Income Tax Act

The Act is called the Income Tax Act and, subject to the Sixth Schedule, comes into operation on 1st January 1974 and applies to assessments for the year of income 1974 and subsequent years.

Defines qualifying interest for joint husband-and-wife accounts; caps aggregate interest on housing bonds at three hundred thousand shillings; permits record-keeping in written or specified electronic/mechanical forms.

Section 10 lists specified categories of income and deems payments made or facilitated by owners or operators of digital marketplaces/ platforms for digital content monetisation, property or services to be income accruing in or derived from Kenya.

Income received by a person in his capacity as a trustee, executor or administrator is treated as that trustee's (or executor's/administrator's) income; trustees may designate amounts paid as qualifying dividends or qualifying interest (deemed already tax paid); designated cumulative totals must not exceed qualifying amounts received.

Instalment tax must be paid by every person chargeable to tax or who has paid provisional tax for the relevant year of income, subject to statutory exemptions and reductions.

Advance tax is payable on every commercial vehicle from 1 January 1996 at the rates in the Third Schedule.

Employers must pay fringe benefit tax on loans provided below the market interest rate to directors, employees, or their relatives, starting 12 June 1998; loans advanced on or before 11 June 1998 are excluded.

Turnover tax is payable by resident persons whose annual business turnover exceeds one million shillings but does not exceed (or is not expected to exceed) twenty-five million shillings; such persons must submit returns and pay the tax on time and keep records; certain incomes are exempt.

Section 12D repealed by Act No. 9 of 2025, s. 6.

Non-resident persons who earn income from providing services to users located in Kenya via the internet or electronic networks must pay a significant economic presence tax; taxable profit is deemed to be 10% of gross turnover; returns and payment are due by the 20th day of the month following the month the service was offered.

Section 12F was repealed by Act No. 9 of 2025, s. 8.

Covered persons must pay a minimum top-up tax if their combined effective tax rate for a year is less than 15%, payable by the end of the fourth month after the end of that year.

Income tax is charged on all income of a person derived in or from Kenya; the Cabinet Secretary must make regulations to implement provisions covering income from internet or electronic network businesses including digital marketplaces; "digital marketplace" is defined.

Rules for treating various business-related sums as income: (a) whole profits of a resident's partly foreign business are deemed Kenyan income; (b) partner's profits are computed by specified formula; partnership may deduct partner medical costs up to one million shillings per year; (c) insurance or damages for loss of profits are income; (d) recoveries of previously deducted amounts are income (with a Commissioner power to spread the amount); (e) balancing charges under the Second Schedule are income; (f) Ninth Schedule rules apply to licensees/contractors/subcontractors.

Foreign exchange gains or losses realized in a business carried on in Kenya must be included as trading receipts or deductible expenses for the year in which they are realized, subject to specified exceptions and a calculation method.

If a business is carried on by an export processing zone enterprise, the Eleventh Schedule applies.

Section 5 sets out that income from employment and similar services is chargeable as income, specifying treatment for residents and non-residents, rules for timing (deeming earlier years), exclusions for reimbursements and certain allowances, valuation of benefits (including premises, vehicle benefits and share options), definitions (including "employee"), prescribed interest rates, and various specified limits and exceptions.

Gains or profits include royalties, rent, premiums or similar payments received for the use or occupation of property.

Resident persons must pay a residential rental income tax on Kenyan residential property income above 288,000 shillings up to 15,000,000 shillings per year; a person may elect in writing to the Commissioner not to be subject to this tax; the Cabinet Secretary may make regulations by Gazette.

Dividends paid by resident companies are treated as income when payable; certain amounts are deemed dividends; dividends received by resident companies are generally not taxable unless the recipient controls less than 12.5% of the payer; dividends received by specified financial institutions are taxable.

If a dividend is paid out of gains or profits on which no tax was paid, the company that distributes the dividend must be charged tax on those gains or profits at the resident corporate rate in the year the dividend is distributed, except for income exempt under this Act.

