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.
- Jurisdiction
- Kenya
- Instrument
- Act or statute
- Citation
- Cap. 470
- Version
- 1 Jul 2025
- Language
- en
- Official source
- View official record ↗
Source attribution: Source: Kenya Law
Statute overview
About this statute
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. Advance tax is payable on every commercial vehicle from 1 January 1996 at the rates in the Third Schedule.
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Provisions of Income Tax Act
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Part I
PRELIMINARY
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PRELIMINARY - 1. Short title and commencement
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.
Section 1. Short title and commencement Section This Act may be cited as the Income Tax Act, and shall, subject to the Sixth Schedule, come into operation on 1 st January, 1974, and apply to assessments for the year of income 1974 and subsequent years of income. - 2 Verify source ↗
PRELIMINARY - 2. Interpretation
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 2. Interpretation Section 2(1)(a) interest earned on an account held jointly by a husband and wife shall be deemed to be qualifying interest; and Section 2(1)(b) in the case of housing bonds, the aggregate amount of interest shall not exceed three hundred thousand shillings; Section 2(1A) Where under the provisions of this Act, any accounts, books of accounts or other records are required to be kept, such accounts, books or other records may be kept in written form or on micro-film, magnetic tape or any other form of mechanical or electronic data retrieval mechanism. Section 2(2) Deleted by Act No. 9 of 2025, s. 2.
Part II
IMPOSITION OF INCOME TAX
- 10 Verify source ↗
IMPOSITION OF INCOME TAX - 10. Income from management or professional fees, royalties, interest and rents
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.
Section 10. Income from management or professional fees, royalties, interest and rents Section 10(1)(a) a management or professional fee or training fee; Section 10(1)(b) a royalty or natural resource income; Section 10(1)(c) interest and deemed interest; Section 10(1)(d) the use of property; Section 10(1)(e) an appearance at, or performance in, any place (whether public or private) for the purpose of entertaining, instructing, taking part in any sporting event or otherwise diverting an audience; or Section 10(1)(f) an activity by way of supporting, assisting or arranging an appearance or performance referred to in paragraph (e) of this section; Section 10(1)(g) withdrawals; Section 10(1)(h) deleted by Act No. 16 of 2014, s. 6(b) ; Section 10(1)(i) deleted by Act No. 23 of 2019, s. 6(a) ; Section 10(1)(j) an insurance or reinsurance premium; Section 10(1)(k) sales promotion, marketing, advertising services, and transportation of goods (excluding air and shipping transport services; Section 10(1)(l) supply of goods to a public entity; Section 10(1)(m) making or facilitating payment over a digital market place; Section 10(2) A net gain referred to in section 3(2)(g) is deemed to be income that accrued in or was derived from Kenya. Section 10(3) Where a payment has been made to a non-resident person, withholding tax paid thereon shall not be refundable or available for deduction against the income where an audit adjustment has been made in respect of such payment. Section 10(4) Where a resident or a non-resident person, being the owner or operator of a digital marketplace or platform, makes or facilitates payment in respect of digital content monetisation, property or services, the amount thereof shall be deemed to be income which accrued in or was derived from Kenya. Section 10(5) In this section, “platform” means a digital platform or website that facilitates the exchange of a short-term engagement, freelance or provision of a service, between a service provider, who is an independent contractor or freelancer, and a client or customer. - 11 Verify source ↗
IMPOSITION OF INCOME TAX - 11. Trust income, etc., deemed income of trustee, beneficiary, etc.
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.
Section 11. Trust income, etc., deemed income of trustee, beneficiary, etc. Section 11(1) Any income chargeable to tax under this Act and received by any person in his capacity as a trustee, executor or administrator, shall be deemed to be income of that trustee, executor or administrator as the case may be. Section 11(2) Where an amount included in the income of the trustee, executor or administrator under subsection (1) consists of qualifying dividends or qualifying interest, that amount shall be deemed to be an amount chargeable to tax under section 3(2)(b) and not section 3(2)(e). Section 11(3) Any amount, received as income in a year of income by any person beneficially entitled thereto from any trustee in his capacity as such, or paid out of income by the trustee on behalf of such person, shall, subject to this Act, be deemed to be income of such, and to the extent that any such amount is received or so paid out of income chargeable to tax under this Act on that trustee it shall be deemed to be income– (a) in any case other than that of an annuity directed to be paid free of tax– (i) of such gross amount as would, after deduction of tax at the rate paid or payable on such income by such trustee, be equal to the amount received or so paid; and (ii) that has borne tax at such rate; (b) in the case of an annuity directed to be paid free of tax, of such gross amount as is equal to the amount of such annuity together with the amount of the sums paid by the trustee to the annuitant to meet the liability of the annuitant to tax on such annuity. Section 11(3A) Deleted by Act No. 4 of 2023, s. 8 Section 11(4) The trustee, executor or administrator may designate a part or all of the amounts paid by him to a person that is chargeable to tax under subsection (2) to be qualifying dividends or qualifying interest and, in that case, such designated amount shall be deemed to have been already tax paid. Section 11(5) The cumulative totals, at any time, of the amounts designated up to that time by a trustee under subsection (4) as qualifying dividends or qualifying interest shall not exceed the cumulative totals of qualifying dividends or qualifying interest respectively, received by the trustee, in his capacity as a trustee, after the 31 st December, 1990 and up to that time. [Act No. 8 of 1991, s. 56, Act No. 8 of 2021, s. 5, Act No. 4 of 2023, s. 8] - 12 Verify source ↗
IMPOSITION OF INCOME TAX - 12. Imposition of instalment tax
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.
Section 12. Imposition of instalment tax Section 12(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 1 st 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 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. Section 12(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 to the 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 per cent. Section 12(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, 17A, 35 or 37. Section 12(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. Section 12(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. [Act No. 14 of 1982, s. 18, Act No. 10 of 1988, s. 30, Act No. 10 of 1990, s. 43, Act No. 8 of 1991, s. 57, Act No. 13 of 1995, s. 77, Act No. 8 of 1997, s. 31, Act No. 38 of 2016, s. 5, Act No. 8 of 2020, s. 3.] - 12A Verify source ↗
IMPOSITION OF INCOME TAX - 12A. Imposition of advance tax
Advance tax is payable on every commercial vehicle from 1 January 1996 at the rates in the Third Schedule.
Section 12A. Imposition of advance tax Section 12A(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. Section 12A(2) The Commissioner may prescribe the conditions and procedures governing the payment of advance tax. [Act No. 13 of 1995, s. 78, Act No. 8 of 1996, s. 30, Act No. 4 of 1999, s. 33, Act No. 10 of 2006, s. 19, Act No. 10 of 2010, s. 22.] - 12B Verify source ↗
IMPOSITION OF INCOME TAX - 12B. Imposition of fringe benefit Tax
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.
Section 12B. Imposition of fringe benefit Tax Section 12B(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. Section 12B(2) For the purpose of this section, the taxable value of a fringe benefit shall be– in the case of a loan provided after 11th 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: Provided that where the term of the loan extends for a period beyond the date of termination of employment, the provisions of this section shall continue to apply for as long as the loan remains unpaid. Section 12B(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. Section 12B(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. Section 12B(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. Section 12B(6) For the purpose of 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. [Act No. 5 of 1998, s. 31, Act No. 6 of 2001, s. 45.] - 12C Verify source ↗
IMPOSITION OF INCOME TAX - 12C. Turnover and presumptive tax
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 12C. Turnover and presumptive tax Section 12C(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 shillings but does not exceed or is not expected to exceed twenty-five million shillings during any year of income. Section 12C(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. Section 12C(3) Notwithstanding subsection (1), turnover tax shall not apply to– (a) rental income; (b) management or professional or training fees; or (c) Deleted by Act No. 2 of 2020, Sch ; (d) any income which is subject to a final withholding tax under this Act. Section 12C(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. Section 12C(5) Deleted by Act No. 2 of 2020, Sch. Section 12C(6) Deleted by Act No. 2 of 2020, Sch. Section 12C(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 (Cap. 469A). Section 12C(8) For purposes of this section "tax period" means a calendar month. [Act No. 10 of 2006, s. 20, Act No. 8 of 2008, s. 29, Act No. 10 of 2018, s. 6, Act No. 23 of 2019, s. 7, Act No. 2 of 2020, Sch, Act No. 4 of 2023, s. 9] - 12D Verify source ↗
IMPOSITION OF INCOME TAX - 12D.[Repealed by Act No. 9 of 2025, s. 6]
Section 12D repealed by Act No. 9 of 2025, s. 6.
Section 12D.[Repealed by Act No. 9 of 2025, s. 6] - 12E Verify source ↗
IMPOSITION OF INCOME TAX - 12E. Significant economic presence tax
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 12E. Significant economic presence tax Section 12E(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. Section 12E(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. Section 12E(3)(a) to a non-resident person who offers the services through a permanent establishment; Section 12E(3)(b) to an income chargeable under section 9(2) or section 10; or Section 12E(3)(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; Section 12E(3)(d) deleted by Act No. 9 of 2025, s. 7(b) . Section 12E(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. Section 12E(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. Section 12E(6) The Cabinet Secretary may make Regulations for the better implementation of this section within six months from the commencement of this provision. - 12F Verify source ↗
IMPOSITION OF INCOME TAX - 12F.[Repealed by Act No. 9 of 2025, s. 8]
Section 12F was repealed by Act No. 9 of 2025, s. 8.
Section 12F.[Repealed by Act No. 9 of 2025, s. 8] - 12G Verify source ↗
IMPOSITION OF INCOME TAX - 12G. Minimum top-up tax
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.
Section 12G. Minimum top-up tax Section 12G(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. Section 12G(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. Section 12G(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. Section 12G(3A) Minimum top-up tax shall be payable by the end of the fourth month after the end of the year of income. Section 12G(4)(a) to a public entity that is not engaged in business; Section 12G(4)(b) to a person whose income is exempt from tax under paragraph 10 of the First Schedule; Section 12G(4)(c) to a pension fund and the assets of that pension fund; Section 12G(4)(d) to a real estate investment vehicle that is an ultimate parent entity; Section 12G(4)(e) to a non-operating investment holding company; Section 12G(4)(f) to an investment fund that is an ultimate parent entity; Section 12G(4)(g) to a sovereign wealth fund; or Section 12G(4)(h) to an intergovernmental or supranational organisation including a wholly owned agency or organ of the intergovernmental or supranational organisation. Section 12G(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. - 3 Verify source ↗
IMPOSITION OF INCOME TAX - 3. Charge of tax
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.
Section 3. Charge of tax Section 3(1) Subject to, and in accordance with, this Act, a tax to be known as income tax shall be charged for each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya. Section 3(2) Subject to this Act, income upon which tax is chargeable under this Act is income in respect of– (a) gains or profits from– (i) any business, for whatever period of time carried on; (ii) any employment or services rendered; (iii) any right granted to any other person for use or occupation of property; (b) dividends or interest; (c) (i) a pension, charge or annuity; and (ii) any withdrawals from, or payments out of, a registered pension fund or a registered provident fund or a registered individual retirement fund; and (iii) any withdrawals from a registered home ownership savings plan; (ca) income accruing from a business carried out over the internet or an electronic network including through a digital marketplace; (d) deleted by Act No. 14 of 1982, s. 17 ; (e) an amount deemed to be the income of any person under this Act or by rules made under this Act; (f) gains accruing in the circumstances prescribed in, and computed in accordance with, the Eighth Schedule; (g) subject to section 15(5A), the net gain derived on the disposal of an interest in a person, if the interest derives twenty per cent or more of its value, directly or indirectly, from immovable property in Kenya; (h) a natural resource income; and (i) gains from financial derivatives, excluding financial derivatives traded at the Nairobi Securities Exchange. Section 3(2A) The Cabinet Secretary shall make regulations to provide for the mechanisms of implementing the provisions of subsection (2)(ca). Section 3(3) For the purposes of this section– (a) "person" does not include a partnership; (b) a bonus or interest paid by a designated cooperative society, as defined under section 19A, shall be deemed to be a dividend; (ba) "digital marketplace" means an online or electronic platform which enables users to sell or provide services, goods or other property to other users; (c) for the purposes of subsection (2)(g) and section 15(5A) – (i) deleted by Act No. 4 of 2023, s. 3. (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. [Act No. 13 of 1975, s. 2, Act No. 8 of 1978, s. 9, Act No. 14 of 1982, s. 17, Act No. 10 of 1990, s. 39, Act No. 8 of 1991, s. 53, Act No. 9 of 1992, s. 36, Act No. 4 of 1993, s. 35, Act No. 13 of 1995, s. 74, Act No. 57 of 2012, s. 14, Act No. 16 of 2014, s. 3, Act No. 23 of 2019, s. 3, Act No. 8 of 2021, s. 3, Act No. 22 of 2022, s. 3, Act No. 4 of 2023, s. 3.] - 4 Verify source ↗
IMPOSITION OF INCOME TAX - 4. Income from businesses
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.
