NINTH SCHEDULE

TAXATION OF EXTRACTIVE INDUSTRIES

Finance Act, 2014 effective 01 January 2015 (Taxation of petroleum companies- Repeal & replacement of this schedule)

PART I (p1) , PART II(p2-p6) , PART III(p7-p12) , PART IV(p13-p19)

PART I

– INTERPRETATION

(1) In this Schedule, unless the context otherwise requires-
“consideration”, in relation to the disposal of an interest in a person, a mining or petroleum right, or mining or petroleum information, means the total amount received or receivable for the disposal, including the fair market value of any amount in kind determined at the time of the disposal;
“contract area” means the area that is the subject of a petroleum agreement and, if any part of that area is relinquished pursuant to the agreement, contract area means the contract area that was originally granted;
“contractor” means a person with whom the Government has concluded a petroleum agreement and includes any successor or assignee of the person;
“cost”, in relation to an interest in a person, a mining or petroleum right, or mining or petroleum information, means the total consideration given for the acquisition of the interest, right, or information, including the fair market value of any amount given in kind determined at the time the amount is given;
“de-commissioning plan” means a plan for the decommissioning, abandonment, relocating or removal and, if applicable, redeployment of wells, flowlines, pipelines, facilities, infrastructure and assets related to upstream petroleum operations;
“development expenditure” means capital expenditure incurred by a contractor when undertaking operations authorised under a development plan, other than social infrastructure or expenditure to which Part II of the Second Schedule applies, and includes expenditure whenever incurred in acquiring –

(a) an interest in a petroleum agreement other than an interest referred to in paragraph (a) of the definition of “exploration expenditure”; or
(b) petroleum information other than information referred to in paragraph (b) of the definition of “exploration expenditure”;

“development plan” means a development plan prepared and adopted under a petroleum agreement; “disposal”, in─

(a) relation to an interest in a person, a mining or petroleum right, or mining or petroleum information, means any change in the ownership of the interest, right, or information, including by way of sale, transfer, assignment, or exchange;
(b) the case of an interest in a person, includes the cancellation or redemption of the interest;

“exploration expenditure” means expenditure incurred by a contractor in undertaking exploration operations authorised under a petroleum agreement, other than social infrastructure expenditure or expenditure to which Part II of the Second Schedule applies, and includes expenditure incurred in acquiring –

(a) an interest in a petroleum agreement from the Government or under a farm-out agreement; or
(b) petroleum information relating to exploration operations from the Government or under a farm-out agreement;

“exploration operations” means work authorised under a petroleum agreement in the search for petroleum prior to the approval of a development plan and includes –

(a) geological, geophysical, and geochemical surveys and analyses;
(b) aerial mapping;
(c) investigations of subsurface geology;
(d) stratigraphic tests;
(e) the drilling of wells to test a geological feature that has not already been determined to contain producible petroleum sufficient for commercial production; or
(f) any other work that is necessarily connected with activities described in paragraphs (a) to (e);

“extraction expenditure” means capital expenditure incurred by a licensee when undertaking operations authorised under an extraction right, other than social infrastructure expenditure or expenditure to which Part II of the Second Schedule applies, and includes expenditure whenever incurred in acquiring –

(a) an interest in a mining right other than an interest referred to in paragraph (a) of the definition of “prospecting expenditure”; or
(b) mining information other than information referred to in paragraph (b) of the definition of “prospecting expenditure”;
(c) a right to extract minerals issued or granted under the Mining Act; or
(d) a right to extract geothermal resources issued or granted under the Geothermal Resources Act;

“farm-out agreement” means an agreement to which paragraph 13 applies;
“interest in a person” includes a share or other membership interest in a company, an interest in a partnership or trust, or any other ownership interest in a person;
“licence area” means the area that is the subject of a mining right;
“licensee” means a person who has been issued with, or granted, a mining right;
“minerals” has the meaning assigned to it in the Mining Act;
“mining information” means information relating to mining operations;
“mining operations” means authorised operations undertaken under a mining right;
“mining right” means a prospecting or extraction right;

“person” includes an individual, company, partnership, trust, government, or similar body or association;
“petroleum agreement” has the meaning assigned to it in the Petroleum (Exploration and Production) Act;
“Petroleum (Exploration and Production) Act” means the Petroleum (Exploration and Production) Act, or any successor legislation dealing with the exploration, development, production, and transportation of petroleum;
“petroleum information” means information relating to petroleum operations; Finance Act, 2015 effective 1st Jan 2016
“petroleum operations” means authorized operations undertaken under a petroleum agreement; Finance Act, 2015 effective 1st Jan 2016
“prospecting expenditure” means expenditure incurred in undertaking operations authorised under a prospecting right, other than social infrastructure expenditure or expenditure to which Part II of the Second Schedule applies, and includes expenditure incurred in acquiring –