Non-resident persons carrying on business in Kenya through a permanent establishment must pay tax on repatriated income for the year of income.

Pensions (resident and non-resident) and certain pension-related funds are treated as having accrued in or derived from Kenya for tax purposes, with apportionment rules where only part of a pension relates to services in Kenya.

Section 9. Income of certain non-resident persons deemed derived from Kenya Section 9(1) Where a non-resident person carries on the business of shipowner, charterer or air transport operator and any ship or aircraft owned or chartered by

Income specified in Part I of the First Schedule that accrued in or was derived from Kenya is exempt from tax to the extent specified; the Cabinet Secretary may, by notice in the Gazette, grant or withdraw such exemptions.

Interest on securities listed in Part II of the First Schedule is exempt from tax to the extent specified; the Cabinet Secretary may, by Gazette notice, exempt interest on loans charged on the Consolidated Fund or local authority revenues (where the income accrued in or was derived from Kenya), either generally or only for non-resident recipients.

Section 15 allows deductions for expenditure wholly and exclusively incurred in producing income, lists specific deductible items, permits carryforward of deficits for five succeeding years, and gives the Commissioner and Cabinet Secretary specified powers related to guidelines and extensions.

Lists categories of expenditures and losses that are not allowable as deductions for tax purposes and assigns the Commissioner a duty to prescribe computation and period for deemed interest.

For income computation, the value at which a farmer's opening and closing stock is taken into account is to be the value the Commissioner determines to be just and reasonable.

Section 17A has been repealed by Act No. 9 of 2000, s. 43.

Section 18 sets rules for treating certain gains or profits of non-resident persons and permanent establishments as income derived from Kenya and prescribes how such gains are to be ascertained.

If a resident conducts business with a related resident or certain non-residents located in a preferential tax regime and that business yields no or less gains than expected, the resident's gains from that business are to be deemed the amount that would have been expected if the business were with an independent person dealing at arm's length or if none of the parties were located in a preferential tax regime.

Sections 18C, 18D, 18E and 18F apply to returns for the year of income 2022 and subsequent years of income.

Multinational enterprise groups or resident constituent entities must notify the Commissioner by the last day of the group's reporting financial year whether they are the ultimate parent, a surrogate parent, or the identity and tax residence of the ultimate/surrogate parent.

Resident ultimate parent entities must file a country-by-country report with the Commissioner; an ultimate parent or constituent must also file a master file and local file as specified.

A person who fails to comply with sections 18C and 18D commits an offence and is subject to penalties under the Tax Procedures Act (Cap. 469B).

Section 18F provides definitions used in sections 18C–18E for terms related to multinational enterprise reporting, such as "country-by-country report", "constituent entity", "ultimate parent entity", "master file", and related terms.

This section sets rules for computing the gains or profits of insurance companies from insurance business for tax purposes, including treatment of life insurance separately and the items to include and deduct.

Section 19A sets how total income is ascertained for designated co-operative societies and designated primary societies, allows specified deductions of bonuses and dividends (subject to a cap), deems the income of credit-and-savings primary societies to specified aggregates, and gives the Commissioner power to determine written down values where not readily ascertainable.

Certain collective investment vehicles registered by the Commissioner are exempt from income tax, subject to conditions and limited by withholding tax on interest and dividends and by the First and Third Schedules.

Members’ clubs and trade associations are treated as carrying on a business, and their gross revenue receipts (excluding joining fees, welfare contributions and subscriptions) are treated as business income.

When a mortality table was not used to determine the purchase price, the Commissioner must use a table of mortality the Commissioner considers appropriate to compute expected payments.

Section 22A sets limits and rules for deductible contributions to registered pension or provident funds, specifies numeric caps (30% of pensionable income; KSh 360,000 or KSh 30,000 per month for part years), describes when funds may be transferred between registered funds, and treats NSSF contributions as contributions to a defined contribution registered fund.

Individuals not enrolled in a registered fund or public pension scheme may contribute to a registered individual retirement fund up to the deductible amounts specified in subsection (2).