Section 4. Income from businesses Section For the purposes of section 3(2)(a)(i)– (a) where a business is carried on or exercised partly within and partly outside Kenya by a resident person, the whole of the gains or profits from such business shall be deemed to have accrued in or to have been derived from Kenya; (b) the gains or profits of a partner from a partnership shall be the sum of– (i) any remuneration payable to him by the partnership together with any interest on capital so payable, less any interest on capital payable by him to the partnership; and (ii) his share of the total income of the partnership, calculated after deducting the total of any remuneration and interest on capital payable to any partner by the partnership and after adding any interest on capital payable by any partner to the partnership, and where the partnership makes a loss, calculated in the manner set out in subparagraph (ii), his gains or profits shall be the excess, if any, of the amount set out in subparagraph (i) over his share of that loss; Provided that in computing the total income of a partnership, there shall be deducted the cost of medical expenses or medical insurance cover paid by the partnership for the benefit of any partner, subject to a limit of one million shillings per year; (c) any sum received under any insurance against loss of profits, or received by way of damages or compensation for loss of profits, shall be deemed to be gains or profits of the year of income in which it is received; (d) where in computing gains or profits for any year of income any expenditure or loss has been deducted, or a deduction in respect of any reserve or provision to meet any liability has been made, and in a later year of income the whole or part of such expenditure or loss is recovered, or the whole or part of that liability is released, or the retention in whole or in part of such reserve or provision has become unnecessary, then any sum so recovered or released or no longer required as a reserve or provision shall be deemed to be gains or profits of the year of income in which it is recovered or released or no longer required: Provided that if the person so chargeable with tax in respect of any such sum requests the Commissioner in writing to exercise his power under this proviso, the Commissioner may divide the sum into so many equal portions, not exceeding six, as he may consider fit, and one such portion shall be taken into account in computing the gains or profits of such person for the year of income in respect of which such sum is so deemed to be gains or profits and for each of the previous years of income corresponding to the number of portions; (e) where under the Second Schedule it is provided that a balancing charge shall be made, or a sum shall be treated as a trading receipt, for any year of income, the amount thereof shall be deemed to be gains or profits of that year of income; (f) in computing the gains or profits of a "licensee" "contractor" or "subcontractor" as defined in the Ninth Schedule, the provisions of that Schedule shall apply. [Act No. 18 of 1984, s. 2, Act No. 8 of 2009, s. 17, Act No. 4 of 2012, s. 10, Act No. 16 of 2016, s. 4.] - 4A Verify source ↗
IMPOSITION OF INCOME TAX - 4A. Income from businesses where foreign exchange loss or gain is realized
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.
Section 4A. Income from businesses where foreign exchange loss or gain is realized Section 4A(1) A foreign exchange gain or loss realized on or after 1st January, 1989 in a business carried on in Kenya shall be taken into account as a trading receipt or deductible expenses in computing the gains and profits of that business for the year of income in which that gain or loss was realized: Provided that– (i) no foreign exchange gain or loss shall be taken into account to the extent that taking that foreign exchange gain or loss into account would duplicate the amounts of gain or loss accrued in any prior year of income; and (ii) the foreign exchange loss shall be deferred (and not taken into account) and claimed over a period of not more than five years from the date the loss was realized by a person whose gross interest paid or payable to a non-resident person exceeds thirty per cent of the person’s earnings before interest, taxes, depreciation, and amortization in any year of income; Section 4A(1A) Deleted by Act No. 4 of 2023, s. 4(b). Section 4A(2) The amount of foreign exchange gain or loss shall be calculated in accordance with the difference between (a times r 1 ) and (a times r 2 ) where– "a" is the amount of foreign currency received, paid or otherwise computed with respect to a foreign currency asset or liability in the transaction in which the foreign exchange gain or loss is realized; r 1 is the applicable rate of exchange for that foreign currency ("a") at the date of the transaction in which the foreign exchange gain or loss is realized; r 2 is the applicable rate of exchange for that foreign currency ("a") at the date on which the foreign currency asset or liability was obtained or established or on the 30th December, 1988, whichever date is the later. Section 4A(3) For the purposes of this section, no foreign exchange loss shall be deemed to be realized where a foreign currency asset or liability is disposed of or satisfied and within a period of sixty days a substantially similar foreign currency asset or liability is obtained or established. Section 4A(4) For the purposes of this section– "control" deleted by Act No. 8 of 2021, s. 4; "company" does not include a bank or a financial institution licensed under the Banking Act (Cap. 488), or non-deposit taking microfinance businesses under the Microfinance Act (Cap. 493C), entities licensed under the Hire Purchase Act (Cap. 507) and persons exempt under section 16(2)(j)(iii); "all loans" shall have the meaning assigned in section 16(3); "foreign currency asset or liability" means an asset or liability denominated in, or the amount of which is otherwise determined by reference to, a currency other than the Kenya Shilling. - 4B Verify source ↗
IMPOSITION OF INCOME TAX - 4B. Export processing zone enterprise
If a business is carried on by an export processing zone enterprise, the Eleventh Schedule applies.
Section 4B. Export processing zone enterprise Section Where a business is carried on by an export processing zone enterprise, the provisions of the Eleventh Schedule shall apply. [Act No. 10 of 1990, s. 40.] - 5 Verify source ↗
IMPOSITION OF INCOME TAX - 5. Income from employment, etc.
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.
Section 5. Income from employment, etc. Section 5(1)(a) a person who is, or was at the time of the employment or when the services were rendered, a resident person in respect of any employment or services rendered by him in Kenya or outside Kenya; or Section 5(1)(b) a non-resident person in respect of any employment with or services rendered to an employer who is resident in Kenya or the permanent establishment in Kenya of an employer who is not so resident, Section 5(2)(a) where any such amount is received in respect of a year of income which expired earlier than four years prior to the year of income in which it was received, or prior to the year of income in which the employment or services ceased, if earlier, it shall be deemed to be income of the year of income which expired five years prior to the year of income in which it was received, or prior to the year of income in which the employment or services ceased as the case may be; and Section 5(2)(a)(i) where any such amount is received in respect of a year of income which expired earlier than four years prior to the year of income in which it was received, or prior to the year of income in which the employment or services ceased, if earlier, it shall be deemed to be income of the year of income which expired five years prior to the year of income in which it was received, or prior to the year of income in which the employment or services ceased as the case may be; and Section 5(2)(a)(ii) where the Commissioner is satisfied that subsistence, travelling, entertainment or other allowance represents solely the reimbursement to the recipient of an amount expended by him wholly and exclusively in the production of his income from the employment or services rendered then the calculation of the gains or profits of the recipient shall exclude that allowance or expenditure; Section 5(2)(a)(iii) notwithstanding the provisions of subparagraph (ii), where such amount is received by an employee as payment of subsistence, travelling, entertainment or other allowance, in respect of a period spent outside his usual place of work while on official duties, the first ten thousand shillings per day expended by him for the duration of that period shall be deemed to be reimbursement of the amount so expended and shall be excluded in the calculation of his gains or profits; and Section 5(2)(a)(iv) notwithstanding the provisions of subparagrapgh (ii), where such an amount is received by an employee as payment of travelling allowance to perform official duties, the standard mileage rate approved by the Automobile Association of Kenya shall be deemed to be reimbursement of the amount so expended and shall be excluded in the calculation of the employee’s gains and profits; Section 5(2)(b) save as otherwise expressly provided in this section, the value of a benefit, advantage, or facility of whatsoever nature the aggregate value whereof is not less than sixty thousand shillings granted in respect of employment or services rendered; Section 5(2)(c) where the contract is for a specified term, any amount received as compensation on the termination of the contract shall be deemed to have accrued evenly over the unexpired period of the contract; Section 5(2)(c)(i) where the contract is for a specified term, any amount received as compensation on the termination of the contract shall be deemed to have accrued evenly over the unexpired period of the contract; Section 5(2)(c)(ii) where the contract is for an unspecified term and provides for compensation on the termination thereof, the compensation shall be deemed to have accrued in the period immediately following the termination at a rate equal to the rate per annum of the gains or profits from the contract received immediately prior to termination; Section 5(2)(c)(iii) where the contract is for an unspecified term and does not provide for compensation on the termination thereof, any compensation paid on the termination of the contract shall be deemed to have accrued evenly in the three years immediately following such termination; Section 5(2)(d) any balancing charge under Part II of the Second Schedule; Section 5(2)(e) the value of premises provided by an employer for occupation by his employee for residential purposes; Section 5(2)(f) to a registered or unregistered pension scheme, pension fund, or individual retirement fund; or Section 5(2)(f)(i) to a registered or unregistered pension scheme, pension fund, or individual retirement fund; or Section 5(2)(f)(ii) for group life policy cover, unless such a cover confers a benefit to the employee or any of his dependants. Section 5(2)(fa) club entrance and subscription fees allowed against the employer’s income; Section 5(2)(g) deleted by Act No. 6 of 1994, s. 34. Section 5(2A)(a) the difference between the interest that would have been payable on the loan received if calculated at the prescribed rate of interest and the actual interest paid on the loan; and Section 5(2A)(a)(i) the difference between the interest that would have been payable on the loan received if calculated at the prescribed rate of interest and the actual interest paid on the loan; and Section 5(2A)(a)(ii) zero: Section 5(2A)(b) For the purposes of this subsection– "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 five per cent of the share capital or voting power of that company; "market lending rates" means the average 91-day treasury bill rate of interest for the previous quarter; "prescribed rate of interest" means the following: (i) in the year of income commencing on the 1st January, 1990, 6 per cent; (ii) in the year of income commencing on the 1st January, 1991, 8 per cent; (iii) in the year of income commencing on the 1st January, 1992, 10 per cent; (iv) in the year of income commencing on the 1st January, 1993, 12 per cent; (v) in the year of income commencing on the 1st January, 1994, 15 per cent; and (vi) in the year of income commencing on or after the 1st January, 1995, 15% or such interest rate based on the market lending rates as the Commissioner may from time to time prescribe, to cover a period of not less than six months but not more than one year, whichever is the lower. "relative of a director or an employee" means- (i) his spouse; (ii) his son, daughter, brother, sister, uncle, aunt, nephew, niece, stepfather, step-mother, step-child, or in the case of an adopted child his adopter or adopters; or (iii) the spouse of any such relative as is mentioned in subparagraph (ii). Section 5(2B)(a) such value as the Commissioner may, from time to time, determine; and Section 5(2B)(b) where such vehicle is hired or leased from a third party, the employee shall be deemed to have received a benefit in that year of income equal to the cost of hiring or leasing; or Section 5(2B)(b)(i) where such vehicle is hired or leased from a third party, the employee shall be deemed to have received a benefit in that year of income equal to the cost of hiring or leasing; or Section 5(2B)(b)(ii) where an employee has restricted use of such motor vehicle, the Commissioner shall, if satisfied of that fact upon proof by the employee, determine a lower rate of benefit depending on the usage of the motor vehicle. Section 5(2C)(a) in the 1996 year of income, 1% of the initial capital expenditure on the vehicle by the employer; Section 5(2C)(b) in the 1997 year of income, 1.5% of the initial capital expenditure on the vehicle by the employer; and Section 5(2C)(c) in 1998 and subsequent years of income, 2% of the initial expenditure on the vehicle by the employer. Section 5(3)(a) in the case of a director of a company, other than a whole time service director, an amount equal to the higher of fifteen per centum of his total income excluding the value of those premises and income which is chargeable under section 3(2)(f), the market rental value and the rent paid by the employer; Section 5(3)(b) in the case of a whole time service director, an amount equal to the higher of fifteen per centum of the gains or profits from his employment, excluding the value of those premises, and income which is chargeable under section 3(2)(f), the market rental value and the rent paid by the employer; Section 5(3)(c) "plantation" shall not include a forest or timber plantation; and Section 5(3)(c)(i) "plantation" shall not include a forest or timber plantation; and Section 5(3)(c)(ii) "agricultural employee" shall not include a director other than a whole time service director; Section 5(3)(d) where the premises are provided under an agreement with a third party which is not at arm’s length, the value of the premises determined under this subsection shall be the fair market rental value of the premises in that year, or the rent paid by the employer, whichever is the higher; or Section 5(3)(d)(i) where the premises are provided under an agreement with a third party which is not at arm’s length, the value of the premises determined under this subsection shall be the fair market rental value of the premises in that year, or the rent paid by the employer, whichever is the higher; or Section 5(3)(d)(ii) where a person occupies premises for part only of a year of income, the value ascertained under the foregoing provisions shall be reduced by that proportion which is just and reasonable having regard to the period of occupation and the yearly rate of gains or profits from employment; Section 5(4)(a) the expenditure on passages between Kenya and any place outside Kenya borne by employer: Provided that this paragraph shall not apply to expenditure other than expenditure on the provision of passages for the benefit of an employee recruited or engaged outside Kenya and who is in Kenya solely for the purpose of serving the employer and is not a citizen of Kenya; Section 5(4)(aa) this paragraph shall cease to apply on the 1st July, 2015; Section 5(4)(aa)(i) this paragraph shall cease to apply on the 1st July, 2015; Section 5(4)(aa)(ii) the period of vacation shall not exceed seven days; and Section 5(4)(aa)(iii) the term "employee" shall include the immediate family members of the employee; Section 5(4)(b) in the case of a full-time employee or his beneficiaries (which expression includes a whole time service director, or a director who controls more than five per cent of the share capital or voting power of a company) the value of any medical services provided by the employer or medical insurance provided by an insurance provider approved by the Commissioner of Insurance and paid for by the employer on behalf of a full-time employee or his beneficiaries: Provided that in the case of a director other than a whole time service director, the value of the services shall be subject to such limit as the Cabinet Secretary may, from time to time, prescribe; Section 5(4)(c) to an unregistered pension scheme, unregistered provident fund or unregistered individual retirement fund; or Section 5(4)(c)(i) to an unregistered pension scheme, unregistered provident fund or unregistered individual retirement fund; or Section 5(4)(c)(ii) to a registered pension scheme, a registered provident fund or a registered individual retirement fund in excess of the amount specified in section 22A or 22B; Section 5(4)(d) educational fees of employee’s dependants or relatives disallowed under section 16(2(a)(iv) which have been taxed in the hands of the employer; Section 5(4)(e) fringe benefits subject to tax under section 12B; Section 5(4)(f) the first sixty thousand shillings on the value of meals served by the employer, whether the meals are supplied by the employer or not, within his premises to employees in a canteen or cafeteria operated or established by the employer or provided by a third party who is a registered taxpayer, whether the meals are supplied in the premises of the employer or the premises of the third party, shall be excluded in the calculation of his gains or profits subject to such conditions as the Commissioner may specify; Section 5(4)(fa) any amount paid or granted to a public officer pursuant to any written law or statutory instrument, with effect from 27th July, 2022, to reimburse an expenditure incurred for the purpose of performing official duties, notwithstanding the ownership or control of any assets purchased; Section 5(4)(g) this paragraph shall only apply in respect of amounts not exceeding three hundred and sixty thousand shillings for each year of service; Section 5(4)(g)(a) this paragraph shall only apply in respect of amounts not exceeding three hundred and sixty thousand shillings for each year of service; Section 5(4)(g)(b) this paragraph shall not apply to any person who is eligible for deductions under section 22A. Section 5(4)(h) "beneficiaries" means the full time employee’s spouse and not more than four children whose age shall not exceed twenty-one years; and Section 5(4)(h)(i) "beneficiaries" means the full time employee’s spouse and not more than four children whose age shall not exceed twenty-one years; and Section 5(4)(h)(ii) "low income employee" deleted by Act No. 16 of 2014, s. 5(c) . Section 5(5)(a) in the case of an employee share ownership plan, the value of the benefit shall be the difference between the offer price, per share, at the date the option is granted by the employer, and the market value, per share on the date when the employee exercises the option; Section 5(5)(b) the Commissioner may, from time to time, prescribe the value where the cost or the fair market value of a benefit cannot be determined. Section 5(6)(a) the benefits chargeable shall be deemed to have accrued on the date the employee exercises the option; Section 5(6)(b) "offer price" means the price at which an employer’s shares are initially offered to an employee under an employee share ownership plan; Section 5(6)(c) where the shares are fully listed on any securities exchange operating in Kenya, the mid-market value on the date the option was exercised by the employee; or Section 5(6)(c)(i) where the shares are fully listed on any securities exchange operating in Kenya, the mid-market value on the date the option was exercised by the employee; or Section 5(6)(c)(ii) where the shares are not fully listed, the price which the shares might reasonably be expected to fetch on sale in the open market, when the option is exercised; Section 5(6)(d) "share option" means the offer made by an employer to an employee to purchase a fixed number of shares at a fixed price, which may be paid for at the end of the vesting period; Section 5(6)(e) "vesting period" means a fixed period of time between the date of offer by the employer and the date after which the option to purchase can be exercised by the employee. Section 5(7)(a) the expiry of five years from the end of the year of the award of the shares; Section 5(7)(b) the disposal of the shares by the employee; or Section 5(7)(c) this subsection shall not apply to any cash emoluments or other benefits in kind offered to an employee by virtue of the employment; Section 5(7)(c)(i) this subsection shall not apply to any cash emoluments or other benefits in kind offered to an employee by virtue of the employment; Section 5(7)(c)(ii) the benefit shall be deemed to accrue at the earlier of the occurrence of the events contemplated in paragraphs (a), (b) or (c); Section 5(7)(c)(iii) the value of the taxable benefit shall be the fair market value of the shares at the earlier of the occurrence of the events contemplated in paragraphs (a), (b) or (c); or Section 5(7)(c)(iv) where the fair market value is not available, the Commissioner shall determine the value of the shares based on the last issued financial statements. Section 5(8)(a) has an annual turnover of not more than one hundred million shillings; Section 5(8)(b) does not carry on management, professional or training business; Section 5(8)(c) has not been formed as a result of splitting or restructuring of an existing entity; and Section 5(8)(d) has been in existence for a period of not more than five years. - 6 Verify source ↗
IMPOSITION OF INCOME TAX - 6. Income from the use of property
Gains or profits include royalties, rent, premiums or similar payments received for the use or occupation of property.
