments into and out of the Fund; and
- (b) monies invested under section 34 of the Act. Statutory Amendments Act 11 of 2017 *
47. Deleted by (TaxLAA-No1-2020 wef-25April2020)
48.
Gains arising from trade in securities exchange operating in Kenya by any dealer licensed under the Capital Markets Authority Act:
- Provided that such securities have been held for a period not exceeding twenty-four months from the date of acquisition.
50. (1) Investment income of a pooled fund or other kind of investment consisting of retirement schemes, provided that all the constituent schemes of the pooled fund are registered by the Commissioner.
(2) For the purpose of this paragraph, “pooled fund” has the meaning assigned to it under the Retirement Benefit Act, 1997.
51. Interest income accruing from all listed bonds, notes or other similar securities used to raise funds for infrastructure and other social services, provided that such bonds, notes or securities shall have a maturity of at least three years. Finance Act 2010 Effective 11 June 2010
52.Deleted byFinance Act 15 June06 Effective 16 June 06 (TaxLAA-No1-2020 wef-25April2020)
52.Interest income generated from cash flows passed to the investor in the form of asset-backed securities.
53.Deleted/Amended byFinance Act, 2016 Effective 1st July 2016 (Finance Act 2020- wef-30June2020)
Income from employment paid in the form of bonuses, overtime and retirement benefits:
Provided that this paragraph shall only apply to employees whose taxable employment income before bonus and overtime allowances does not exceed the lowest tax band provided under Head B of the Third Schedule.
53.Monthly pension granted to a person who is sixty- five years of age or more. (Finance Act 2020- wef-30June2020) Deleted by (TLAA 2024 wef 27th December, 2024 S14)
(2) For the purpose of this paragraph, “pooled fund” has the meaning assigned to it under the Retirement Benefit Act, 1997.
51. Interest income accruing from all listed bonds, notes or other similar securities used to raise funds for infrastructure and other social services, provided that such bonds, notes or securities shall have a maturity of at least three years. Finance Act 2010 Effective 11 June 2010
52.Deleted by
53.Deleted/Amended by
53.
53*. Payment of pension benefits from a registered pension fund, registered provident fund, registered individual retirement fund, public pension scheme or National Social Security Fund, upon attainment of the retirement age determined in accordance with the rules of the fund or the scheme:
Provided that this exemption shall also apply to—
(a) payment of gratuity or other allowances paid under a public pension scheme;
(b) payment of a retirement annuity; or
(c) withdrawals from the fund prior to attaining the retirement age due to ill health; or withdraws from the fund after the twenty years from the date of registration as a member of the fund. (TLAA 2024 wef 27th December, 2024 S14*)
54.
Interest income on bonds issued by the East African Development Bank. Finance Act, 2016 Effective 1st July 2016
55.
Dividends paid by Special Economic Zone Enterprise, developers or operators to any non-resident person. Finance Act, 2017 effective 1st January 2018 Deleted by (TaxLAA-No1-2020 wef-25April2020)
56.
Compensating tax accruing to a power producer under a power purchase agreement. Tax laws (Amendment) Act 2018 Effective 1st July 2018 Deleted by (TaxLAA-No1-2020 wef-25April2020)
56.
57. The income of the National Housing Development Fund. Finance Act 2019 Effective 1st January 2020
57.The income or* principal sum of a registered family trust. (Finance Act 2021- wef-01July2021) (TLAA 2024 wef 27th December, 2024 S14*)
58*. Income earned by an individual who is registered under the Ajira Digital Program for three years beginning 1st January, 2020;
58*. Income earned by an individual who is registered under the Ajira Digital Program for three years beginning 1st January, 2020;
Provided that—
59*. The amount withdrawn from the National Housing Development Fund to purchase a house by a contributor who is a first-time home-owner. Finance Act 2019 Effective 1st January 2020*
- a) the individual shall qualify for the exemption upon payment of registration fee of ten thousand shillings per annum; and
- b) the Cabinet Secretary shall, in consultation with the Cabinet Secretary for the ministry responsible for information communication technology, issue regulations for the better carrying out of this provision. Finance Act 2019 Effective 1st January 2020*
58. Any capital gains relating to the transfer of title of immovable property to a family trust. (Finance Act 2021- wef-01July2021)
60*.