(a) an interest in a prospecting right from the Government or under a farm-out agreement; or
(b) prospecting information from the Government or under a farm-out agreement;

“prospecting information” means mining information relating to the search for minerals under a prospecting right;
“prospecting right” means any of the following –

(a) a right to prospect for minerals issued or granted under the Mining Act;
(b) an authority or right to search for geothermal resources issued or granted under the Geothermal Resources Act;

“social infrastructure expenditure” means capital expenditure incurred by a licensee or contractor on the construction of a public school, hospital, road, or any similar social infrastructure;

“subcontractor” means a person supplying services other than a person supplying services as an employee to –

(a) a licensee in respect of mining operations undertaken by the licensee; or
(b) a contractor in respect of petroleum operations undertaken by the contractor;

“underlying ownership”, in relation to a person, means an interest in the person held directly, or indirectly through an interposed person or persons, by an individual or by a person not ultimately owned by the individuals.
(2) Unless the context otherwise requires, any term that is not defined in this Act but is defined in the Mining Act, Geothermal Resources Act or Petroleum (Exploration and Production) Act, has the meaning assigned in the Mining Act, Geothermal Resources Act or Petroleum (Exploration and Production) Act, as the case may be.
(3) Where more than one person has signed a petroleum agreement, each person shall be considered as a contractor for the purposes of this Schedule.
(4) In case of a deduction on social infrastructure expenditure, section 15(2)(x) shall apply.

PART II
– TAXATION OF MINING OPERATIONS

Taxation of licensees
2.

(1) A licensee is subject to tax in accordance with this Act but subject to the modifications in this Schedule.
(2) Where there is any inconsistency between this Schedule and any other provision of this Act regarding the taxation of a licensee, this Schedule shall prevail.
(3) The corporate rate specified under paragraph 2 of Head B of the Third Schedule shall be the rate of income tax applicable to a licensee that is a company.

Limitation of deductions relating to mining operations

3.

(1) Subject to subparagraph (5), a deduction for expenditure to the extent incurred by a licensee when undertaking mining operations in a licence area during a year of income shall only be allowed against the income derived by the licensee from the mining operations in the licence area during that year.
(2) If a licensee suffers a loss in respect of mining operations in a licence area for a year of income, the amount of the loss shall be carried forward and allowed as a deduction against the income of the licensee derived from mining operations in the licence area in the next following year of income of the licensee.
(3) The amount of a loss for a year of income that is not deducted under subparagraph (2) shall be carried forward by the licensee to the next following year of income and be deductible in that year in accordance with subparagraph (2), and so on until the loss is fully deducted or the mining operations in the licence area cease.
(4) If a licensee has carried forward a loss for a licence area under subparagraph (2) for more than one year of income, the loss of the earliest year of income shall be allowed as a deduction first.
(5) If -

(a) a licensee has ceased mining operations under a mining right in a licence area; and
(b) the licensee suffers a loss in relation to the mining operations under the mining right in the licence area for a year of income that has not been deducted under subparagraph (2),

the licensee may elect, by notice in writing to the Commissioner, to treat the loss as a loss under subparagraph (2) in relation to another licence area in which the licensee undertakes mining operations if the area covered by the second-mentioned licence area falls wholly within the area covered by the first-mentioned licence area.
(6) If -

(a) a licensee has ceased mining operations under a mining right in a licence area during a year of income and has a loss in relation to the mining operations under the mining right in the licence area for that year; and
(b) subparagraph (5) does not apply to the licensee in respect of the ceased mining operations,

the licensee may elect, by notice in writing to the Commissioner, to treat the loss as a loss in relation to the mining operations undertaken by the licensee in the licence area in the previous year of income.
(7) The amount of a loss for a year of income that is not deducted under subparagraph (6) may be carried back for not more than three years of income from the year in which the loss arose.
(8) A licensee has a loss in relation to mining operations in a licence area for a year of income if the total deductions of a licensee in respect of mining operations undertaken by the licensee in the licence area during the year exceed the total amount of income derived from such operations in the area for the year.

Prospecting expenditure

4.