This section was repealed by Act No. 8 of 2020, s. 6.

The Commissioner may, if satisfied the main purpose of a transaction was to avoid or reduce tax (including where the expected main benefit in the three years after completion was avoidance) and if he considers it just and reasonable, direct adjustments to counteract that avoidance.

The Commissioner may treat undistributed distributable income of a private company as dividends and may direct a charge on the company; the Commissioner must advise a company that asks whether he proposes action.

Income paid under a settlement for the benefit of a settlor's child is treated as the settlor's income for that year, with specified exceptions; the settlor (person who made the settlement) can recover tax paid from trustees and require the Commissioner to issue a certificate, and the Commissioner decides disputes about apportionment with a final decision.

Income received by persons under a settlement is deemed to be income of the settlor (with special rules for revocable settlements, use by related or controlled persons, and rights for settlor to recover tax).

Permits incorporated businesses with prior written approval to change their accounting year; requires written application six months before the intended date; requires the Commissioner to respond within three months; allows the Commissioner to treat accounting periods not equal to 12 months as income of the year the period ends; requires unincorporated businesses to use a 12-month period ending 31 December and prevents eligible persons from changing that date after 31 December 1998.

Sums received after a business stops are treated as income in the year received if not already included; sums paid after cessation that would have been deductible are deducted in the year paid or, if not then deductible, in the year the business ceased.

Companies that (a) operate under a Government special operating framework arrangement, (b) are incorporated to manufacture human vaccines or similar manufacturing/refining activities, and (c) have capital investment of at least ten billion shillings must be subject to the tax rate specified in that special operating framework arrangement with the Government.

The Commissioner must assess every person with taxable income promptly after the filing deadline.

Section 74 has been repealed.

The Commissioner may make instalment assessments after the deadline; a person who has paid instalment tax is deemed assessed on the amount paid; and the Commissioner may estimate income and assess if instalments are unpaid.

Section 74B was deleted by Act No. 29 of 2015, 2nd Sch.

Section 75 is deleted.

Section 75A has been repealed by Act No. 38 of 2016, s. 13.

Section 75B has been deleted by Act No. 29 of 2015, 2nd Schedule.

The Commissioner must not assess an employee for a year of income when the employee's only taxable income that year is emoluments and tax on those emoluments has already been recovered under section 37, except in specified circumstances.

The Commissioner must not assess a person on income already subject to withholding tax that is a final tax.

Section 77 has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 78 was deleted by Act No. 29 of 2015, 2nd Sch.

This section has been deleted.

Section 80 has been deleted.

Section 81 has been deleted by Act No. 29 of 2015, 2nd Sch.

Resident individuals with taxable income who file a return are entitled to personal relief, which is set off against tax at the rate and subject to the limitation in Head A of the Third Schedule; proportionate relief applies on arrival, departure, or death during a year, and special rules apply when no return is filed or where the Commissioner grants relief in an assessment.

A resident individual who receives taxable income is entitled to a tax relief called the personal relief.

Section 30A has been repealed by Act No. 12 of 2024, s. 10.

Provides conditions under which individuals or their employers qualify for insurance relief and requires insurers to recover relief from the surrender value and remit it to the Commissioner when a policy is surrendered before maturity.

A resident individual who proves that in a year of income they contributed to a post-retirement medical fund is entitled to a personal relief for that year called the post-retirement medical fund relief.

Section 32 has been deleted.

Section 33 has been repealed.

Tax on any income specified in this Act is charged at the rate set out in the Third Schedule; transfers of interest in a person are charged in accordance with the Ninth Schedule; and "person" excludes a partnership.

Section 34A was repealed by Act No. 8 of 1978, s. 9(k).

Section 35 lists categories of payments from which tax must be deducted by specified persons and sets procedural obligations for remittance, returns and certificates; it also gives the Cabinet Secretary powers to exempt payments or amend the Fourth Schedule.

Trustees paying annuities under a will or settlement must deduct tax from those annuities at the rate paid or payable on the income from which the annuity is paid, subject to enumerated exceptions and Commissioner authorisation for a lower or nil rate; trustees must also provide certificates when section 11(2)(a) applies.