Interest income accruing from all listed bonds, notes or other similar securities used to raise funds for infrastructure, projects and assets defined under Green Bonds Standards and Guidelines, and other social services:
- Provided that such bonds, notes or securities shall have a maturity of at least three years. Finance Act 2019 Effective 1st January 2020*
61. Deemed interest in respect of an interest free loan advanced to a company undertaking the manufacture of human vaccines. (Finance Act 2022-wef-01-July-2022)
62. Payments made to non-resident service providers not having a permanent establishment in Kenya in respect of services provided to a company undertaking the manufacture of human vaccines. (Finance Act 2022-wef-01-July-2022)
63. Compensating tax accruing to a company undertaking the manufacture of human vaccines. (Finance Act 2022-wef-01-July-2022)
64, Dividends paid by a company undertaking the manufacture of human vaccines to any non-resident person. (Finance Act 2022-wef-01-July-2022)
65. Income of a company undertaking the manufacture of human vaccines. (Finance Act 2022-wef-01-July-2022) Deleted by(Finance Act 2023 wef 1st-July-2023 s24)
66. Dividends paid by Special Economic Zone enterprises, developers and operators licensed under the Special Economic Zones Act. (Finance Act 2022-wef-01-July-2022)
67. Dividends paid by Special Economic Zone enterprises, developers and operators to any nonresident person. (Finance Act 2022-wef-01-July-2022)
68. Royalties paid to a non-resident person by a company undertaking the manufacture of human vaccines. (Finance Act 2023 wef 1st-July-2023 s24)
69. Interest paid to a resident person or nonresident person by a company undertaking the manufacture of human vaccines. (Finance Act 2023 wef 1st-July-2023 s24)
70. Investment income from a post-retirement medical fund, whether or not the fund is part of a retirement benefits scheme. (Finance Act 2023 wef 1st-July-2023 s24)
71. Income earned by a non-resident contractor, sub-contractor, consultant or employee involved in the implementation of a project financed through a one hundred percent grant under an agreement between the Government and the development partner, to the extent provided for in the Agreement: Provided that the non-resident is in Kenya solely for the implementation of the project financed by the one hundred percent grant. (Finance Act 2023 wef 1st-July-2023 s24) Deleted by (TLAA 2024 wef 27th December, 2024 S14)
71*. Income earned by a non-resident contractor, sub-contractor, consultant or an employee involved in the implementation of a project financed through a one hundred per cent grant under an agreement between the Government and a development partner, to the extent provided for in the Agreement: Provided that—
(a) the non-resident contractor, subcontractor, contractor or employee shall maintain this status for the tenure of the agreement;
(b) any other income not directly related to the project earned by that non-resident contractor, sub-contractor, consultant or employee shall be subject to tax. (TLAA 2024 wef 27th December, 2024 S14*)
72. Gains on transfer of property within a special economic zone enterprise, developer and operator. (Finance Act 2023 wef 1st-July-2023 s24)
73. Royalties, interest, management fees, professional fees, training fees, consultancy fee, agency or contractual fees paid by a special economic zone developer, operator or enterprise, in the first ten years of its establishment, to a non-resident person. (Finance Act 2023 wef 1st-July-2023 s24)
(Part-II....SECURITIES, THE INTEREST ON WHICH IS EXEMPT FROM TAX*.
Kenya Government 2 3/4 per cent Stock 1977/83,
Kenya Government 3 1/2 per cent Stock 1973/78,
Kenya Government 4 1/2 per cent Stock 1971/78,
Kenya Government 5 per cent Stock 1978/82,
Kenya Government 5 1/2 per cent Stock 1976/80,
Kenya Government 6 1/2 per cent Stock 1972/74,
Kenya Government 6 per cent Loan to finance Development Programme 1957/60, 1960/63, 1980/93,
Nairobi City Council 3 1/4 per cent Stock 1970/74,
East African High Commission 4 per cent Stock 1972/74,
East African High Commission 4 per cent Stock 1973/76,
East African High Commission 5 1/2 per cent Stock 1980/84,
East African High Commission 5 per cent International Co-operation Administration Loan 1978,
East African High Commission 4 3/4 per cent International Bank for Reconstruction and
Development Loans 1974 (two issues),
East African High Commission 5 3/4 per cent Stock 1977/83.
2. The income of Sceptre Trust Limited accrued in or derived from Kenya from interest payable by the Government at the rate of 6 1/2 per cent on two loans each of £250,000 made by Sceptre Trust Limited to the Government in 1959 and 1960 respectively for the purpose of Government staff housing and repayable over a period of twenty years.
3. The income of the International Bank for Reconstruction and Development accrued in or derived from Kenya from interest payable by the Government on a loan to be made in various currencies equivalent to $8,400,000 (eight million four hundred thousand dollars) by the International Bank for Reconstruction and development to the Government under the terms of loan Agreement No. 303 KE dated 29th November, 1961, for the purpose of Land Settlement and Development Projects.
4. The income of the Colonial Development Corporation accrued in or derived from Kenya from interest payable by the Government on a loan of £1,500,000 to be made by the Colonial Development Corporation to the Government under an agreement dated 18th December, 1961, for the purpose of Land Settlement and Development Projects.
5. The income of the Life and Casualty Insurance Company of Tennessee, a company incorporated in the United States of America, in so far as that income represents interest accrued in respect of or is derived from a loan of an amount not to exceed an aggregate of US$2,100,000 charged on the revenues of the City Council of Nairobi and secured by a document described as a Loan Agreement, dated 1st July, 1969, made between the City Council of Nairobi of the one part and the Loan and Casualty Insurance Company of Tennessee of the other part relating to a project for housing development situated at Kimathi Estate, Nairobi.
6. The income of Kreditanstalt fur Wiederaufbau a statutory Corporation incorporated in the Federal Republic of Germany in so far as that income represents interest accrued in respect of or derived from a loan of Deutsch Mark 27,257,515 made by that corporation to the Chemelil Sugar Company Limited under the provisions of a document described as a Loan Agreement dated 5th May, 1967, made between Chemelil Sugar Company Limited of the one part and Kreditanstalt fur Wiederaufbau of the other part relating to a loan for the supply of factory equipment for a sugar factory situated at Chemelil.
7. The income of SIFIDA INVESTMENT COMPANY S.A., a company incorporated in Luxembourg, in so far as it consists of interest accrued in or derived from Kenya, whether before or after the date of commencement of this Act.
8. The income of the Export Development Corporation of Canada in so far as that income represents interest accrued in respect of or derived from a loan of Canadian $3,900,000 under a loan agreement dated 22nd March, 1972, between Panafrican Paper Mills (East Africa) Limited of the one part and Export Development Corporation of the other part.
9. The income of Export-Import Bank of the United States, an agency of the United States of America, in so far as it consists of interest accrued in or derived from Kenya.