Section 6. Income from the use of property Section 6(1) For the purpose of section 3(2)(a)(iii) of this Act, "gains or profits" shall include any royalty, rent, premium or similar consideration received for the use or occupation of property. Section 6(2) In the case of a lease or similar transaction, the income of a lessor shall be determined in accordance with such rules as may be prescribed under this Act. [Act No. 8 of 1997, s. 29.] - 6A Verify source ↗
IMPOSITION OF INCOME TAX - 6A. Imposition of residential rental Income Tax
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.
Section 6A. Imposition of residential rental Income Tax Section 6A(1) Notwithstanding any other provision of this Act, a tax to be known as residential rental income tax shall be payable with effect from the 1 st January, 2016 by any resident person from income which is accrued in or derived from Kenya for the use or occupation of residential property, and which is in excess of two hundred and eighty-eight thousand shillings but does not exceed fifteen million shillings during any year of income. Provided that this section shall not apply where a person who would otherwise pay tax under this section, by notice in writing addressed to the Commissioner, elects not to be subject to residential rental income tax, in which case the other provisions of this Act shall apply to such a person. Section 6A(2) The Cabinet Secretary may, by notice in the Gazette , prescribe regulations for the better carrying out the provisions of this section. [Act No. 14 of 2015, s. 8, Act No. 38 of 2016, s. 3, Act No. 8 of 2020, s. 2.] - 7 Verify source ↗
IMPOSITION OF INCOME TAX - 7. Income from dividends
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.
Section 7. Income from dividends Section 7(1) For the purposes of section 3(2)(b)– (a) a dividend paid by a resident company shall be deemed to be income of the year of income in which it was payable; (b) an amount shall be deemed to be a dividend distributed by a company to a shareholder where– (i) any cash or asset is distributed or transferred by that company to or for the benefit of that shareholder or any person related to that shareholder; (ii) the shareholder or any person related to that shareholder is discharged from any obligation measurable in money which is owed to that company by that shareholder or related person; (iii) the amount is used by that company in any other manner for the benefit of the shareholder or any person related to that shareholder; (iv) any debt owed by the shareholder or any person related to that shareholder to any third party is paid or settled by that company; (v) the amount represents additional taxable income or reduced assessed loss of that company by virtue of any transaction with the shareholder or related person to such shareholder, resulting from an adjustment. Section 7(2) Notwithstanding section 3(2)(b), a dividend received by a resident company, other than a dividend received by a company which controls directly or indirectly less than twelve and one-half per cent of the voting power of the company paying the dividend, shall be deemed not to be income chargeable to tax. Section 7(3) A dividend received by the financial institutions specified in the Fourth Schedule shall be deemed to be income chargeable to tax in accordance with this section. [Act No. 2 of 1975, s. 5, Act No. 8 of 1978, s. 9, Act No. 9 of 1992, s. 38, Act No. 4 of 1993, s. 38, Act No. 6 of 1994, s. 35, Act No. 8 of 2008, s. 26, Act No. 10 of 2018, s. 3.] - 7A Verify source ↗
IMPOSITION OF INCOME TAX - 7A. Dividend distributed out of untaxed gains or profits
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.
Section 7A. Dividend distributed out of untaxed gains or profits Section Where a dividend is distributed out of gains or profits on which no tax is paid, the company distributing the dividend shall be charged to tax in the year of income in which the dividends are distributed at the resident corporate rate of tax on the gains or profits from which such dividends are distributed: Provided that this section shall not apply to income which is exempt under this Act. [Act No. 10 of 2018, s. 4, Act No. 23 of 2019, s. 4.] - 7B Verify source ↗
IMPOSITION OF INCOME TAX - 7B. Repratiated income
Non-resident persons carrying on business in Kenya through a permanent establishment must pay tax on repatriated income for the year of income.
Section 7B. Repratiated income Section 7B(1) A non-resident person who carries on business in Kenya through a permanent establishment shall pay tax on repatriated income for the year of income. Section 7B(2) The repatriated income under subsection (1) shall be computed using the following formula– R=A1+ (P - T) – A2 Where– R is the repatriated profit; A1 is the net assets at the beginning of the year; P is the net profit for the year of income calculated in accordance with generally accepted accounting principles; T is the tax payable on the chargeable income; and A2 is the net assets at the end of the year. Section 7B(3) The tax imposed under this section shall be in addition to tax chargeable on the income of the permanent establishment under section 4. Section 7B(4) For the purposes this section, “net assets” means the total book value of assets less total liabilities for the year of income and shall not include revaluation of assets. [Act No. 4 of 2023, s. 6] - 8 Verify source ↗
IMPOSITION OF INCOME TAX - 8. Income from pensions, etc.
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 8. Income from pensions, etc. Section 8(1) For the purposes of section 3(2)(c) of this Act, any pension received by a resident individual from a pension fund or pension scheme established outside Kenya shall be deemed to have accrued in or to have been derived from Kenya to the extent to which it relates to employment or services rendered by the individual, or the spouse or parent of the individual, in Kenya and the amount so derived shall be the proportion of the total pension which the length of the employment or services in Kenya, including periods of leave earned thereby, bears to the total length of employment or services in respect of which the pension is paid. Section 8(2) For the purposes of this Act any pension or retirement annuity received by a non-resident individual from a pension fund or pension scheme established in Kenya or under an annuity contract made in Kenya shall be deemed to have accrued in or to have been derived from Kenya. Section 8(3) For the purposes of this Act, any pension received in respect of employment by or services rendered to the Community or one of its corporations shall be deemed to have accrued in or to have been derived from Kenya– (a) if received by a resident individual; or (b) if received by a non-resident individual if the person making payment of the pension was resident in Kenya. Section 8(4) Deleted by Act No. 9 of 2025, s. 4. Section 8(5) Deleted by Act No. 9 of 2025, s. 4. Section 8(5A) For the purposes of subsection 5(c)(ii), accumulated funds are segregated where– (a) the accumulated funds based on contributions prior to the 1 st January 1991 are accounted for separately from contributions after 31 st December, 1990; and (b) the net accumulated funds on each account earn the average rate of return on all the assets in the fund at the accounting date for a year of income; and (c) the net accumulated funds based on contributions prior to 1 st January, 1991, are made up of the accumulated balances as at 31 st December, 1990, less any withdrawals from the fund plus any investment income earned on the fund up to the accounting date for a year of income. Section 8(6) Deleted by Act No. 9 of 2025, s. 4. Section 8(7) Deleted by Act No. 9 of 2025, s. 4. Section 8(8) Upon dissolution of the marriage of the beneficiary of a registered individual retirement fund, or registered home ownership savings plan, as part of a written agreement, all or part of the balance of funds of that beneficiary may be transferred to a registered individual retirement fund or registered house ownership savings plan, in the name of the former spouse of that beneficiary. Section 8(9) Deleted by Act No. 9 of 2025, s. 4. Section 8(9A) Deleted by Act No. 9 of 2025, s. 4. Section 8(10) For the purposes of this subsection– (a) pension and lumpsums paid from a public pension scheme, shall be deemed to be received from a registered pension fund or a registered provident fund, as the case may be; (b) any surplus funds in respect of a registered pension fund or a registered provident fund withdrawn by or refunded to an employer shall be deemed to be the income of that employer. Section 8(11) In subsection (10), the expression "surplus funds" means surplus funds identified through an actuarial valuation carried out in accordance with this Act or any rules made thereunder. [Act No. 2 of 1975, s. 5, Act No. 8 of 1985, s. 11, Act No. 10 of 1990, s. 42, Act No. 8 of 1991, s. 55, Act No. 9 of 1992, s. 40, Act No. 4 of 1993, s. 40, Act No. 6 of 1994, s. 36, Act No. 13 of 1995, s. 76, Act No. 8 of 1996, s. 29, Act No. 6 of 2001, s. 44, Act No. 7 of 2002, s. 39, Act No. 15 of 2003, s. 31, Act No. 4 of 2004, s. 47, Act No. 6 of 2005, s. 22, Act No. 8 of 2009, s. 20, Act No. 9 of 2025, s. 4.] - 9 Verify source ↗
IMPOSITION OF INCOME TAX - 9. Income of certain non-resident persons deemed derived from 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
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 him calls at any port or airport in Kenya, the gains or profits from such business from the carriage of passengers who embark, or cargo or mail which is embarked, in Kenya shall be the gross amount received on account of the carriage and those gains or profits shall be deemed to be income derived from Kenya; but this subsection shall not apply to gains or profits from the carriage of passengers who embark, or cargo or mail which is embarked, in Kenya solely as a result of transhipment. Provided that all income of a non-resident shipping line including income from delay in taking delivery of goods or returning any of the equipment used for transportation of goods shall be deemed to be income derived from Kenya. Section 9(2) Where a non-resident person carries on, in Kenya, the business of transmitting messages by cable, radio, optical fibre, television broadcasting, Very Small Aperture Terminal (VSAT), internet, satellite or by any other similar method of communication, then the gains or profits from the business shall be the gross amount received for the transmission of messages which are transmitted by the apparatus established in or outside Kenya, whether or not those messages originate from Kenya, and such gains and profits shall be deemed to be income derived from Kenya. Section 9(3) Where a resident person enters into a financial derivatives contract with a non-resident person, any gain accruing to the non-resident person from that arrangement shall be subject to tax at the rate specified in the Third Schedule. Section 9(4) The provisions of subsection (3) shall be carried out in accordance with Regulations made by the Cabinet Secretary. [No. Act 10 of 2006, s. 18, Act No. 9 of 2007, s. 19, Act No. 23 of 2019, s. 5, Act No. 22 of 2022, s. 6.]
Part III
EXEMPTION FROM TAX
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EXEMPTION FROM TAX - 13. Certain income exempt from tax, etc.
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.
Section 13. Certain income exempt from tax, etc. Section 13(1) Notwithstanding anything in Part II, the income specified in Part I of the First Schedule which accrued in or was derived from Kenya shall be exempt from tax to the extent so specified. Section 13(2) The Cabinet Secretary may, by notice in the Gazette , provide– (a) that any income or class of income which accrued in or was derived from Kenya shall be exempt from tax to the extent specified in such notice; (b) that any exemption under subsection (1) of this section shall cease to have effect either generally or to the extent specified in the notice. Section 13(3) A notice under subsection (2) of this section shall be laid before the National Assembly without unreasonable delay, and if a resolution is passed by the National Assembly within twenty days on which it next sits after the notice is so laid that the notice be annulled, it shall thenceforth be void, but without prejudice to the validity of anything previously done thereunder, or to the issuing of a new notice. [Act No. 13 of 1978, Sch.] - 14 Verify source ↗
EXEMPTION FROM TAX - 14. Interest on Government loans, etc., exempt from tax
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 14. Interest on Government loans, etc., exempt from tax Section 14(1) Notwithstanding anything in Part II, interest payable on the securities specified in Part II of the First Schedule shall be exempt from tax to the extent so specified. Section 14(2) The Cabinet Secretary may, by notice in the Gazette , provide that the interest payable on any loan charged on the Consolidated Fund or on the revenues of any local authority, shall, insofar as such interest is income which accrued in or was derived from Kenya, be exempt from tax, either generally or only in respect of interest payable to persons who are not resident. [Act No. 8 of 1978, s. 9.]
