Imposition of Instalment tax.
(1)
Notwithstanding any other provisions of this Act, a tax to be
known as instalment tax shall be payable for the year of income commencing on
or after the 1st January, 1990 by every person chargeable to tax or any person
who has paid provisional tax in any year of income in accordance with the
provisions of this section, but a taxpayer shall not be required to pay the
instalment tax –- (a)
if to the best of his judgement and belief he will have no income chargeable to tax for that year of income other than emoluments; andDeleted - (a) if the minimum tax payable under section 12D is higher than the instalment tax under this section; and
- (b) if he has reasonable ground to believe that the whole of the tax payable by him in respect of those emoluments will be recovered under section 37.
(2)
The amount of instalment tax payable by any person for any current
year of income shall be the lesser of –- (a) the amount equal the to tax that would be payable by that person if his total income for the current year was an amount equal to his instalment income; or
- (b) the amount specified in the preceding year assessment multiplied by one hundred and ten percent.
(3)
The amount of tax determined under either subsection (2)(a) or
(b) shall be reduced by the aggregate of the tax that has been or will be paid in
the current year by way of deduction under section 12A, 35, 37 (4)
The amount of instalment tax required to be paid for any year of
income shall be the annual amount calculated in accordance with subsections (2)
and (3) but subject to the proportions as specified in the Twelfth Schedule.(5)
No instalment tax shall be payable by an individual in any year
of income where the total tax payable for that year of income is an amount not
exceeding forty thousand shillings.(12A)- Imposition of Advance tax. Effective 1 January 07 Finance Act 2010 Effective 11 June 2010
(1)
Notwithstanding any other provision of this Act, a tax to
be known as advance tax shall be payable commencing on the 1st January, 1996
in respect of every commercial vehicle at the rates specified in the Third Schedule.(2)
The Commissioner may prescribe the conditions and procedures
governing the payment of advance tax.(12B)-Imposition of Fringe benefit tax.
(1)
Notwithstanding any other provision of this Act, a tax to
be known as fringe benefit tax shall be payable commencing on the 12th June,
1998 by every employer in respect of a loan provided at an interest rate lower
than the market interest rate, to an individual who is a director or an employee or
is a relative of a director or an employee, by virtue of his position as director or
his employment or the employment of the person to whom he is related:- Provided that the fringe benefit tax shall not apply to loans advanced on or before 11th June, 1998.
(2)
For the purpose of this section, the taxable value of a fringe
benefit shall be in the case of a loan provided after l1th June, 1998, or a loan
provided on or before 11th June, 1998 the terms or conditions of which are
varied after 11th June, 1998, the greater of-- (i) the difference between the interest that would have been payable on the loan if calculated at the market interest rate and the actual interest paid on the loan; and
- (ii) zero;
(3)
Fringe benefit tax shall be charged on the total taxable value of a
fringe benefit provided by an employer in a month and shall be due and payable
on or before the tenth day of the following month: - Provided that the fringe benefit tax charged prior to 1st January, 1999 shall be due and payable on or before 10th January, 1999.
(4)
The Commissioner may prescribe the form and manner in which the
fringe benefit tax shall be payable and any other period for which the market rate
of interest may be applicable.(5)
The provisions of this Act in respect to fines, penalties, Interest
charges, objections and appeals shall apply mutatis mutandis to the fringe benefit
tax imposed under this section.(6)
For the purpose under this section -"employee" and "relative of a director or employee" shall have the meaning assigned thereto under section 5(2A) of this Act:
"loan" includes a loan from an unregistered pension or provident fund;
“market interest rate" means the average 91-day treasury bill rate of interest for the previous quarter.
12C Imposition of
turnover tax
Finance Act 2008 Effective 13 June 08
Provided that a person who would otherwise be liable to pay tax under this section may, by notice in writing addressed to the Commissioner, elect not to be subject to turnover tax, in which case the other provisions of this act shall apply to such person.