(1) A licensee shall be allowed a deduction for prospecting expenditure in the year of income in which the licensee incurred the expenditure.
(2) Subject to paragraph 13, if a licensee –

(a) disposes of an interest in a mining right or information the cost of which was deducted as prospecting expenditure under subparagraph (1); or
(b) otherwise recovers or recoups an amount deducted as prospecting expenditure under subparagraph (1),

the consideration for the disposal, or the amount recovered or recouped, is income of the licensee charged to tax under section 3(2)(a)(i) in the year of income in which the interest is disposed of or the amount is otherwise recovered or recouped.
(3) ~~For the purposes of Part II of the Second Schedule, the rate of depreciation for machinery first used to undertake operations under a prospecting right is one hundred per cent.~~

The rate of depreciation for machinery first used to undertake operations under a prospecting right shall be the rate specified in paragraph 1(b)(x) of the Second Schedule. (Finance Act 2021- wef-01Jan2022*)

Extraction expenditure

5.

(1) Subject to subparagraphs (2) and (3), a licensee shall be allowed a deduction for extraction expenditure in the year of income in which the licensee incurred the expenditure and in the following years of income until the expenditure has been fully deducted and the deduction for each year of income is twenty per cent of the amount of the expenditure.
(2) If a licensee incurs extraction expenditure before the commencement of commercial production, subparagraph (1) shall apply on the basis that the expenditure was incurred at the commencement of commercial production.
(3) The amount of the deduction allowed under subparagraph (1) for the year of income in which the commencement of commercial production occurs is computed according to the following formula
─ A x B/C
Where:-

A. is the amount of the expenditure;
B. is the number of days in the period beginning on the date of commencement of commercial production and ending on the last day of the year of income in which commercial production commenced; and
C. is the number of days in the year of income in which commercial production commenced.

(4) The total deductions allowed to a licensee under this paragraph for extraction expenditure for the current year of income and all previous years of income shall not exceed the amount of the expenditure.
(5) Subject to paragraph 13, if a licensee disposes of an interest in a mining right or information the cost of which was deducted as extraction expenditure under subparagraph (1) during a year of income, no deduction shall be allowed for the extraction expenditure for that year and–

(a) if the consideration for the disposal exceeds the written down value of the interest or information at the time of disposal, the amount of the excess is income of the licensee charged to tax under section 3(2)(a)(i) in the year of income in which the disposal occurred; or
(b) if the written down value of the interest or information at the time of disposal exceeds the consideration for the disposal, the licensee shall be allowed a deduction for the amount of the excess in the year of income in which the disposal occurred.

(6) Except where subparagraph (5) applies, if a licensee recovers or recoups an amount deducted as extraction expenditure under subparagraph (1), the amount recovered or recouped shall be income of the licensee charged to tax under section 3(2)(a)(i) in the year of income in which the amount is recovered or recouped.
(7) In this paragraph –
“commencement of commercial production” means the first period of thirty consecutive days during which the average level of production on the twenty five highest production days in the thirty-day period reaches such production level as may be determined by the Cabinet Secretary responsible for mining; and
“written down value”, in relation to an interest in a mining right or information of a licensee, means the cost of the right or information reduced by the deductions allowed to the licensee in respect of the right or information under this paragraph.

Rehabilitation expenditure

6.

(1) A contribution made by a licensee to a rehabilitation fund in accordance with an approved rehabilitation plan relating the licensee’s mining operations shall be allowed as a deduction for the year of income in which the contribution was made.
(2) An expenditure incurred by a licensee in carrying out work required by an approved rehabilitation plan in respect of the licensee’s mining operations shall be allowed as a deduction for the year of income in which the expenditure is incurred:
Provided that the work is not paid for, directly or indirectly, from money made available out of the licensee’s rehabilitation fund for the licensee’s mining operations
(3) An amount accumulated in or withdrawn from a rehabilitation fund to meet expenditure incurred under an approved plan and interest income and investment income in respect of a rehabilitation fund shall be exempt from tax.
(4) Subject to subparagraph (5), an amount withdrawn from a rehabilitation fund and returned to the licensee shall be considered as income of the licensee and shall be charged to tax under section 3(2)(a)(i) in the year of income in which the amount was returned to the licensee.
(5) Any surplus in a rehabilitation fund of a licensee at the time of completion of rehabilitation shall be considered as income of the licensee and shall be charged to tax under section 3(2)(a)(i) in the year of income in which rehabilitation is completed.
(6) In this paragraph –
“approved rehabilitation plan” means a plan for the rehabilitation of a mine site approved by the Cabinet Secretary responsible for mining; and
“rehabilitation fund” means a fund or account required to be established under a mining right to provide for the future payment of remedial work to the licence area covered by the mining right and is managed jointly by the Cabinet Secretary responsible for mining and the licensee.