Part IV
ASCERTAINMENT OF TOTAL INCOME
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ASCERTAINMENT OF TOTAL INCOME - 15. Deductions allowed
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.
Section 15. Deductions allowed Section 15(1) For the purpose of ascertaining the total income of any person for a year of income there shall, subject to section 16 of this Act, be deducted all expenditure incurred in such year of income which is expenditure wholly and exclusively incurred by him in the production of that income, and where under section 27 of this Act any income of an accounting period ending on some day other than the last day of such year of income is, for the purpose of ascertaining total income for any year of income, taken to be income for any year of income, then such expenditure incurred during such period shall be treated as having been incurred during such year of income. Section 15(2)(a) bad debts incurred in the production of such gains or profits which the Commissioner considers to have become bad, and doubtful debts so incurred to the extent that they are estimated to the satisfaction of the Commissioner to have become bad, during such year of income and the Commissioner may prescribe such guidelines as may be appropriate for the purposes of determining bad debts under this subparagraph; Section 15(2)(b) amounts to be deducted under the Second Schedule in respect of that year of income; Section 15(2)(bb) amounts to be deducted under the Ninth Schedule in respect of that year of income; Section 15(2)(c) any expenditure of a capital nature incurred during that year of income by the owner or occupier of farm land for the prevention of soil erosion; Section 15(2)(d) any expenditure of a capital nature incurred in that year of income by any person on legal costs and stamp duties in connexion with the acquisition of a lease, for a period not in excess of, or expressly capable of extension beyond, ninety-nine years, of premises used or to be used by him for the purposes of his business; Section 15(2)(e) any expenditure, other than expenditure referred to in paragraph (f) of this section, incurred in connection with any business before the date of commencement of that business where such expenditure would have been deductible under this section if incurred after such date, so, however, that the expenditure shall be deemed to have been incurred on the date on which such business commenced; Section 15(2)(f) in the case of the owner of premises, any sums expended by him during such year of income for structural alterations to the premises where such expenditure is necessary to maintain the existing rent: Provided that no deduction shall be made for the cost of an extension to, or replacement of, such premises; Section 15(2)(g) the amount considered as representing the diminution in value of any implement, utensil or similar article, employed in the production of gains or profits, not being machinery or plant in respect of which a deduction may be made under the Second Schedule, at a rate of one hundred per cent in that year of income; Section 15(2)(ga) expenditure incurred by a person carrying on a business in payment of Affordable Housing Levy as provided under section 5(b) of the Affordable Housing Act, 2024; Section 15(2)(h) deleted by Act No. 8 of 2020, s. 5 ; Section 15(2)(i) deleted by Act No. 9 of 2025, s. 10(a)(ii) ; Section 15(2)(j) deleted by Act No. 9 of 2025, s. 10(a)(iii) ; Section 15(2)(k) deleted by Act No. 8 of 1997, s. 32 ; Section 15(2)(l) any expenditure of a capital nature incurred in such year of income by the owner or tenant of any agricultural land, on clearing such land, or on clearing and planting thereon permanent or semi-permanent crops; Section 15(2)(m) deleted by Act No. 16 of 2014, s. 7(a) ; Section 15(2)(n) expenditure of a capital nature on scientific research; or Section 15(2)(n)(i) expenditure of a capital nature on scientific research; or Section 15(2)(n)(ii) expenditure not of a capital nature on scientific research; or Section 15(2)(n)(iii) a sum paid to a scientific research association approved for the purposes of this paragraph by the Commissioner as being an association which has as its object the undertaking of scientific research related to the class of business to which such business belongs; or Section 15(2)(n)(iv) a sum paid to any university, college, research institute or other similar institution approved for the purposes of this paragraph by such Commissioner for the scientific research as is mentioned in subparagraph (iii) of this paragraph; Section 15(2)(o) any sum contributed in such year of income by an employer to a national provident fund or other retirement benefits scheme established for employees throughout Kenya by the provisions of any written law; Section 15(2)(p) any expenditure on advertising in connexion with any business to the extent that the Commissioner considers just and reasonable; and for this purpose "expenditure on advertising" includes any expenditure intended to advertise or promote, whether directly or indirectly, the sale of the goods or services provided by that business; Section 15(2)(q) deleted by Act No. 13 of 1984, s. 19 ; Section 15(2)(r) deleted by Act No. 9 of 2025, s. 10 (a)(iv) ; Section 15(2)(s) deleted by Act No. 8 of 2020, s. 5 ; Section 15(2)(ss) deleted by Act No. 8 of 2020, s. 5 ; Section 15(2)(t) expenditure incurred by the lessee in the case of a lease or similar transaction as determined in accordance with such rules as may be prescribed under this Act; Section 15(2)(u) deleted by Act No. 8 of 2020, s. 5; Section 15(2)(v) deleted by Act No. 8 of 2020, s. 5; Section 15(2)(w) any donation in that year of income to a charitable organization whose income is exempt from tax under paragraph 10 of the First Schedule to this Act, expenditure incurred in the construction of a sports facility on public grounds, or to any project approved by the Cabinet Secretary responsible for matters relating to finance; Section 15(2)(x) expenditure of a capital nature incurred in that year of income, with the prior approval of the Cabinet Secretary, by a person on the construction of a public school, hospital, road or any similar kind of social infrastructure; Section 15(2)(y) deleted by Act No. 22 of 2022, s. 8; Section 15(2)(z) expenditure incurred in that year of income by a person sponsoring sports, with the prior approval of the Cabinet Secretary responsible for sports; Section 15(2)(aa) expenditure incurred in that year of income on donations to the Kenya Red Cross, county governments or any other institution responsible for the management of national disasters to alleviate the effects of a national disaster declared by the President. Section 15(2)(ab) deleted by Act No. 2 of 2020, Sch. Section 15(2)(ac) in the case of an employee, the amount deducted in accordance with section 5(1)(a) of the Affordable Housing Act, 2024; Section 15(2)(ad) a contribution to a post-retirement medical fund subject to a limit of fifteen thousand shillings per month; Section 15(2)(ae) contributions made to the Social Health Insurance Fund in accordance with section 27(a) and (b) of the Social Health Insurance Act, 2023; Section 15(3)(a) the amount of interest which may be deducted under this paragraph shall not exceed the investment income chargeable to tax for that year of income, and where the amount of that interest paid in that year exceeds the investment income of that year, the excess shall be carried forward to the next succeeding year and deducted only from investment income and, in so far as the interest has not already been so deducted, from investment income of the subsequent years of income; and Section 15(3)(a)(i) the amount of interest which may be deducted under this paragraph shall not exceed the investment income chargeable to tax for that year of income, and where the amount of that interest paid in that year exceeds the investment income of that year, the excess shall be carried forward to the next succeeding year and deducted only from investment income and, in so far as the interest has not already been so deducted, from investment income of the subsequent years of income; and Section 15(3)(a)(ii) for the purposes of this paragraph, "investment income" means dividends and interest but excludes qualifying dividends and qualifying interest; Section 15(3)(b) if any person occupies any premises for residential purposes for part only of a year of income the deduction under this paragraph shall be reduced accordingly; and Section 15(3)(b)(i) if any person occupies any premises for residential purposes for part only of a year of income the deduction under this paragraph shall be reduced accordingly; and Section 15(3)(b)(ii) no person may claim a deduction under this paragraph in respect of more than one residence; Section 15(3)(c) deleted by Act No. 14 of 1982, s. 19 ; Section 15(3)(d) in the case of a partner, the amount of the excess, if any, of his share of any loss incurred by the partnership, calculated after deducting the total of any remuneration and interest on capital payable to any partner by the partnership and after adding any interest on capital payable by any partner to the partnership, over the sum of any remuneration and such interest so payable to him less any such interest so payable by him; Section 15(3)(e) deleted by Act No. 8 of 1978, s. 9; Section 15(3)(f) deleted by Act No. 9 of 2025, s. 10(b)(ii) ; Section 15(3)(g) in the case of a business which is a sole proprietorship, the cost of medical expenses or medical insurance cover incurred for the benefit of the proprietor, subject to a limit of one million shillings per year. Section 15(4) Where the ascertainment of the total income of a person results in a deficit for a year of income, the amount of that deficit shall be an allowable deduction in ascertaining the total income of such person for that year and the succeeding five years of income. Section 15(4A) Deleted by Act No. 22 of 2022, s. 8(b) . Section 15(5) Notwithstanding subsection (4), the Cabinet Secretary may, on the recommendation of the Commissioner, extend the period of deduction beyond five years where a person applies through the Commissioner for such extension, giving evidence of inability to extinguish the deficit within that period. Section 15(5)(a) A person to whom this subsection applies who has succeeded to any business, or to a share therein, either as a beneficiary under the will or on the intestacy of a deceased person who carried on, solely or in partnership, that business shall be entitled to a deduction in the year of income in which he so succeeds in respect of such part of any deficit in the total income of the deceased for his last year of income as is attributable to any losses incurred by the deceased in the business in that year of income or in earlier years of income. Section 15(5)(b) This subsection applies to a person who is the widow, widower or child, of the deceased person and to a person who was an employee or partner of the deceased person in that business; and, where there are two or more such persons, each such person shall be entitled to a deduction of so much of the whole amount deductible as his share in the business under the will or on the intestacy bears to the sum of the shares of all such persons. Section 15(5A)(a) deleted by Act No. 14 of 2015, s. 10(c)(i); Section 15(5A)(a)(a) deleted by Act No. 14 of 2015, s. 10(c)(i); Section 15(5A)(a)(b) the amount computed according to the following formula– Section 15(6)(a) any scientific research which may lead to, or facilitate, an extension of that business or of businesses in that class; Section 15(6)(a)(i) any scientific research which may lead to, or facilitate, an extension of that business or of businesses in that class; Section 15(6)(a)(ii) any scientific research of a medical nature which has a special relation to the welfare of workers employed in that business, or in businesses of that class; Section 15(6)(b) expenditure of a capital nature on scientific research does not include any expenditure incurred in the acquisition of rights in, or arising out of scientific research but, subject thereto, does include all expenditure incurred for the prosecution of, or the provision of facilities for the prosecution of, scientific research. Section 15(7)(a) the gains or profits of a person derived from any one of the sources of income respectively specified in paragraph (e) of this subsection (and in this subsection called "specified sources") 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; Section 15(7)(b) where the computation of gains or profits of a person in a year of income derived from a specified source results in a loss, that loss may only be deducted from gains or profits of that person derived from the same specified source in the following year and, in so far as the loss has not already been so deducted, in subsequent years of income; Section 15(7)(c) the subparagraphs of paragraph (e) of this section shall be construed so as to be mutually exclusive; Section 15(7)(d) gains chargeable to tax under section 3(2)(f) of this Act and losses referred to in subsection (3)(f) of this section shall not be deemed income or losses derived or resulting from specified sources for the purposes of this subsection; Section 15(7)(e) rights granted to other persons for the use or occupation of immovable property; Section 15(7)(e)(i) rights granted to other persons for the use or occupation of immovable property; Section 15(7)(e)(ii) employment (including former employment) of personal services for wages, salary, commissions or similar rewards (not under an independent contract of service), and a self-employed professional vocation; Section 15(7)(e)(iii) deleted by Act No. 4 of 2023, s. 11 ; Section 15(7)(e)(iv) agricultural, pastoral, horticultural, forestry or similar activities, not falling within subparagraphs (i) and (ii) of this paragraph; Section 15(7)(e)(ivA) surplus funds withdrawn by 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 section 8(10); Section 15(7)(e)(ivB) income of a licensee from one licence area or a contractor from one contract area as determined in accordance with the Ninth Schedule; and Section 15(7)(e)(v) other sources of income chargeable to tax under section 3(2)(a), not falling within subparagraph (i), (ii), (iii) or (iv) of this paragraph. Section 15(8) Deleted by Act No. 10 of 2006, s. 21. [Act No. 2 of 1975, s. 5, Act No. 13 of 1975, s. 2, Act No. 7 of 1976, s. 2, Act No. 16 of 1977, Sch., Act No. 8 of 1978, s. 9, Act No. 6 of 1981, s. 5, Act No. 1 of 1982, s. 3, Act No. 14 of 1982, s. 19, Act No. 8 of 1983, s. 14, Act No. 13 of 1984, s. 19, Act No. 18 of 1984, s. 3, Act No. 8 of 1985, s. 12, Act No. 10 of 1986, s. 29, Act No. 10 of 1988, s. 31, Act No. 8 of 1989, s. 18, Act No. 10 of 1990, s. 44, Act No. 8 of 1991, s. 58, Act No. 9 of 1992, s. 41, Act No. 4 of 1993, s. 41, Act No. 13 of 1995, s. 79, Act No. 8 of 1996, s. 31, Act No. 8 of 1997, s. 32, Act No. 9 of 2000, s. 42, Act No. 6 of 2001, s. 46, Act No. 15 of 2003, s. 32, Act No. 4 of 2004, s. 48, Act No. 6 of 2005, s. 23, Act No. 10 of 2006, s. 21, Act No. 9 of 2007, s. 20, Act No. 8 of 2008, s. 30, Act No. 8 of 2009, s. 22, Act No. 16 of 2014, s. 7. Act No. 14 of 2015, s. 10, Act No. 38 of 2016, s. 6, Act No. 15 of 2017, s. 12, Act No. 10 of 2018, s. 7, Act No. 2 of 2020, Sch, Act No. 8 of 2020, s. 5, Act No. 8 of 2021, s. 8, Act No. 22 of 2022, s. 8, Act No. 4 of 2023, s. 11, Act No. 2 of 2024, 3rd Sch., Act No. 12 of 2024, s.7, Act No. 9 of 2025, s. 10.] - 16 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 16. Deductions not allowed
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.