Employers must deduct and account for tax from employee emoluments; when computing deductions employers must grant employees applicable deductions, reliefs and exemptions; tax deducted is treated as paid by the employee and set off against that employee's tax; failure to remit leads to collection and interest as if tax were due; an aggrieved employer may object in writing within thirty days.

Directors and officers of a company who are concerned with management are guilty of an offence if the company required to make deductions under sections 35, 36 or 37 fails to remit the deducted amount as required, unless they prove they did not know and took all reasonable steps; they face a fine between ten thousand and two hundred thousand shillings or up to two years' imprisonment, or both.

Section 38. Application to Government

A Kenyan citizen who is taxable in Kenya on employment income or income under section 10(1)(e) that was also taxed abroad may, if they prove to the Commissioner they paid foreign tax, obtain a credit (set-off) against Kenyan tax, subject to the credit not exceeding the Kenyan tax payable on that income.

Section 39A was repealed by Act No. 8 of 2009, s. 26.

Employers who hire at least ten university or TVET graduates as apprentices for six to twelve months in any year of income are eligible for a tax rebate in the year after the year of engagement; the Cabinet Secretary may make regulations by notice in the Gazette to implement this section.

Section 40 was repealed.

Tax treaties with other countries apply to Kenyan income tax, but treaty benefits (exemption, exclusion or reduced rate) are denied to a resident of the other state if 50% or more of the person's underlying ownership is held by persons who are not residents of that other state, except for companies listed on that state's stock exchange.

The Cabinet Secretary may, by notice in the Gazette and from time to time, declare that arrangements with foreign governments for exchanging tax information shall have effect in relation to income tax.

Rules for allowing foreign tax credits under a special arrangement: compute tax with the foreign income included; apportion tax where foreign tax rates vary; credit limited to the lesser of apportionment-based tax or foreign tax; taxpayers may elect in writing to forgo the credit for a year; adjustments allow assessments or claims within six years.

A claim for an allowance by way of credit under this Part must be made to the Commissioner within six years from the end of the year of income to which it relates, subject to section 42(7).

If a person's income is chargeable to tax, that income is assessed on that person and the tax charged on that person.

Section 45 has been repealed by Act No. 4 of 2023, s. 22.

Income of an incapacitated person is assessed and taxed in the name of the person’s trustee, guardian, curator, committee or court-appointed receiver, in the same manner and to the same amount as if the person were not incapacitated.

Income of a non-resident person shall be assessed on, and the tax charged on, that person either in their own name or in the name of certain representatives or agents; masters of ships or captains of aircraft owned or chartered by a non-resident who is chargeable under section 9 are deemed agents for this section; this does not make a non-resident assessable in the name of a broker or similar agent who is not the normal agent.

Income accrued to or received before a person's death that would have been taxed on them is to be assessed and charged to their executors or administrators; amounts received by executors that would have been the deceased's income are treated as their income and taxed on them; if executors distribute the estate before a change in tax rate, they are not liable for the increased tax.

Each trustee is jointly and severally liable to pay any tax charged in an assessment.

A person in whose name another's income is assessable must perform all actions required of a taxable person and pay tax charged on them from any assets of that other person in their possession on or obtained after service of a notice of assessment.

A person who is responsible for paying another person's tax may retain enough money received on that person's behalf to cover the tax and is indemnified for those payments.

Section 51A has been repealed by Act No. 38 of 2016, s. 11.

The Commissioner may require persons (including executors, liquidators, bankrupts, or precedent partners) by written notice to furnish returns of income; persons chargeable who were not required to return must notify the Commissioner within 14 days after the four‑month period, with specified employee exceptions.

Section 52A deleted by Act No. 8 of 1996, s. 40.

Individuals and other persons must file a return of income with a self-assessment to the Commissioner within six months after their year of income; companies must also include dividend assessments on untaxed gains and pay the tax by the self-assessment due date; the Commissioner prescribes the form.