PART III
– PETROLEUM OPERATIONS

Taxation of contractors

7.

(1) A contractor is subject to tax in accordance with this Act but subject to the modifications in this Schedule.
(2) If there is any inconsistency between this Schedule and any other provision of the Act, in relation to the taxation of a contractor, this Schedule shall prevail.
(3) The rate of income tax applicable to a contractor is—

(a) in the case of a resident company, thirty per cent; or
(b) in the case of a non-resident company, thirty seven and a half per cent.

Limitation of deductions relating to petroleum operations

8.

(1) A deduction for expenditure to the extent incurred by a contractor in undertaking petroleum operations in a contract area during a year of income shall be allowed only against the income derived by the contractor from the petroleum operations in the contract area during the year.
(2) If a contractor suffers a loss in respect of petroleum operations in a contract area for a year of income, the amount of the loss shall be carried forward and allowed as a deduction against the income of the contractor derived from petroleum operations in the contract area in the next following year of income of the contractor.
(3) The amount of a loss for a year of income that is not deducted under subparagraph (2) shall be carried forward by the contractor to the next following year of income and be deductible in that year in accordance with subparagraph (2), and so on until the loss is fully deducted or the petroleum operations in the contract area cease.
(4) If a contractor suffers a loss carried forward for a contract area under subparagraph (2) for more than one year of income, the loss of the earliest year of income shall be allowed as a deduction first.
(5) If a contractor has ceased petroleum operations under a petroleum agreement in a contract area during a year of income and the contractor has a loss in relation to the petroleum operations under the petroleum agreement in the contract area for that year the contractor may elect, by notice in writing to the Commissioner, to treat the loss as a loss in relation to the petroleum operations undertaken by the contractor in the contract area in the previous year of income.
(6) The amount of a loss for a year of income that is not deducted under subparagraph (5) may be carried back for not more than three years of income from the year in which the loss arose.
(7) A contractor suffers a loss in relation to petroleum operations in a contract area for a year of income if the total deductions of a contractor in respect of petroleum operations undertaken by the contractor in the contract area during the year exceed the total amount of income derived from such operations in the area for the year.

Exploration expenditure

9.

(1) A contractor shall be allowed a deduction for exploration expenditure in the year of income in which the contractor incurred the expenditure.
(2) Subject to paragraph 13, if a contractor—

(a) disposes of an interest in a petroleum agreement or information the cost of which was deducted as exploration expenditure under subparagraph (1); or
(b) otherwise recovers or recoups an amount deducted as exploration expenditure under subparagraph(1),

the consideration for the disposal, or the amount recovered or recouped, shall be considered as income of the contractor and be charged to tax under section 3(2)(a)(i) in the year of income in which the interest is disposed of or the amount is otherwise recovered or recouped.
(3) ~~For the purposes of Part II of the Second Schedule,~~ ~~the rate of depreciation for machinery first used to undertake exploration operations shall be one hundred per cent.~~

The rate of depreciation for machinery first used to undertake exploration operations shall be the rate specified in paragraph 1(b)(xi)of the Second Schedule. (Finance Act 2021- wef-01Jan2022*)

Development expenditure

10.
(1) Subject to subparagraphs (2) and (3), a contractor shall be allowed a deduction for development expenditure in the year of income in which the contractor incurred the expenditure and in following years of income until the expenditure has been fully deducted and the deduction for each year of income shall be twenty per cent of the amount of the expenditure.
(2) If a contractor incurs development expenditure before the commencement of commercial production, subparagraph (1) shall apply on the basis that the expenditure was incurred at the time of commencement of commercial production.
(3) The amount of the deduction allowed under subparagraph (1) for the year of income in which commencement of commercial production occurs shall be computed according to the following formula:
A x B/C

Where:-

A. is the amount of the expenditure;
B. is the number of days in the period beginning on the date of commencement of commercial production and ending on the last day of the year of income in which commercial production commenced; and
C. is the number of days in the year of income in which commercial production commenced.