Finance Act 2008 Effective 1 January 09
1A
Notwithstanding subsection (1), turnover tax shall not apply to-
(a) rental income and management or professional or training fees;
(b) the income of incorporated companies; or
(c) any income which is subject to a final withholding tax under this Act.
Finance Act 2006 Effective 1 January 07
(2) The Minister may, by notice in the Gazette, prescribe rules for the better carrying out of the provisions of this section.
(2) The presumptive tax shall apply to persons who are issued or liable to be issued with a business permit or trade license by a county government in a year of income.
(3) A person liable to pay tax under subsection (1) may, by notice in writing, addressed to the Commissioner, elect not to be subject to the provisions of this section in which case the other provisions of this Act shall apply to such person.
(4) The due date for payment of tax under subsection (1) shall be at the time of payment for the business permit or trade license or renewal of the same.
(5) Notwithstanding subsection (1), presumptive tax shall not apply to income derived from—
(a) management and professional services; or
(b) rental business; or
(c) Incorporated companies
(12C)-Turnover and
Presumptive tax Finance Act, 2019 effective 1stJanuary 2020 ,
(1) Notwithstanding any other provision of this Act, a tax to be known as
turnover tax shall be payable by any resident person whose turnover
from business does not exceed or is not expected to exceed five
million shillings during any year of income.
(1)
Notwithstanding any other provision of this Act, a tax to be known as turnover tax shall be payable by any resident person whose turnover from business is more than one million shillingsbut does not exceed or is not expected to exceed fifty million shillings* but does not exceed or is not expected to exceed twenty-five million shillings during any year of income. Amended by TLAA2020,wef25April2020 (Finance Act 2023 wef 1st-July-2023 s9*)
Notwithstanding any other provision of this Act, a tax to be known as turnover tax shall be payable by any resident person whose turnover from business is more than one million shillings
(2)
Despite subsection (1), a person who would otherwise be liable to pay
turnover tax under this section may, by notice in writing addressed to
the Commissioner, elect not to be subject to the provisions of this
section, in which case the other provisions of this Act shall apply to
such person. (3)
Notwithstanding subsection (1), turnover tax shall not apply to— - (a) rental income;
- (b) management or professional or training fees;
- (c)
the income of incorporated companies; orDeleted by TLAA2020,wef25April2020 - (d) any income which is subject to a final withholding tax under this Act.
(4)
A person subject to turnover tax under this section shall submit a return
and pay the tax due to the Commissioner on or before the twentieth day
of the month following the end of the tax period. (5)
(6)
(7)
A person subject to turnover tax under this section shall be required to
keep records necessary for the determination and ascertainment of the
tax in accordance with the Tax Procedures Act, 2015. (8)
For purposes of this section “tax period” means a calendar month.(12D)-Minimum tax. FA2020, wef 01January2021
(1)Notwithstanding any other provision of this Act, a tax to be known as minimum tax shall be payable by a person if—
(a) that person’s income is not exempt under this Act;(b) that person’s income is not chargeable to tax under sections 5, 6A, 12C, the Eighth or the Ninth Schedules; or
(c) the instalment tax payable by that person under section 12 is higher lower than the minimum tax. (TLAAno2-2020 wef 01/01/2021)
(d*) that person is engaged in business whose retail price is controlled by the Government. (TLAAno2-2020 wef 01/01/2021*) Deleted by (Finance Act 2021- wef-01July2021)
(e*) that person is engaged in insurance business. (TLAAno2-2020 wef 01/01/2021*) Deleted by (Finance Act 2021- wef-01July2021)
(1A*)
Notwithstanding the provisions of subsection(1), a person shall not pay minimum tax if that person—(a) is engaged in business whose retail price is controlled by the Government;
(b) is engaged in insurance business;
(c) is engaged in manufacturing and that person’s cumulative investment in the preceding four years from assent is at least ten billion shillings;
(d) is licensed under the Special Economic Zones Act, 2015; and
(e) is engaged in distribution business whose income is wholly based on a commission. (Finance Act 2021- wef-01July2021*)
(12E)-Digital service tax. ( Introduced Finance Act 2020- wef-01January2021) Repealed by (TLAA 2024 wef 27th December, 2024 S5)
(3)Despite subsection (1), digital service tax shall not apply to income chargeable under section 9(2) or section 35. (Finance Act 2021- wef-01July2021)
12E. Significant economic presence tax. (TLAA 2024 wef 27th December, 2024 S5)
(1) Notwithstanding any other provision of this Act, a tax known as significant economic presence tax shall be payable by a non-resident person whose income from the provision of services is derived from or accrues in Kenya through a business carried out over the internet or an electronic network including through* a digital marketplace. Amended by (FA 2025-wef 1st July-2025 S7*).