Section 16. Deductions not allowed Section 16(1)(a) any expenditure or loss which is not wholly and exclusively incurred by him in the production of the income; Section 16(1)(b) any capital expenditure, or any loss, diminution or exhaustion of capital; Section 16(1)(c) any expenditure or loss where the invoices of the transactions are not generated from an electronic tax invoice management system except where the transactions have been exempted in accordance with the Tax Procedures Act (Cap. 469B). Section 16(2)(a) entertainment expenses for personal purposes; or Section 16(2)(a)(i) entertainment expenses for personal purposes; or Section 16(2)(a)(ii) hotel, restaurant or catering expenses other than for meals or accommodation expenses incurred on business trips or during training courses or work related conventions or conferences, or meals provided to employees on the employer’s premises; Section 16(2)(a)(iii) vacation trip expenses except those customarily made on home leave as provided in the proviso to section 5(4)(a) and (aa); or Section 16(2)(a)(iv) educational fees of employee’s dependants or relatives; Section 16(2)(a)(v) deleted by Act No. 4 of 2023, s. 12 . Section 16(2)(b) any expenditure or loss which is recoverable under any insurance, contract, or indemnity; Section 16(2)(c) any income tax or tax of a similar nature paid on income: Provided that, save in the case of foreign tax in respect of which a claim is made under section 41, a deduction shall be allowed in respect of income tax or tax of a similar nature, including compensation tax paid on income which is charged to tax in a country outside Kenya to the extent to which that tax is payable in respect of and is paid out of income deemed to have accrued in or to have been derived from Kenya; Section 16(2)(d) any sums contributed to a registered or unregistered pension, saving, or provident scheme or fund, except as provided in section 15(2)(o), or any sum paid to another person as a pension; Section 16(2)(e) a premium paid under an annuity contract; Section 16(2)(f) any expenditure incurred in the production of income deemed under section 10 of this Act to have accrued in or to have been derived from Kenya where such expenditure was incurred by a non-resident person not having a permanent establishment within Kenya; Section 16(2)(fa) any expenditure incurred in the production of dividend income deemed under paragraph (a) of subsection (1), of section 7 to have been derived from Kenya where such expenditure was incurred by a non-resident person not having a permanent establishment within Kenya; Section 16(2)(g) deleted by Act No. 8 of 1978, s. 9; Section 16(2)(h) any loss incurred in any business which, having regard to the nature of the business, to the principal occupation of the owner, partners, shareholders or other persons having a beneficial interest therein, to the relationship between any such persons or to any other relevant factor, the Commissioner considers it reasonable to regard as not being carried on mainly with a view to the realization of profits; and, without prejudice to the generality of the foregoing, a business shall be deemed not to be carried on for any year of income with a view to the realization of profits where more than one quarter of the amount of the revenue expenditure incurred in such business in such year relates to goods, services, amenities or benefits, or to the production of goods, services, amenities or benefits, which are of a personal of domestic nature enjoyed by the owner, partners, shareholders or other persons having a beneficial interest in the business or a member of the family or the domestic establishment of any such person; Section 16(2)(i) deleted by Act No. 10 of 2006, s. 22; Section 16(2)(j) any income which is exempt from tax shall be excluded from the calculation of earnings before interest, taxes, depreciation and amortization; and Section 16(2)(j)(i) any income which is exempt from tax shall be excluded from the calculation of earnings before interest, taxes, depreciation and amortization; and Section 16(2)(j)(ii) interest on all loans; Section 16(2)(j)(iii) banks or financial institutions licensed under the Banking Act (Cap. 488); Section 16(3) For the purposes of subsection (2), the expressions– "all loans" means loans, overdrafts, ordinary trade debts, overdrawn current accounts or any other form of indebtedness for which the company is paying a financial charge, interest, discount or premium but shall not include local loans; "deemed interest" deleted by Act No. 38 of 2016, s. 7. Section 16(4) Deleted by Act No. 9 of 2025, s. 11(b). Section 16(5) The Commissioner shall prescribe the form and manner in which the deemed interest shall be computed and the period for which it shall be applicable. [Act No. 7 of 1976, s. 2, Act No. 11 of 1976, s. 7, Act No. 8 of 1978, s. 9, Act No. 14 of 1982, s. 20, Act No. 10 of 1988, s. 32, Act No. 10 of 1990, s. 45, Act No. 9 of 1992, s. 42, Act No. 6 of 1994, s. 37, Act No. 8 of 1997, s. 33, Act No. 6 of 2001, s. 47, Act No. 7 of 2002, s. 40, Act No. 15 of 2003, s. 33, Act No. 6 of 2005, s. 24, Act No. 10 of 2006, s. 22, Act No. 8 of 2008, s. 31, Act No. 8 of 2009, s. 23, Act No. 10 of 2010, s. 23, Act No. 4 of 2012, s. 13, Act No. 16 of 2014, s. 8, Act No. 38 of 2016, s. 7, Act No. 23 of 2019, s. 8, Act No. 8 of 2021, s. 9, Act No. 22 of 2022, s. 9, Act No. 4 of 2023, s. 12, Act No. 9 of 2025, s. 11.] - 17 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 17. Ascertainment of income of farmer in relation to stock
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 17. Ascertainment of income of farmer in relation to stock Section 17(1) The stock owned by a farmer at the beginning and end of each period for which he makes up the accounts of his farming business shall, in computing the gains or profits from such business, be taken into account at such value as the Commissioner may determine to be just and reasonable. Section 17(2) An election duly made by a farmer under section 16 of the Management Act shall be binding upon him for all subsequent years of income in which he carries on the business of farming: Provided that on application in writing by the farmer, the Commissioner may, subject to such adjustment that he may consider appropriate, permit any farmer who has elected not to take into account the value of stock to revoke his election with effect from the year of income prior to that in which the application is made. Section 17(3) Subject to subsection (4) of this section, every farmer who has elected not to take into account the value of stock shall be charged for each year of income on all amounts received for stock disposed of by him in any circumstances and whether or not the proceeds thereof would, but for this section, be regarded as a capital receipt; and, if a part of the stock is disposed of otherwise than in the open market, he shall be charged on the cost or open market value of such stock, whichever is the lesser, so, however, that in no case shall he be charged on less than the amount received for such stock: Provided that if the sale of any stock has been undertaken as part of the operations involved in changing from one type of farming to another and the whole or part of the amounts received therefrom has been expended in purchasing stock of a different kind, or on purposes essential to such change where no deduction is allowable under the Second Schedule in respect of such expenditure, the amounts so received, to the extent to which they are so expended, and the amount so expended, shall be disregarded for the purposes of ascertaining his total income for a year of income. Section 17(4) Where a farmer who has elected not to take into account the value of stock ceases to carry on the business of farming, the Commissioner in ascertaining the farmer’s total income for the year of income in which cessation takes place, may make such adjustment as he may determine to be just and reasonable in respect of the value of any stock held by that farmer on 1 st January, 1936, or on the date on which he commenced the business whichever date is the later. Section 17(5) Every farmer who has elected not to take into account the value of stock shall furnish, when the Commissioner so requires, a statement setting out to the best of his knowledge and belief the value of the stock held by him at any date relevant for the purposes of this section. Section 17(6) Subject to any such adjustment referred to in subsection (4) of this section and to such adjustments as the Commissioner would have considered appropriate had an application been received under the proviso to subsection (2) of this section, the executors or administrators of a farmer who has elected not to take into account the value of stock and who dies while carrying on a business of farming shall be charged in respect of stock belonging to the deceased farmer at the time of his death– (a) if sold in the open market, on the realized price; (b) if transferred without payment to a beneficiary under the will or on the intestacy of the deceased farmer, on the open market value: Provided that where such beneficiary succeeds to such business of farming and elects, by notice in writing to the Commissioner within one year after the end of the year of income in which the farmer dies, not to take into account the value of stock, the following provisions shall have effect in relation to any stock which was so transferred to him– (i) no amount shall be charged on the executors or administrators in respect of such stock transferred to him; and (ii) this section shall be applied to such beneficiary as if he had carried on the business of farming throughout the whole period from the date on which the deceased farmer commenced that business and had made the election which the deceased farmer made; (c) in any other case, on the open market value, as if such price or value had been income of such farmer for the year of income in which he died. Section 17(7) In this section "stock" means all livestock and produce, and crops which have been harvested. - 17A Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 17A.[Repealed by Act No. 9 of 2000, s. 43]
Section 17A has been repealed by Act No. 9 of 2000, s. 43.
Section 17A.[Repealed by Act No. 9 of 2000, s. 43] - 18 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 18. Ascertainment of gains or profits of business in relation to certain non-resident persons
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.
Section 18. Ascertainment of gains or profits of business in relation to certain non-resident persons Section 18(1) Where a non-resident person carries on any business in Kenya which consists of manufacturing, growing, mining, or producing, or harvesting, whether from the land or from the water, any product or produce, and sells outside, or for delivery outside Kenya, such product or produce, whether or not the contract of sale is made within or without Kenya, or utilizes that product or produce in any business carried on by him outside Kenya, then the gains or profit from such business carried on in Kenya shall be deemed to be income derived from Kenya and to be gains or profits such amount as would have accrued if such product or produce had been sold wholesale to the best advantage. Section 18(2) Where a bank which is a permanent establishment of a non-resident person holds outside Kenya any deposits, assets or property acquired from its operations in Kenya, the gains or profits accruing from such deposits, assets or other property held outside Kenya shall be deemed to be income accrued in or derived from Kenya. Section 18(3) Where a non-resident person carries on business with a related resident person and the course of such business is such that it produces to the resident person or through its permanent establishment either no profits or less than the ordinary profits which might be expected to accrue from that business if there had been no such relationship, then the gains or profits of such resident person or through its permanent establishment from such business shall be deemed to be of such an amount as might have been expected to accrue if the course of that business had been conducted by independent persons dealing at arm’s length. Section 18(4) Deleted by Act No. 4 of 2023, s. 13 . Section 18(5) When a non-resident person carries on a business in Kenya through a permanent establishment in Kenya the gains or profits of the permanent establishment shall be ascertained without any deduction in respect of interest, royalties or management or professional fees paid or purported to be paid by the permanent establishment to the non-resident person and by disregarding any foreign exchange loss or gain with respect to net assets or liabilities purportedly established between the permanent establishment in Kenya and the non-resident person. Provided that for the avoidance of doubt, the expression "non-resident person" shall include both the head office and other offices of the non-resident person. Section 18(6) Deleted by Act No. 9 of 2025, s. 12. - 18A Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 18A. Ascertainment of gains and profits of business in a preferential tax regime
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.
Section 18A. Ascertainment of gains and profits of business in a preferential tax regime Section 18A(1) Where– (a) a resident person carries on business with a related resident person operating in a preferential tax regime; or (b) a resident person carries on business with– (i) a non-resident person located in a preferential tax regime; or (ii) an associated enterprise of a non-resident person located in a preferential tax regime; or (iii) a permanent establishment of a non-resident person operating in Kenya where the non-resident person is located in a preferential tax regime, and the business produces no gains or produces less gains than those which would have been expected to accrue from that business if the business activity was not with a party in a preferential tax regime, the gains of that resident person from that business shall be deemed to be the amount which would have been expected to accrue if that business had been conducted by an independent person dealing at arm’s length, or if none of the parties were located in a preferential tax regime. Section 18A(2) For the purposes of this section, "preferential tax regime” means– (a) any Kenyan legislation, regulation or administrative practice which provides a preferential rate of tax to such income or profit, including reductions in the tax rate or the tax base; or (b) a foreign jurisdiction which– (i) does not tax income; (ii) taxes income at a rate that is less than twenty per cent; (iii) does not have a framework for the exchange of information; (iv) does not allow access to banking information; or (v) lacks transparency on corporate structure, ownership of legal entities located therein, beneficial owners of income or capital, financial disclosure, or regulatory on supervision. Section 18A(3) For the purposes of this section, qualifying intellectual property income that subject to the preferential tax rate shall be determined using the following formula– Where- I is income receiving tax benefits; Q is the research and development expenditures made by the taxpayer, excluding acquisition costs and related party outsourcing costs; T is the research and development expenditures made by the taxpayer, including acquisition costs and related party outsourcing costs; and P is intellectual property income including royalties, capital gains and any other income from the sale of an intellectual property asset including embedded intellectual property income calculated under transfer pricing principles: Provided that for the purposes of this subsection intellectual property losses shall only be deducted against intellectual property income [Act No. 15 of 2017, s. 13, Act No. 22 of 2022, s. 10, Act No. 4 of 2023, s. 14] - 18B Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 18B. Application of sections 18C, 18D, 18E and 18F
Sections 18C, 18D, 18E and 18F apply to returns for the year of income 2022 and subsequent years of income.
Section 18B. Application of sections 18C, 18D, 18E and 18F Section The provisions of sections, 18C, 18D, 18E, and 18F shall apply to returns for the year of income 2022 and subsequent years of income. [Act No. 22 of 2022, s. 11.] - 18C Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 18C. Notification to the Commissioner
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.
Section 18C. Notification to the Commissioner Section 18C(1) A multinational enterprise group or a constituent entity, other than an excluded multinational enterprise group, that is resident in Kenya, shall notify the Commissioner, not later than the last day of the reporting financial year of that group– (a) whether or not it is the ultimate parent entity of the group; (b) in case it is not the ultimate parent entity of the group, whether or not it is a surrogate parent entity; or (c) in case paragraphs (a) and (b) do not apply, the identity of the constituent entity which is the ultimate parent entity or surrogate parent entity and the tax residence of that constituent entity. Section 18C(2) The notification referred to in subsection (1) shall be made to the Commissioner in such form as the Commissioner may specify. [Act No. 22 of 2022, s. 12.] - 18D Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 18D. Filing of country-by-country report, master file and local file
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.