(4) The total deductions allowed to a contractor under this paragraph for development expenditure for the current year of income and all previous years of income shall not exceed the amount of the expenditure.
(5) Subject to paragraph 15, if a contractor disposes of an interest in a petroleum agreement or information the cost of which was deducted as development expenditure under subparagraph (1) during a year of income, no deduction shall be allowed for the development expenditure for that year and –

(a) the consideration for the disposal exceeds the written down value of the interest or information at the time of disposal, the amount of the excess shall be considered income of the contractor charged to tax under section3(2)(a)(i) in the year of income in which the disposal occurred; or
(b) the written down value of the interest or information at the time of disposal exceeds the consideration for the disposal, the contractor shall be allowed a deduction for the amount of the excess in the year of income in which the disposal occurred.

(6) Except where subparagraph (5) applies, if a contractor recovers or recoups an amount deducted as development expenditure under subparagraph (1), the amount recovered or recouped shall be considered income of the contractor charged to tax under section 3(2)(a)(i) in the year of income in which the amount is recovered or recouped.
(7) In this paragraph –
“commencement of commercial production” means the first day of commercial production as determined under the petroleum agreement; and
“written down value”, in relation to an interest in a petroleum agreement or information of a contractor, means the acquisition cost of the interest or information reduced by the deductions allowed to the contractor in respect of the interest or information under this paragraph.

Decommissioning expenditure

11.

(1) A contractor shall be allowed a deduction for the amount that the contractor transfers to an escrow account during a year of income as required under an approved decommissioning plan for a contract area made under a petroleum agreement to finance expenditure expected to be incurred by the contractor in the abandonment and decommissioning of petroleum operations undertaken under the petroleum agreement.
(2) Subject to subparagraph (3), a contractor shall be allowed a deduction for expenditure incurred by the contractor under an approved decommissioning plan in the abandonment and decommissioning of petroleum operations in a contract area.
(3) A deduction shall not be allowed under subparagraph (2) for expenditure incurred in the abandonment and decommissioning of petroleum operations in a contract area if the expenditure is paid for, directly or indirectly, from money made available out of the escrow account established under the decommissioning plan for the contract area to finance such expenditure.
(4) An amount accumulated in an escrow account, or an amount withdrawn from an escrow account to meet expenditure incurred under an approved decommissioning plan for a contract area, shall be exempt from tax.
(5) An amount withdrawn from the escrow account and returned to the contractor shall be considered income of the contractor charged to tax under section 3(2)(a)(i) in the year of income in which the amount was returned to the contractor.
(6) Any surplus in an escrow account established under an approved decommissioning plan for a contract area by a contractor at the time of completion of decommissioning of the contract area to which the account relates is included in the income of the contractor for the year of income in which decommissioning is completed.
(7) In this section –
“approved decommissioning plan” has the meaning assigned to it under the Petroleum (Exploration and Production) Act.

Paid-on-behalf

12.

(1) This paragraph shall apply where the portion of profit oil and gas that the Government is entitled to take and receive under a petroleum agreement is inclusive of taxes payable by the contractor under this Act.
(2) For the avoidance of doubt, where this paragraph applies, the portion of profit oil and gas that the Government is entitled to take and receive under a petroleum agreement with a contractor shall be inclusive only of the taxes payable by the contractor under this Act directly in relation to the petroleum operations undertaken by the contractor and shall exclude –

(a) the tax payable on any gain made by the contractor or any other person on a disposal, directly or indirectly, of an interest in the petroleum agreement; or
(b) any tax that the contractor is liable under the Act to deduct from a payment made by the contractor.

PART IV
— COMMON RULES APPLICABLE TO MINING AND PETROLEUM OPERATION

Farm-outs

13.

(1) This paragraph shall apply where –

(a) a licensee or contractor has entered into an agreement (referred to as a “farm-out agreement”) with a person (referred to as the “transferee”) for the transfer of an interest in a mining right or petroleum agreement; and
(b) the consideration given by the transferee for the interest wholly or partly includes the transferee undertaking some or all of the work commitments of the licensee or contractor under the right or agreement.

(2) If this paragraph applies, and the transfer of the interest occurs at the time the farm-out agreement is entered into, the consideration received by the licensee or contractor for the interest shall not include the value of any work undertaken by the transferee on behalf of the licensee or contractor.
(3) If this paragraph applies and the transfer of the interest is deferred until the transferee completes some or all of the work commitments of the licensee or contractor under the mining right or petroleum agreement-

(a) any amount in money payable under the farmout agreement before the transfer of the interest shall be included in the income of the contractor charged to tax under section3(2)(a)(i) in the year of income in which the amount is payable; and
(b) the value of any work undertaken by the transferee on behalf of the licensee or contractor shall be excluded in–
(i) the consideration received by the licensee or contractor for the transfer of the interest; or
(ii) the income of the contractor charged to tax under this Act.