Section 53 was repealed by Act No. 16 of 2014, s. 13.

Persons carrying on a business who file a return of income must include supporting accounts and certificates; where accounts were prepared or examined by a professional person they must include signed copies and certificates, and the Commissioner may require further certification within at least 30 days.

Persons carrying on a business must keep records of receipts, expenses, goods bought and sold, accounts, books, deeds, contracts and vouchers adequate for computing tax.

Section 54B has been repealed by Act No. 9 of 2025, s. 22.

Companies and persons carrying on business must keep business books and related documents for at least ten years; the Commissioner may, by written notice, require persons chargeable with tax to keep records in specified forms or languages.

Section 56 deleted by Act No. 29 of 2015, 2nd Sch.

The Commissioner may require employers or persons making payments to provide a written return within a reasonable time (not less than 30 days) listing payees and amounts, and pension recipients and amounts; the Commissioner may exclude classes by written notice.

The Commissioner may require any person carrying on business to furnish, within a reasonable time (not less than thirty days from service), a return of specified payments; the return must state payees, addresses, amounts and other particulars.

The Commissioner may require an occupier to provide a return stating the owner/lessor details and the rent or other consideration, within a reasonable time of at least thirty days from service of the notice.

The Commissioner may require accommodation providers to furnish, within a reasonable time (not less than thirty days after service), a return listing every lodger or inmate resident on the date of the notice who has been resident throughout the preceding three months (except temporary absences).

The Commissioner may require persons who hold income on behalf of others to furnish a return stating the income and the owner's name and address.

The Commissioner may require a person, by written notice, to provide within a reasonable time (not less than thirty days) a return containing a full and true statement of income claimed to be exempt and particulars the Commissioner specifies.

The Commissioner may, by written notice, require the trustees of (or a party to) a settlement referred to in sections 25 or 26 to provide him with a return within a reasonable time, not less than thirty days from service, containing particulars he considers necessary for those sections.

The Commissioner may, by written notice, require trustees of a registered pension fund or scheme and employers who contribute to such a fund to furnish him with a return within a reasonable time, not less than thirty days from service, listing specified particulars.

The Commissioner may require, by written notice, persons who pay annuity benefits to provide a return listing payees and amounts; payers must provide that return within a reasonable time of at least thirty days from service of the notice.

The Commissioner may, by written notice, require resident companies that pay dividends to provide within a reasonable time (not less than 30 days from service) a return with shareholder names, addresses and particulars of amounts and tax deducted.

The Commissioner may, by written notice, require businesses (notably banks) that receive or retain money on which interest is payable to furnish returns of interest paid or credited for a specified year, within a reasonable time not less than 30 days; the year specified cannot end more than three years before service of the notice.

The Commissioner may, by written notice, require a building society to furnish a return of dividends paid or credited in a specified year, with minimum timing and content requirements.

Section 69 has been deleted.

Section 70 was deleted by Act No. 29 of 2015, 2nd Schedule.

Section 71 is deleted (Deleted by Act No. 29 of 2015, 2nd Sch.).

Section 72 has been repealed.

Section 72A has been deleted by Act No. 29 of 2015, 2nd Schedule.

Section 72B was repealed by Act No. 9 of 2025, s. 23.

Section 72C was repealed by Act No. 9 of 2025, s. 24.

Section 72D was repealed by Act No. 23 of 2019, s. 13.

Section 82 was repealed by Act No. 40 of 2013, s. 42.

This section has been repealed.

Section 84 has been deleted: "[Deleted by Act No. 29 of 2015, 2nd Sch.]"

Section 85 has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 86 was deleted by Act No. 29 of 2015, 2nd Sch.

Section 87 deleted by Act No. 29 of 2015, 2nd Sch.

Section 88 has been deleted.

Section 89 deleted by Act No. 29 of 2015, 2nd Sch.

Section 90 has been deleted.

Section 91 has been deleted.

Section 91A has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 100 has been deleted by Act No. 9 of 2000, s. 53.