(2) For purposes of this section, a non- resident person shall be considered to have significant economic presence where the user of the service is located in Kenya.
(3) Subsection (1) shall not apply—
(a) to a non-resident person who offers the services through a permanent establishment;
(b) to an income chargeable under section 9(2) or section 10;
(c) to a non-resident person providing digital services to an airline in which the government of Kenya has at least forty-five per cent shareholding; or
(d) to a non-resident person with an annual turnover of less than five million shillings.Deleted by (FA 2025-wef 1st July-2025 S7).
(4) For the purposes of computing the tax under subsection (1), the taxable profit of a person liable to pay the tax shall be deemed to be ten per cent of the gross turnover.
(5) A person subject to tax under this section shall submit a return and pay the tax due to the Commissioner on or before the twentieth day of the month following the end of the month in which the service was offered.
(6) The Cabinet Secretary may make Regulations for the better implementation of this section within six months from the commencement of this provision*. Amended by (FA 2025-wef 1st July-2025 S7*).
(12F*). Digital asset tax.
(ii) a non-fungible token or any other token of similar nature, by whatever name called; and
12G. Minimum top-up tax. (TLAA 2024 wef 27th December, 2024 S5)
(1) Notwithstanding any other provision of this Act, a tax known as minimum top-up tax shall be payable by a covered person where the combined effective tax rate in respect of that person for a year of income is less than fifteen per cent.
(2) The combined effective tax rate for a covered person shall be the sum of all the adjusted covered taxes, divided by the sum of all net income or loss for the year of income, multiplied by a hundred.
(3) The amount of tax payable shall be the difference between fifteen per cent of the net income or loss for the year of income of a covered person, and the combined effective tax rate for the year of income, multiplied by the excess profit of the covered persons.
(3A) Minimum top-up tax shall be payable by the end of the fourth month after the end of the year of income. (FA 2025-wef 1st July-2025 S9).
(4) This section shall not apply—
(a) to a public entity that is not engaged in business;
(b) to a person whose income is exempt from tax under paragraph 10 of the First Schedule;
(c) to a pension fund and the assets of that pension fund;
(d) to a real estate investment vehicle that is an ultimate parent entity;
(e) to a non -operating investment holding company;
(f) to an investment fund that is an ultimate parent entity;
(g) to a sovereign wealth fund; or
(h) to an intergovernmental or supranational organisation including a wholly owned agency or organ of the intergovernmental or supranational organisation.
(5) In this section—
“adjusted covered taxes” means taxes recorded in the financial accounts of a covered person for the income, profits, or share of the income or profits of a covered person where the covered person owns an interest, and includes taxes on distributed profits, deemed profit distributions under this Act subject to such adjustments as may be prescribed;
“covered person” means a resident person or a person with a permanent establishment in Kenya who is a member of a multinational group and the group has a consolidated annual turnover of seven hundred and fifty million Euros or more in the consolidated financial statements of the ultimate parent entity in at least two of the four years of income immediately preceding the tested year of income;
“net income or loss” means the sum net income or loss for the year of income after deducting the sum of the losses of a covered person as determined under a recognised accounting standards in Kenya; and “excess profit” means the net income or loss of a covered person for the year of income less—
(a) ten per cent for the employee costs; and
(b) eight per cent for the net book value of tangible assets: Provided that the employee cost and book value of tangible assets may be adjusted as prescribed in regulations.