(4) If an interest referred to in subparagraph (3) is subsequently transferred, the consideration received by the licensee or contractor shall not include any amount included in the income of the licensee or contractor charged to tax under subparagraph (3) (a).

Indirect transfers of interest

14.

(1) A licensee or a contractor shall immediately notify the Commissioner, in writing, if there is a ~~ten per cent~~ twenty per cent* or more change in the underlying ownership of a licensee or contractor. (Finance Act 2023 wef 1st-July-2023 s29*)
(2) If the person disposing of the interest to which the notice under subparagraph (1) relates is a non-resident person, the licensee or contractor shall be liable, as agent of the non-resident person, for any tax payable under this Act by the non- resident person in respect of the disposal.

Taxation of subcontractors

15.

(1) Subject to subparagraph (3), a non-resident subcontractor who derives a fee for the provision of services (referred to in this paragraph as a “services fee”) to a licensee or contractor in respect of mining or petroleum operations shall be liable to pay non-resident withholding tax at the rate specified in subparagraph (2) on the gross amount of the services fee.
(2) The rate of withholding tax under subparagraph (1) is –

(a) for a service fee paid by a contractor, ~~5.625%~~ ten per cent*; or (Finance Act 2021- wef-01July2021*)
(b*) for a service fee paid by a licensee, twenty 5.625 per cent ten per cent**. Finance Act, 2015 effective 1st Jan 2016* (Finance Act 2021- wef-01July2021**)

(3) Subparagraph (1) shall not apply if the subcontractor provides the services giving rise to the fee through a permanent establishment in Kenya.
(4) A services fee to which subparagraph (3) applies shall be deemed to be income that accrued in or was derived from Kenya for the purposes of section 3 and be assessed to the subcontractor under section 44.
(5) A licensee or contractor paying a services fee to a nonresident subcontractor that is subject to non-resident withholding tax under subparagraph (1) shall deduct tax from the gross amount paid at the rate specified in subparagraph (2).
(6) A licensee or contractor to whom subparagraph (5) applies shall deduct the withholding tax at the earlier of —

(a) the time the licensee or contractor credits the services fee to the account of the non-resident subcontractor; or
(b) the time the fee is actually paid.

(7) Section 35(5) and (6) shall apply to non-resident withholding tax that a licensee or contractor is required to deduct under subparagraph (5) on the basis that the tax is tax deducted under section 35(1).
(8) Non-resident withholding tax imposed under subparagraph (1) shall be a final tax on the services fee and shall not be included in the calculation of the total income of the subcontractor.
(9) In this section,

“non-resident subcontractor” means a subcontractor that is not a resident and includes a subcontractor that is a foreign government or foreign government body.

Deduction of withholding tax by contractor

16.

(1) The rate of withholding tax to be deducted by a contractor under section 35(1) is—

(a) in the case of dividends, ten per cent of the gross amount of the dividend payable;
(b) in the case of interest, fifteen per cent of the gross amount of the interest payable;
(c) in the case of royalties or a natural resource income twenty per cent of the gross amount of the royalty payable or natural resource income; or
(d) in the case of ~~management or professional fees~~ management, training or professional fees*, ~~twelve and a half per cent~~ ten percent** of the gross amount of the management or professional fee payable. Finance Act, 2015 effective 1st Jan 2016 * (Finance Act 2021- wef-01July2021**)

Source of income

17.

An amount that is by virtue of this Schedule charged to tax under section3(2) (a) (i) shall be deemed to be income that accrued in or was derived from Kenya.

Deductibility of interest

18.

~~Section 16(2)(j)(i) applies to a contractor or licensee on the basis that the reference to “three” is treated as a reference to “two”.~~

The provisions of section 16(2)(j) shall apply to a contractor or a licensee. (Finance Act 2021- wef-01Jan2022*)

Hedging transactions

19.

(1) Subject to subparagraph (2), hedging transactions entered into by a licensee or contractor shall be treated as a specified source of income for the purposes of section15(7).
(2) Subparagraph (1) does not apply to an approved hedging transaction entered into by a licensee or contractor that has an annual turnover of less than ten million shillings as required to obtain project finance and approved by the Commissioner.
(3) In this paragraph,

“hedging transaction” means a transaction entered into by a licensee or contractor to manage commodity price risk.

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INCOME TAX ACT KENYA (ITA)-Updated with tax laws Acts of 2024