Section 18D. Filing of country-by-country report, master file and local file Section 18D(1) Each ultimate parent entity that is resident in Kenya shall file a country-by-country report with the Commissioner in accordance with subsection (3). Section 18D(1A)(a) the ultimate parent entity is not obligated to file a country-by-country report in its jurisdiction of tax residence; Section 18D(1A)(b) the jurisdiction in which the ultimate parent entity is resident has a current international tax agreement which Kenya is a party to but does not have a competent authority agreement with Kenya at the time of filing the country-by-country report for the reporting financial year; or Section 18D(1A)(c) there has been a systemic failure of the jurisdiction of tax residence of the ultimate parent entity that has been notified by the Commissioner to the constituent entity resident in Kenya. Section 18D(1B) The provisions of subsections (1) and (1A) shall apply to a multinational enterprise group whose total consolidated group turnover, including extraordinary or investment income, is at least ninety-five billion shillings during the financial year immediately preceding the reporting financial year as reflected in its consolidated financial statements for such preceding financial year. Section 18D(2) An ultimate parent entity or a constituent entity shall file the country-by-country report referred to under subsection (1) not later than twelve months after the last day of the reporting financial year of the group. Section 18D(3) An ultimate parent entity or a constituent entity of a multinational enterprise group shall file a master file and a local file to the Commissioner in such manner as the Commissioner may specify. Section 18D(4) The master file and the local file shall be filed not later than six months after the last day of the reporting financial year of the multinational enterprise group. Section 18D(5)(a) the information relating to the identity of each constituent entity, its jurisdiction of tax residence, if different, jurisdiction where such entity is organized, and the nature of the main business activity or activities of such entity; Section 18D(5)(b) the group's aggregate information including information relating to the amount of revenue, profit or loss before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees and tangible assets other than cash or cash equivalents with regard to each jurisdiction where the group has taxable presence; and Section 18D(5)(c) any other information as may be required by the Commissioner. Section 18D(6)(a) a detailed overview of the group; Section 18D(6)(b) the group’s growth engines; Section 18D(6)(c) a description of the supply chain of the key products and services; Section 18D(6)(d) the group’s research and development policy; Section 18D(6)(e) a description of each constituent entity’s contribution to value creation; Section 18D(6)(f) information about intangible assets and the group intercompany agreements associated with them; Section 18D(6)(g) information on any transfer of intangible assets within the group during the tax period, including the identity of the constituent entities involved, the countries in which those intangible assets are registered and the consideration paid as part of the transfer; Section 18D(6)(h) information about financing activities of the group; Section 18D(6)(i) the consolidated financial statements of the group; Section 18D(6)(j) tax rulings, if any, made in respect of the group; and Section 18D(6)(k) any other information that the Commissioner may require. Section 18D(7)(a) details and information on the resident constituent entity’s activities within the multinational enterprise group; Section 18D(7)(b) management structure of the resident constituent entity; Section 18D(7)(c) business strategies including structuring, description of the material-controlled transactions, the resident constituent entity’s business and competitive environment; Section 18D(7)(d) the international transactions and amounts paid to the resident constituent entity or received by the entity; and Section 18D(7)(e) any other information that the Commissioner may require. Section 18D(8) Where there are more than one constituent entities of the same multinational enterprise group that are resident in Kenya, the multinational enterprise group may designate one of such constituent entities to file a country-by-country report and notify the Commissioner in such form as the Commissioner may specify. Section 18D(9) Deleted by Act No. 9 of 2025, s. 13(b). Section 18D(10)(a) a non-resident surrogate parent entity files the country-by-country report on the group with the competent authority of the tax jurisdiction of the entity; Section 18D(10)(b) the jurisdiction in which the non-resident surrogate parent entity is resident requires the filing of country-by-country reports; Section 18D(10)(c) the competent authority of the jurisdiction in which the non-resident surrogate parent entity is resident and Kenya have a competent authority agreement for the exchange of information; Section 18D(10)(d) the competent authority in the jurisdiction where the non-resident surrogate parent is resident has not notified Kenya of a systemic failure; or Section 18D(10)(e) the non-resident parent entity has notified the competent authority in the jurisdiction of its tax residence that the entity is the designated surrogate parent entity of the group. Section 18D(11) The Commissioner shall maintain the confidentiality of the information contained in a return submitted in accordance with section 6(1) and section 6A(2) of the Tax Procedures Act (Cap. 469B). [Act No. 22 of 2022, s. 12, Act No. 4 of 2023, s. 15, Act No. 9 of 2025, s. 13] - 18E Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 18E. Offences and penalties
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 18E. Offences and penalties Section A person who fails to comply with the provisions of sections 18C and 18D commits an offence and shall be subject to the penalties prescribed under the Tax Procedures Act (Cap. 469B). [Act No. 22 of 2022, s. 12.] - 18F Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 18F. Definitions
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.
Section 18F. Definitions Section For the purposes of sections 18C, 18D and 18E– "competent authority agreement" means an agreement between authorized representatives of jurisdictions which are parties to an international agreement that requires the exchange of country-by-country reports; "consolidated financial statements" means financial statements of a multinational enterprise group in which the assets, liabilities, income, expenses and cash flows of the ultimate parent entity and the constituent entities are presented as those of a single enterprise; "constituent entity” means– (a) any separate business unit of a multinational enterprise group that is included in the consolidated financial statements of the multinational enterprise group for financial reporting purposes, or which would be so included if equity interests in such business unit of a multinational enterprise group were traded on a public securities exchange; (b) any such business unit that is excluded from the multinational enterprise group’s consolidated financial statements solely on size or materiality grounds; (c) any permanent establishment of any separate business unit of the multinational enterprise group included in paragraphs (a) or (b) provided that the business unit prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting, or internal management control purposes; “a country-by-country report” means a report filed under section 18D(1) describing the financial activities of each constituent entity in all the jurisdictions where the group has taxable presence; "excluded multinational enterprise group” means, with respect to any financial year of the group, a group having total consolidated group revenue of less than the amount specified in section 18D(1); “group” means a collection of enterprises related through ownership or control such that it is either required to prepare consolidated financial statements for financial reporting purposes under applicable accounting principles or would be so required if equity interests in any of the enterprises were traded on a public securities exchange and includes a single enterprise with one or more foreign permanent establishments; “international agreement” means a bilateral or multilateral tax agreement to which Kenya is a party which provides for the exchange of tax information between Kenya and other jurisdictions; “local file” means a file under section 18D(7) containing material transactions of the local taxpayer; “master file” means a file under section 18D(6) containing standardized information relevant for all multinational enterprise group members; "multinational enterprise group” means a group that includes two or more enterprises which are resident in different jurisdictions including an enterprise that carries on business through a permanent establishment or through any other entity in another jurisdiction; “reporting financial year” means an annual accounting period with respect to which the ultimate parent entity of the multinational enterprise group prepares its financial statements; "surrogate parent entity” means one constituent entity of the multinational enterprise group appointed by such group to file the country-by-country report in that constituent entity’s jurisdiction of tax residence, on behalf of the group; “systemic failure” means failure to comply with the competent authority agreement for reasons other than those provided in the agreement; “ultimate parent entity” means an entity which– (a) is not controlled by another entity; and (b) owns or controls, directly or indirectly, one or more constituent entities of a multinational enterprise group. [Act No. 22 of 2022, s. 12, Act No. 4 of 2023, s. 16] - 19 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 19. Ascertainment of income of insurance companies
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 19. Ascertainment of income of insurance companies Section 19(1) Notwithstanding anything in this Act, this section shall apply for the purpose of computing the gains or profits of insurance companies from insurance business which is chargeable to tax; and for the purposes of this Act a mutual insurance company shall be deemed to carry on an insurance business the surplus from which shall be ascertained in the manner provided for in this section for ascertaining gains or profits and which shall be deemed to be gains or profits which are charged to tax under this Act. Section 19(2) Where an insurance company carries on life insurance business in conjunction with insurance business of any other class, the life insurance business of the company shall be treated as a separate business from any other class of insurance business carried on by the company. Section 19(3)(a) the amount of the gross premiums from such business (less such premiums returned to the insured and such premiums paid on reinsurance as relate to such business); and Section 19(3)(a)(i) the amount of the gross premiums from such business (less such premiums returned to the insured and such premiums paid on reinsurance as relate to such business); and Section 19(3)(a)(ii) the amount of other income from such business, including any commission or expense allowance received or receivable from re-insurers and any income derived from investments held in connexion with that business; and Section 19(3)(b) deducting from the sum arrived at under paragraph (a) a reserve for unexpired risks referable to that business at the percentage adopted by the company at the end of that year of income and adding thereto the reserve deducted for unexpired risks at the end of the previous year of income: Provided that the reserves are estimated on the basis of actuarial principles, including discounting of ultimate costs; and Section 19(3)(c) the amount of the claims admitted in such year of income in connexion with such business (provided that claims incurred but not paid or not reported before the end of the accounting period are estimated on the basis of actuarial principles including the discounting of ultimate costs); less any amount recovered in respect thereof under reinsurance; and Section 19(3)(c)(i) the amount of the claims admitted in such year of income in connexion with such business (provided that claims incurred but not paid or not reported before the end of the accounting period are estimated on the basis of actuarial principles including the discounting of ultimate costs); less any amount recovered in respect thereof under reinsurance; and Section 19(3)(c)(ii) the amount of agency expenses incurred in such year of income in connection with such business; and Section 19(3)(c)(iii) the amount of any other expenses allowable as a deduction (excluding costs and expenses attributable to earning exempt income) as determined by the ratio of exempt investment income to the sum of investment and exempt investment income in that year of income in computing the gains or profits of that business under this Act. Section 19(4)(a) the amount received or receivable in Kenya of the gross premiums from such business (less such premiums returned to the insured and such premiums paid on reinsurance, other than to the head office of such company, as relates to such business); and Section 19(4)(a)(i) the amount received or receivable in Kenya of the gross premiums from such business (less such premiums returned to the insured and such premiums paid on reinsurance, other than to the head office of such company, as relates to such business); and Section 19(4)(a)(ii) the amount of other income from such business, not being income from investments, received or receivable in Kenya including any commission or expense allowance received or receivable from reinsurance, other than from the head office of such company, of risks accepted in Kenya; and Section 19(4)(a)(iii) such amount of income from investments as the Commissioner may determine to be just and reasonable as representing income from investment of the reserves referable to such business done in Kenya; and Section 19(4)(b) deducting from the sum arrived at under paragraph (a) a reserve for unexpired risks outstanding at the end of that year of income in respect of policies for which the premiums are received or receivable in Kenya at the percentage adopted by the company in relation to its insurance business as a whole, other than life insurance, but adding to that sum the reserve deducted for similar unexpired risks at the end of the previous year of income: Section 19(4)(c) the amount of the claims admitted in that year of income in connection with that business (Provided that claims incurred but not paid or not reported before the end of the accounting period are estimated on the basis of actuarial principles including the discounting of ultimate costs); less any amount recovered in respect thereof under reinsurance; and Section 19(4)(c)(i) the amount of the claims admitted in that year of income in connection with that business (Provided that claims incurred but not paid or not reported before the end of the accounting period are estimated on the basis of actuarial principles including the discounting of ultimate costs); less any amount recovered in respect thereof under reinsurance; and Section 19(4)(c)(ii) the amount of agency expenses incurred in such year of income in connexion with such business; and Section 19(4)(c)(iii) an amount being such proportion as the Commissioner may determine to be just and reasonable of those expenses of the head office of that company as would have been allowable as a deduction in that year of income in computing its gains or profits if the company had been a resident company in so far as those amounts relate to policies the premiums in respect of which are received or receivable in Kenya. Section 19(5) the amount of actuarial surplus, as determined under the Insurance Act and recommended by the actuary to be transferred from the life insurance fund for the benefit of shareholders; Section 19(5A) Where the actuarial valuation of the life insurance fund results in a deficit for a year of income and the shareholders are required to inject money into the life insurance fund, the amount of money so transferred shall be treated as a negative transfer for the purposes of subsection (5)(a): Provided that the amount of negative transfer shall be limited to the actuarial surplus recommended by the actuary to be transferred from the life insurance fund for the benefit of shareholders in previous years of income. Section 19(6) the same proportion of the amount of actuarial surplus recommended by the actuary to be transferred to the shareholders as the actuarial liability in respect of its long term insurance business in Kenya bears to the actuarial liability in respect of its total long term insurance business; and Section 19(6A) Where the actuarial valuation of the life insurance fund results in a deficit for a year of income and the shareholders are required to inject money into the life insurance fund, the proportionate amount of the money so transferred shall be treated as a negative transfer for the purposes of subsection (6)(a): Provided that the amount of negative transfers shall be limited to the amount of actuarial surplus recommended by the actuary to be transferred from the life insurance fund for the benefit of the shareholders in previous years on income. Section 19(6B) For the avoidance of doubt, the gains arising from the transfer of property by an insurance company other than property connected to life insurance business shall be taxed in accordance with the provisions of the Eighth Schedule. Section 19(7) In this section– "annuity fund" means, where an annuity fund is not kept separately from the life insurance fund of the company such part of the life insurance fund as represents the liability of the company under its annuity contracts; "company" includes a body of persons; "exempt investment income" means dividends chargeable to tax under section 3(2)(a)(i) plus income from disposal of investment shares traded in any securities exchange operating in Kenya; "investment income" does not include– (a) dividends chargeable to tax under section 3(2)(a)(i); and (b) income from the disposal of investment shares traded in any securities exchange operating in Kenya; "life insurance fund" does not include the annuity fund, if any, nor such part of the life insurance fund as represents the liability of the company under any registered annuity contract, registered trust scheme, registered pension scheme or registered pension fund; "life insurance premiums" means premiums referable to the life insurance business other than annuity business; "life insurance expenses" means expenses referable to the life insurance business other than annuity business. Section 19(8) The amount of the gains or profits from insurance business, both from life insurance and from other classes of insurance business, arrived at under this section shall be taken into account together with any other income of the company charged to tax in ascertaining the total income of that company. Section 19(9) Deleted by Act No. 8 of 2008, s. 32(c). [Act No. 8 of 1991, s. 59, Act No. 9 of 1992, s. 43, Act No. 4 of 1993, s. 42, Act No. 6 of 1994, s. 38, Act No. 8 of 1997, s. 34, Act No. 5 of 1998, s. 32, Act No. 8 of 2008, s. 32, Act No. 8 of 2009, s. 24, Act No. 10 of 2018, s. 8, Act No. 9 of 2025, s. 15.] - 19A Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 19A. Co-operative societies
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.
