Taxable Incomes

Basis of charge of tax

Income tax: This is tax charged for each year of income upon all the income of resident or non-resident, which accrued in or was derived from Kenya. (ITA 3(1))

Resident:

Can be an Individual or a body of persons:

• As an individual, means –
• (i) that he has a permanent home in Kenya and was present in Kenya for any period in a particular year of income under consideration; or
• (ii) that he has no permanent home in Kenya but was present in Kenya–
• (A) for a period or periods amounting in the aggregate to183 days or more in that year of income; or
• (B) in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each year of income;  
• As body of persons

1. Company incorporated in Kenya.
2. Body's management and control of the affairs is done in Kenya.
3. Body declared by notice in the Gazette, to be resident in Kenya.

Employee vs consultant:

• Employee

means any person who is not a beneficial owner of or able either directly or indirectly or through the medium of other companies or by any other means to control more than 5% of the share capital or voting power of that company;  Section 5 (2A)(b) ITA

• Consultant: Refer 5^th Schedule of ITA

In a nutshell, consultants provide expert opinions, analysis, and recommendations to organizations or individuals, based on their own expertise. They're essentially fixers, serving as objective troubleshooters, and providing strategies to prevent problems and improve performance.

Income upon which tax is chargeable: Section 3(2)(ii):

• Gains or profits from -a business(s.4), employment(s.5) , or rights for use or occupation of property(s.6);
• Dividends or interest(s.7);
• Pension, charge, annuity, and withdrawals, etc(s.8)
• Income accruing through a digital marketplace(s.12E).
• Any deemed income of a any person under this ACT(s.9),
• Gains set out in 8th schedule ITA. i.e from property, investment shares.
• Gain from disposal of immovable property subject to S.15(5A)ITA and gain is >20% of its value(s3(2)(g) ).
• Natural resource income s.10(1)(b) for residents, s34(2)(b)for non-residents.
• Management, Royalties, etc s.10(1) for residents, s34(2) for non-residents. 
• Trusts(s.11).

• "person" does not include a partnership.
• A bonus or interest paid by a designated co-operative society, shall be deemed to be a dividend.
• Refer Section 3(3) ITA for more clarifications. 
• For the purposes of subsection (2)(g) and section 15(5A) - 
• (i) “immovable property” means a mining right, an interest in a petroleum agreement, mining information or petroleum information; 
• (ii) “net gain”, in relation to the disposal of an interest in a person, means the consideration for the disposal reduced by the cost of the interest; and 
• (iii) the terms “consideration”, “cost”, “disposal”, “interest in a person”, “mining information”, “mining right”, “person”, “petroleum agreement”, and “petroleum information” have the meaning assigned to them in the Ninth Schedule.

Specified sources of income

Gains or profits of a person derived from one of the seven sources of income shall be computed separately from the gains or profits of that person derived from any other of the specified sources and separately from any other income of that person.

They are:

• (i) rights granted to other persons for the use or occupation of immovable property; 
• (ii) employment of personal services for wages, salary, commissions and a self employed professional vocation; 
• (iii) wife’s employment income, wife’s professional income and  wife’s self-employment; 
• (iv) agricultural, pastoral, horticultural, forestry or similar activities, not falling within (i) and (ii), above; 
• (ivA) surplus funds withdrawn or refunded to an employer in respect of registered pension or registered provident funds which are deemed to be the income of the employer under Section8(10); and 
• (ivB) income of a licensee from one license area or a contractor from one contract area as determined in accordance with the Ninth Schedule; 
• (v) other sources of income chargeable to tax under section 3(2)(a), not falling within (i), (ii), (iii) or (iv) above.

SECT 4

• Gains or profits from business accrued in or to have been derived from Kenya;
• Gains or profits of a partnership
• Reserve released or provision recovered 
• Balancing charge or  trading receipt under the Second Schedule
• Gains or profits of a licensee/contractor/subcontractor as defined in the Ninth Schedule.
• A foreign exchange gain or loss realized.
• EPZ gains and profits: Eleventh Schedule shall apply.