National Treasury of Kenya has published the Draft Income Tax Bill 2018 for public comment. The draft Bill is intended to replace the current Income Tax Act with some certain provisions.

Some of the main points are condensed as follows:

Corporate Tax Rate:

  • the corporate tax rates for resident companies and a non-resident company having a permanent establishment in Kenya is 30%, and a new rate of 35% shall apply for taxable income in excess of KES 500 million;
  • a 10% rate is introduced for repatriated income of a non-resident company with a PE;
  • the rate of capital gains tax is increase to 20%.

Incentives:

  • a company newly listed on any securities exchange approved under the Capital Markets Act which has at least 40% of its issued share capital listed, a 25% rate applies for the period of 5 years;
  • an export processing zone enterprise (SEZ) which does not engage in any commercial activities, a 10% corporate tax rate applies for the first 10 years from date of first operation and thereafter 15% for another 10 years;
  • a special economic zone enterprise (SEZ) whether the enterprise sells its products to markets within or outside Kenya, developer or operator, 10% for the first 10 years from date of first operation and thereafter 15% for another 10 years;
  • a company that develops at least one hundred low cost residential units annually a 15% rate applies for that year of income in respect of gains or profits from the development of such units;
  • company whose business is local assembling of motor vehicles, a 15% rate applies for the first 5 years from the year of commencement of its operations.

 Withholding Tax:

  • according to the draft bill, a 5% rate applies for the dividend paid by SEZ enterprise of the gross amount payable, while the separate schedule on the taxation of SEZ enterprises includes that dividend payments made by an SEZ enterprise to a non-resident person are exempt;
  • provided that the 5% rate is applicable to interest, royalties, and management fees paid by any SEZ enterprise to a non-resident person.

Individual income tax:

New individual income tax brackets are as follow:

  • on the first KES 147,580 – 10%;
  • the next KES 139,043 -15%;
  • the next KES 139,043 – 20%;
  • next KES 139,043 – 25%;
  • the next 564,709 up to KES 9,000,000 -30%;
  • on all income over KES 9,000,000 -35%.

Taxation of cross border transactions:

  • the ultimate parent entity or a constituent entity which is not the ultimate parent entity of a multinational enterprise group that is resident for tax purposes in Kenya shall file a country-by-country report with the Commissioner if the group has more than one billion revenue in the previous year. CbC report must be filed within the twelve months after the last day of the reporting financial year of the multinational enterprise group.

  • “Ultimate parent entity” means a constituent entity of a multinational enterprise group that has control in one or more constituent entities of such multinational enterprise group such that it is required to prepare consolidated financial statements.