Section 19A. Co-operative societies Section 19A(1) This section shall apply to designated co-operative societies other than– (a) a society which has been exempted from all the provisions of the Co-operative Societies Act (Cap. 490) under section 92 of that Act; or (b) a society in respect of which the Commissioner is of the opinion, having regard to the number of members composing it, the nature of its business, the manner in which its business is conducted, the extent of its transactions with non-members or any other relevant factors, is a body corporate carrying on business for its own profit. Section 19A(2) In the case of every designated co-operative society, other than a designated primary society, the income on which tax shall be charged shall be its total income for the year of income deducting therefrom an amount equal to the aggregate of bonuses and dividends declared for that year and distributed by it to its members in money or an order to pay money; but the deduction shall in no case exceed the total income of the society for that year of income. Section 19A(3) In the case of every designated primary society, other than a designated primary society which is registered and carries on business as a credit and savings co-operative society to which the provisions of subsection (4) apply, the income on which tax shall be charged shall be its total income for the year of income deducting therefrom an amount equal to the aggregate of bonuses and dividends declared for that year and distributed by it to its members in money or an order to pay money. Section 19A(4) In the case of a designated primary society which is registered and carries on business as a credit and savings co-operative society its total income for any year of income shall, notwithstanding any other provisions of this Act, be deemed to be the aggregate of– (a) fifty per centum of its gross income from interest (other than interest from its members); (b) its gross income from any right granted for the use or occupation of any property, not being a royalty, ascertained in accordance with the provisions of this Act; (c) gains chargeable to tax under section 3(2)(f); (d) any other income (excluding royalties) chargeable to tax under this Act not falling within paragraph (a), (b) or (c) ascertained in accordance with the provisions of this Act. Section 19A(5) Any loss incurred in respect of any year of income prior to the year of income 1985 shall not be deductible. Section 19A(6) Where the written down value of any asset or class of assets cannot be readily ascertained, the Commissioner may, for the purpose of granting any wear and tear allowance in respect of the year of income 1985, determine the amount of the written down value of any asset or class of assets. Section 19A(7) In this section– "bonus" and "dividend" shall, for the purposes of subsections (2) and (3), have the same meaning as in the Co-operative Societies Act (Cap. 490); "designated co-operative society" means a co-operative society registered under the Co-operative Societies Act (Cap. 490); "primary society" means a co-operative society registered under the Co-operative Societies Act (Cap. 490) the membership of which is restricted to individual persons. [Act No. 13 of 1984, s. 20, Act No. 8 of 1985, s. 13, Act No. 6 of 2001, s. 48, Act No. 15 of 2003, s. 34, Act No. 38 of 2013, s. 12.] - 20 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 20. Collective investment schemes
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.
Section 20. Collective investment schemes Section 20(1) Subject to such conditions as may be specified by the Cabinet Secretary under section 130– (a) a unit trust; (b) a collective investment scheme set up by an employer for purposes of receiving monthly contributions from taxed emoluments of his employees and investing them primarily in shares traded on any securities exchange operating in Kenya; (c) a real estate investment trust; or (d) an investee company of a real estate investment trust, registered by the Commissioner, shall be exempt from income tax except for the payment of withholding tax on interest income and dividends as a resident person as specified in the Third Schedule to the extent that its unit holders or shareholders are not exempt persons under the First Schedule. Section 20(2) All distributions of income, and all payments for redemption of units of sale of shares received by unit holders or shareholders shall be deemed to have been already tax paid. [Act No. 10 of 1990, s. 47, Act No. 7 of 2002, s. 41, Act No. 4 of 2012, s. 14, Act No. 23 of 2019, s. 9.] - 21 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 21. Members’ clubs and trade associations
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.
Section 21. Members’ clubs and trade associations Section 21(1) A body of persons which carries on the activities of a members’ club or trade association shall be deemed to be carrying on a business and the gross receipts on revenue account (excluding joining fees, welfare contributions and subscriptions) shall be deemed to be income from a business. Section 21(2) Deleted by Act No. 4 of 2023, s. 17. Section 21(3) In this section– "member" means– (a) in relation to a members’ club, a person who, while he is a member, is entitled to an interest in all the assets of such club in the event of its liquidation; (b) in relation to a trade association, a person who is entitled to vote at a general meeting of such trade association; "members’ club" means a club or similar institution all the assets of which are owned by or held in trust for the members thereof; "gross investment receipts" deleted by Act No. 9 of 2025, s. 16. - 22 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 22. Purchased annuities other than retirement annuities, etc.
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 22. Purchased annuities other than retirement annuities, etc. Section 22(1) Notwithstanding section 3(2)(c) of this Act, where any payment of an annuity to which this section applies is made, that portion of the payment which as represents the capital element thereof, as ascertained under subsection (2) of this section, shall not be deemed to be income. Section 22(2)(a) an annuity includes any amount payable on a periodic basis, whether payable at intervals longer or shorter than a year; Section 22(2)(b) to be made under the contract, in the case of a contract for a term of years certain; or Section 22(2)(b)(i) to be made under the contract, in the case of a contract for a term of years certain; or Section 22(2)(b)(ii) expected at the date of the contract to be made under the contract, in the case of a contract under which the continuation of such payments depends in whole or in part upon the survival of an individual; Section 22(2)(c) if any table of mortality has been used as the basis for determining the consideration or purchase price for the contract, that table shall be used in computing the payments expected to be made under the contract, calculations being based upon complete expectation of life; Section 22(2)(c)(i) if any table of mortality has been used as the basis for determining the consideration or purchase price for the contract, that table shall be used in computing the payments expected to be made under the contract, calculations being based upon complete expectation of life; Section 22(2)(c)(ii) if no table of mortality has been used as the basis for determining the consideration or purchase price for the contract, such table of mortality as the Commissioner considers appropriate to the case shall be used in computing the payments expected to be made under the contract, calculations being based on complete expectation of life; Section 22(2)(c)(iii) the age of that individual at the date of the contract shall be determined by subtracting the calendar year of his birth from the calendar year in which that date falls; Section 22(2)(d) where the continuation of payments depends upon the survival of an individual and where, in the event of the death of such individual before such payments aggregate a stated sum, the contract provides that the unpaid balance of the stated sum shall be paid either in a lump sum or by instalments, then the contract shall be deemed for the purpose of determining the expected term thereof to provide for the continuance of such payments thereunder for a minimum term certain equal to the nearest complete number of years required to complete the payment of the stated sum; Section 22(2)(e) the lump sum, if any, which the individual entitled to those payments is entitled to receive in lieu thereof; or Section 22(2)(e)(i) the lump sum, if any, which the individual entitled to those payments is entitled to receive in lieu thereof; or Section 22(2)(e)(ii) if there is no lump sum, the sum ascertainable from the contract as the present value of the annuity at the date those payments commence; or Section 22(2)(e)(iii) if there is no such sum, the present value of those payments computed as at the date the payments commence on the basis of a rate of interest of four per cent per annum and, where the payments depend upon the survival of an individual, the probabilities of survival of that individual shall be computed according to the table of mortality referred to in paragraph (c). Section 22(3)(a) to any annuity payable under a registered annuity contract or a registered trust scheme; or Section 22(3)(b) to any annuity purchased under any direction in a will, or purchased to provide for an annuity payable under a will or settlement out of income of property disposed of by such will or settlement; or Section 22(3)(c) to any annuity purchased under any pension scheme or pension fund; or Section 22(3)(d) to any annuity purchased by any person in recognition of the services or past services of another person. - 22A Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 22A. Deductions in respect of contributions to registered pension or provident funds
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.
Section 22A. Deductions in respect of contributions to registered pension or provident funds Section 22A(1)(a) the sum of the contributions made by the employee to registered funds in the year; or Section 22A(1)(b) thirty per cent of the employee’s pensionable income in the year; or Section 22A(1)(c) three hundred and sixty thousand shillings (or, where contributions are made to registered funds of the employer in respect of a part year of service of the member, thirty thousand shillings per month of service). Section 22A(2)(a) the sum of the contributions in the year made by the employer on behalf of the member under defined contribution provisions of registered funds including contributions made out of surplus funds as required under section 22 (6); and by the member to registered funds of the employer; Section 22A(2)(b) thirty per cent of the member’s pensionable income from the employer; or Section 22A(2)(c) three hundred and sixty thousand shillings (or, where contributions are made to registered funds of the employer in respect of a part year of service of the member, thirty thousand shillings per month of service), Section 22A(3)(a) the sum of the contributions made by the employer and by the employees in the year to registered funds in respect of members of the defined benefit registered funds of the employer; or Section 22A(3)(b) thirty per cent of the sum of the pensionable incomes from the employer in the year of members of defined benefit registered funds of the employer; or Section 22A(3)(c) the deductible contributions made in the year to registered funds of the employer by members of registered funds of the employer under subsection (1); and Section 22A(3)(c)(i) the deductible contributions made in the year to registered funds of the employer by members of registered funds of the employer under subsection (1); and Section 22A(3)(c)(ii) the amounts deducted by the employer for the year for contributions made under defined contribution provisions of registered funds under subsection (2) in respect of the members of the defined benefit registered funds. Section 22A(4) In determining the deductible amounts that can be made to registered funds by employees and by employers, subsection (1) shall be applied before subsection (2) and subsection (2) shall be applied before subsection (3). Section 22A(5)(a) where an employee retires or terminates his employment with an employer and joins the services of another employer and requests funds to be transferred from the former employer’s registered fund to the new employer’s registered fund; or Section 22A(5)(b) where an employer establishes a new registered fund and transfers the existing pension rights of an employee to that new registered fund; or Section 22A(5)(c) where an employee terminates his employment with an employer and requests funds, which would otherwise be withdrawn or commuted as a lump sum, to be transferred to a registered individual retirement fund; or Section 22A(5)(d) where an employee and the employer agree mutually to transfer the funds relating to the existing retirement benefit rights of the employee from one registered fund of the employer to another registered fund of that employer provided that the trust deeds of both registered funds allow such a transfer; or Section 22A(5)(e) where an individual beneficiary directs that all funds in a registered individual retirement fund be transferred directly to another such fund: Section 22A(6) Where a defined contribution registered fund is determined by an audit to have surplus funds, such funds shall be allocated to the accounts of members in lieu of contributions by an employer in each subsequent year until the surplus is exhausted. Section 22A(7) Where a registered fund is wound up, any surplus funds therein shall be deemed to be the funds of the employer and shall be immediately withdrawn by the employer unless the trust deed in respect of such registered fund specifies the contrary. Section 22A(8) For the purposes of this section, contributions made to the National Social Security Fund shall be deemed to be contributions made to a defined contribution registered fund. - 22B Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 22B. Deductions in respect of registered individual retirement funds
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).
Section 22B. Deductions in respect of registered individual retirement funds Section 22B(1) An individual who is not a member of a registered fund or a public pension scheme at any time in a year of income commencing on or after the 1st January, 1994 shall be eligible to contribute to a registered individual retirement fund up to the amount deductible under subsection (2). Section 22B(2)(a) the sum of the contributions made by the individual or by the employer of the individual on his behalf on or before the 31st of December of the year; or Section 22B(2)(b) thirty per cent of pensionable income of the individual in that year; or Section 22B(2)(c) three hundred and sixty thousand shillings (or, where the contributions are made on behalf of the individual by his employer in respect of a part year of service of the individual, thirty thousand shillings per month of service) reduced by the amount of the contributions made by the individual or by an employer on behalf of the individual to the National Social Security Fund in that year. Section 22B(3) All funds maintained by an individual in a registered individual retirement fund shall be held in one account with a qualified institution. - 22C Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 22C.[Repealed by Act No. 8 of 2020, s. 6.]
This section was repealed by Act No. 8 of 2020, s. 6.
Section 22C.[Repealed by Act No. 8 of 2020, s. 6.] - 23 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 23. Transactions designed to avoid liability to tax
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.
Section 23. Transactions designed to avoid liability to tax Section 23(1) Where the Commissioner is of the opinion that the main purpose or one of the main purposes for which a transaction was effected (whether before or after the passing of this Act) was the avoidance or reduction of liability to tax for any year of income, or that the main benefit which might have been expected to accrue from the transaction in the three years immediately following the completion thereof was the avoidance or reduction of liability to tax, he may, if he determines it to be just and reasonable, direct that such adjustments shall be made as respects liability to tax as he considers appropriate to counteract the avoidance or reduction of liability to tax which could otherwise be effected by the transaction. Section 23(2) Without prejudice to the generality of the powers conferred by subsection (1) of this section, those powers shall extend– (a) to the charging to tax of persons who, but for the adjustments, would not be charged to the same extent; (b) to the charging of a greater amount of tax than would be charged but for the adjustments. Section 23(3) Any direction of the Commissioner under this section shall specify the transaction or transactions giving rise to the direction and the adjustments as respects liability to tax which the Commissioner considers appropriate. - 24 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 24. Avoidance of tax liability by non-distribution of dividends
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.