Section 101 deleted by Act No. 29 of 2015, 2nd Sch.

Section 102 has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 103 has been deleted.

The Commissioner may issue a certificate to Customs identifying a person and amount of tax due; on receipt Customs must refuse clearance to any ship or aircraft owned by that person until the tax is paid. The proper officer or other authority is protected from civil or criminal proceedings for refusing clearance, and detention does not remove the owner's liability for harbour or airport dues.

Section 105 was repealed by Act No. 38 of 2016, s. 15.

A person who was contingently entitled to accumulated trust income and proves the contingency to the Commissioner's satisfaction may claim repayment of the excess tax paid by the trust, subject to a deduction for tax already repaid; the claim must be made in writing to the Commissioner within six years after the end of the year of income in which the contingency occurred.

Specifies when tax charged in an assessment is due and payable, including separate deadlines for individuals, persons other than individuals, instalment assessments, provisional tax after notification, and special treatment for companies being wound up.

Tax under self-assessment is due and payable on the last day of the fourth month following the end of the year of income or accounting period.

Section 93 has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 94 deleted by Act No. 29 of 2015, 2nd Sch.

Section 95 deleted by Act No. 29 of 2015, 2nd Sch.

Section 95A was repealed by Act No. 4 of 1993, s. 56.

Section 96.[Deleted by Act No. 4 of 1993, s. 56.]

Section 96A has been deleted by Act No. 29 of 2015, 2nd Sch.

When a person dies, any tax unpaid in an assessment made upon him, or tax charged to his executors under section 48, becomes a debt that is due and payable out of his estate.

Section 98 has been repealed.

Section 99 is repealed by Act No. 9 of 2000, s. 53.

If a person is guilty of an offence under this Act for which no other penalty is specified, they are liable to a fine up to one hundred thousand shillings, or to imprisonment up to six months, or both.

Section 108 was repealed by Act No. 15 of 2017, s. 14.

The section makes it an offence for any person, without reasonable excuse, to fail to comply with various tax-related obligations (for example, furnishing returns, giving notices or certificates, keeping and preserving records, answering questions, supplying certificates and identifying numbers).

Section 110 has been deleted.

Section 111 has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 112 has been deleted.

Section 113.[Deleted by Act No. 29 of 2015, 2nd Sch.]

Section 114 has been deleted.

Section 115 has been deleted.

This section has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 117 has been deleted.

Section 118 was deleted by Act No. 29 of 2015, 2nd Sch.

Section 119 has been deleted by Act No. 29 of 2015, 2nd Schedule.

Section 120 deleted by Act No. 29 of 2015, 2nd Sch.

Section 121 was deleted by Act No. 29 of 2015, 2nd Sch.

This section has been deleted.

This section has been deleted by Act No. 29 of 2015, 2nd Sch.

This section has been deleted.

This section has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 123C has been deleted.

Section 124 deleted by Act No. 29 of 2015, 2nd Sch.

Section 125 was deleted by Act No. 29 of 2015, 2nd Schedule.

Section 126 has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 127 has been deleted.

Section 127A has been deleted by Act No. 29 of 2015, 2nd Schedule.

Section 127B deleted by Act No. 29 of 2015, 2nd Sch.

Section 127C.[Deleted by Act No. 29 of 2015, 2nd Sch.]

Section 127D has been deleted.

Section 127E deleted by Act No. 29 of 2015, 2nd Sch.

Section 128 deleted by Act No. 29 of 2015, 2nd Sch.

Section 129 deleted by Act No. 29 of 2015, 2nd Sch.

The Cabinet Secretary may make rules to prescribe anything required under this Act and to carry out its provisions.

Section 131 has been repealed.

Section 132 has been deleted by Act No. 29 of 2015, 2nd Sch.

Section 133 sets out which prior Acts are repealed or continue in force for transitional purposes, specifies that certain prior Acts cease to have effect from 1st January, 1974, preserves application of specified provisions for income year 1973 and earlier, and requires that investment allowances as at commencement be claimed on a straight-line basis.