Section 24. Avoidance of tax liability by non-distribution of dividends Section 24(1) Where the Commissioner is of the opinion that a private company has not distributed to its shareholders as dividends within a reasonable period, not exceeding twelve months, after the end of its accounting period such part of its income for that period which could be so distributed without prejudice to the requirements of the company’s business, he may direct that that part of the income of the company shall be treated for the purposes of this Act as having been distributed as a dividend to the shareholders in accordance with their respective interests and shall be deemed to have been paid on a date twelve months after the end of that accounting period. Section 24(2) The Commissioner may direct that a charge be made upon a company in respect of adjustments to the liability of a shareholder as a result of a direction under subsection (1): Provided that– (i) if such a charge is made, such company shall be entitled to recover from the shareholder the amount of tax attributable to the adjustment made in respect of such shareholder; and (ii) where an adjustment is made under this section relating to the distributable profits of a company and such profits are subsequently distributed, the proportionate share therein of a shareholder shall be excluded in computing the total income of that shareholder. Section 24(3) Deleted by Act No. 8 of 1978, s. 9(i)(ii). Section 24(4) A private company may at any time before making a distribution of a dividend to its shareholders inquire of the Commissioner whether the distribution would be regarded by him as sufficient for the purpose of subsection (1) of this section, and the Commissioner, after calling on the company for such information that he may reasonably require, shall advise the company whether or not he proposes to take action under this section. Section 24(5) Where under this section part of the income of a company is treated as having been distributed and divided to its shareholders and in consequence thereof, another company is treated as having received a dividend, then for the purpose of applying the provisions of subsection (1) of this section to the other company, the dividend which it is treated as having received shall be deemed to be part of such income of the other company available for distribution by such other company to its shareholders as dividends. - 25 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 25. Income settled on children
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.
Section 25. Income settled on children Section 25(1) Where, under any settlement, income is paid during the life of the settlor to or for the benefit of a child of the settlor in a year of income, such income shall be deemed to be income of the settlor for such year of income and not income of any other person: Provided that this subsection shall not apply to any year of income in which– (i) the income so paid does not exceed one hundred shillings; or (ii) the child attains the age of eighteen years. Section 25(2) For the purposes of, but subject to, this section– (a) income which is dealt with under a settlement so that it, or assets representing it, will or may become payable or applicable to or for the benefit of a child of the settlor in the future (whether on the fulfilment of a condition, or the happening of a contingency, or as the result of the exercise of a power of discretion, or otherwise) shall be deemed to be paid to or for the benefit of that child; (b) any income so dealt with which is not required by the settlement to be allocated at the time when it is so dealt with, to any particular child or children of the settlor shall be deemed to be paid in equal shares to or for the benefit of each of the children to or for the benefit of whom or any of whom the income or assets representing it will or may become payable or applicable; (c) in relation to any settlor, only income originating from that settlor shall be taken into account as income paid under the settlement to or for the benefit of a child of the settlor. Section 25(3) Where under subsection (1) of this section tax is charged on and is paid by the person by whom the settlement was made, that person shall be entitled to recover from any trustee or other person to whom the income is payable under the settlement the amount of the tax so paid, and for that purpose to require the Commissioner to furnish to him a certificate specifying the amount of the tax so paid, and a certificate so furnished shall be conclusive evidence of the facts appearing therein. Section 25(4) Where the amount of the tax chargeable upon any person for any year of income is, by reason of subsection (1) of this section, affected by tax deducted from the income under Head B of Part VI, the amount by which the tax is affected shall, if the amount of tax is thereby reduced, be paid by him to the trustee or other person to whom the income is payable under the settlement or, where there are two or more such persons, shall be apportioned among those persons as the case may require; and if any question arises as to the amount of a payment or as to any apportionment to be made under this subsection, that question shall be decided by the Commissioner whose decision thereon shall be final. Section 25(5) Any income which is deemed under this section to be the income of a person shall be deemed to be the highest part of his income. Section 25(6) This section shall apply to every settlement, wheresoever it was made or entered into and whether it was made or entered into before or after the commencement of this Act, except a settlement made or entered into before 1st January, 1939, which immediately before that date was irrevocable, and shall (where there is more than one settlor or more than one person who made the settlement) have effect in relation to each settlor as if he were the only settlor. Section 25(7) In this section– (a) "child" means a child under the age of eighteen years and includes a step-child, an adopted child and an illegitimate child; (b) "settlement" includes any disposition, trust, covenant, agreement, arrangement, or transfer of assets, but does not include any disposition, trust, covenant, agreement, arrangement, or transfer of assets through a registered family trust or resulting from an order of a court unless that order is made in contemplation of this provision; (c) "settlor", in relation to a settlement, includes any person by whom the settlement was made or entered into directly or indirectly, and any person who has provided or undertaken to provide funds directly or indirectly for the purpose of the settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into the settlement; (d) reference to income originating from a settlor are references to– (i) income from property originating from that settlor; and (ii) income provided directly or indirectly by that settlor; (e) references to property originating from a settlor are references to– (i) property which that settlor has provided directly or indirectly for the purposes of the settlement; and (ii) property representing that property; and (iii) so much of any property which represents both property so provided and other property as, on such apportionment as the Commissioner may determine to be just and reasonable, represents the property so provided; (f) references to– (i) property or income which a settlor has provided directly or indirectly include references to property or income which has been provided directly or indirectly by another person in pursuance of reciprocal arrangements with that settlor but do not include references to property or income which that settlor has provided directly or indirectly in pursuance of reciprocal arrangements with another person; (ii) property which represents other property include references to property which represents accumulated income from that other property. Section 25(8) Where, under this section, income is deemed to be income of the settlor, it shall be deemed to be income received by him as a person beneficially entitled thereto under the settlement. [Act No. 38 of 2013, s. 13, Act No. 8 of 2021, s. 11.] - 26 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 26. Income from certain settlements deemed to be income of settlor
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).
Section 26. Income from certain settlements deemed to be income of settlor Section 26(1) All income which in a year of income accrued to or was received by any person under a settlement from assets remaining the property of the settlor shall, unless such income is deemed under section 25 of this Act to be income of the settlor for an earlier year of income, be deemed to be income of the settlor for the year of income in which it so accrued to or was received by that person and not income of any other person whether or not such settlement is revocable and whether it was made or entered into before or after the commencement of this Act. Section 26(2) All income which in any year of income accrued to or was received by a person under a revocable settlement shall be deemed to be income of the settlor for such year of income and not income of any other person. Section 26(3) Where in any year of income the settlor, or a relative of the settlor, or any other person, under the direct or indirect control of the settlor or any of his relatives or the settlor and any of his relatives, by agreement with the trustees of a settlement in any way, whether by borrowing or otherwise, makes use of income arising, or of accumulated income which has arisen, under the settlement to which he is not entitled thereunder, then the amount of such income or accumulated income so made use of shall be deemed to be income of such settlor for such year of income and not income of any other person. Section 26(4) For the purposes of this section, a settlement shall be deemed to be revocable if under its terms the settlor– (a) has a right to reassume control, directly or indirectly, over the whole or any part of the income arising under the settlement or of the assets comprised therein; or (b) is able to have access, by borrowing or otherwise, to the whole or any part of the income arising under the settlement or of the assets comprised therein; or (c) has power, whether immediately or in the future and whether with or without the consent of any other person, to revoke or otherwise determine the settlement and in the event of the exercise of such power, the settlor or the wife or husband of the settlor will or may become beneficially entitled to the whole or any part of the property comprised in the settlement or to the income from the whole or any part of such property: Provided that a settlement shall not be deemed to be revocable by reason only that under its terms the settlor has a right to reassume control, directly or indirectly, over income or assets relating to the interest of any beneficiary under the settlement in the event that the beneficiary should predecease him. Section 26(5) In this section– "relative" of a person means– (a) his spouse; (b) any ancestor, lineal descendant, brother, sister, uncle, aunt, nephew, niece, step-father, step-mother, step-child, adopted child, and, in the case of an adopted child, his adopter or adopters; (c) the spouse of any such relative referred to in paragraph (b); "settlement" includes any disposition, trust, covenant other than a registered family trust, agreement, arrangement, or transfer of assets, other than– (a) a settlement made for valuable and sufficient consideration; (b) any agreement made by an employer to confer a pension upon an employee in respect of any period after the cessation of employment with such employer, or to provide an annual payment for the benefit of the widow or any relative or dependant of that employee after his death, or to provide a lump sum to an employee on the cessation of such employment. Section 26(6) Where, under this section, tax is charged on and is paid by the settlor, the settlor shall be entitled to recover from the trustees or other person to whom the income is payable under the settlement the amount of the tax so paid, and for that purpose to require the Commissioner to furnish to him a certificate specifying the amount of the tax so paid, and any certificate so furnished shall be conclusive evidence of the facts appearing therein. Section 26(7) Where, under this section, income is deemed to be income of the settlor, it shall be deemed to be income received by him as a person beneficially entitled thereto under the settlement. [Act No. 8 of 2021, s. 12.] - 27 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 27. Accounting periods not coinciding with year of income, etc.
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.
Section 27. Accounting periods not coinciding with year of income, etc. Section 27(1) Where any person usually makes up the accounts of his business for a period of twelve months ending on any day other than 31 st December, then, for the purpose of ascertaining his total income for any year of income, the income of any such accounting period ending on such other date shall, subject to such adjustment as the Commissioner may consider appropriate, be taken to be income of the year of income in which the accounting period ends– (a) in the case of a person other than an individual, as regards all income charged under section 3 of this Act; and (b) in the case of an individual, as regards all income charged under that section other than gains or profits from any employment or services rendered. Section 27(1A) A person carrying on an incorporated business may subject to the prior written approval of the Commissioner alter the date to which the accounts of the business are made up. Section 27(1B) A person seeking the approval of the Commissioner under subsection (1A) shall apply in writing to the Commissioner at least six months before the date to which the accounts are intended to be made up. Section 27(1C) The Commissioner shall within three months from the date of receipt of the application communicate his decision in writing to the applicant. Section 27(1D) Where the Commissioner does not comply with subsection (1C), the application shall be deemed allowed. Section 27(2) Where a person makes up the accounts of his business for a period greater or less than twelve months, the Commissioner may, subject to such adjustments as he may consider appropriate, including the assessment for a year of income which, but for any alteration in the date to which the accounts of the business are made up, would have been assessed for that year of income, treat the income of that accounting period as income of the year of income in which the accounting period ends, and tax shall be charged accordingly. Section 27(3) The accounting period of a person carrying on any unincorporated business shall be the period of twelve months ending on 31st December in each year; and Section 27(4) Any person to whom subsection (3) applies shall not later than 31st December, 1998 change the accounting date to comply with the provisions of that subsection. [Act No. 7 of 1976, s. 2, Act No. 8 of 1996, s. 34, Act No. 9 of 2025, s. 17.] - 28 Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 28. Income and expenditure after cessation of business
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.
Section 28. Income and expenditure after cessation of business Section 28(1) Where a sum is received by any person after the cessation of his business which, if it had been received prior to such cessation, would have been included in the gains or profits from such business, then, to the extent to which such sum has not already been included in such gains or profits, such sum shall be income of such person for the year of income in which such sum is received. Section 28(2) Where any sum is paid by any person after the cessation of his business which, if it had been paid prior to such cessation, would have been deductible in computing his gains or profits from such business, then, to the extent to which such sum has not already been deducted in computing such gains or profits, it shall be deducted in ascertaining his total income for the year of income in which it is paid and to the extent that such sum or remainder of such sum, as the case may be, cannot be so deducted, it shall be deducted in ascertaining his total income for the year of income in which such business ceased. [Act No. 8 of 1997, s. 37.] - 28A Verify source ↗
ASCERTAINMENT OF TOTAL INCOME - 28A. Special Operating Framework Arrangement
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.
Section 28A. Special Operating Framework Arrangement Section A company which– (a) is engaged in business under a special operating framework arrangement with the Government; (b) incorporated for purposes of undertaking the manufacturer of human vaccines or other manufacturing activities including refining; and (c) whose capital investment is at least ten billion shillings, shall be subject to the rate of tax specified in the special operating framework arrangement with the Government. [Act No. 22 of 2022, s. 13, Act No. 4 of 2023, s. 18]
Part IX
ASSESSMENTS
- 73 Verify source ↗
ASSESSMENTS - 73. Assessments
The Commissioner must assess every person with taxable income promptly after the filing deadline.
Section 73. Assessments Section 73(1) Save as otherwise provided, the Commissioner shall assess every person who has income chargeable to tax as expeditiously as possible after the expiry of the time allowed to such person under this Act for the delivery of a return of income. Section 73(2) Where a person has delivered a return of income, the Commissioner may– (a) (i) accept the return and deem the amount that person has declared as his self assessment in which case no further notification need be given; or (ii) where the return is in respect of a year of income prior to 1992, accept that return and assess him on the basis thereof; (b) if he has reasonable cause to believe that such return is not true and correct, determine, according to the best of his judgment, the amount of the income of that person and assess him accordingly. Section 73(3) Where a person has not delivered a return of income for any year of income, whether or not he has been required by the Commissioner so to do, and the Commissioner considers that the person has income chargeable to tax for that year, he may, according to the best of his judgment, determine the amount of the income of that person and assess him accordingly; but such assessment shall not affect any liability otherwise incurred by such person under this Act in consequence of his failure to deliver the return. [Act No. 8 of 1991, s. 66, Act No. 6 of 1994, s. 43.] - 74 Verify source ↗
ASSESSMENTS - 74.[Repealed by Act No. 16 of 2014, s. 17.]
Section 74 has been repealed.
Section 74.[Repealed by Act No. 16 of 2014, s. 17.] - 74A Verify source ↗
ASSESSMENTS - 74A. Instalment assessment
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 74A. Instalment assessment Section 74A(1) Without prejudice to his powers under section 73, Commissioner may proceed to make an instalment assessment for tax under section 12 in respect of any person after the expiry of the time allowed to that person under this Act for the payment of instalment tax; and Section 74A(2) When a person has paid instalment tax under section 12 he shall thereupon be deemed to have been assessed for the purpose of instalment tax under this section on the basis of the amount of instalment tax paid; and Section 74A(3) Where a person has not paid instalment tax for a year of income and the Commissioner considers that the person has or will have income chargeable to tax for that year, he may, according to the best of his judgment, estimate the income of that person and make an instalment assessment upon him accordingly. [Act No. 10 of 1990, s. 54, Act No. 8 of 1996, s. 42, Act No. 16 of 2014, s. 18.] - 74B Verify source ↗
ASSESSMENTS - 74B.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 74B was deleted by Act No. 29 of 2015, 2nd Sch.
Section 74B.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 75 Verify source ↗
ASSESSMENTS - 75.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 75 is deleted.
Section 75.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 75A Verify source ↗
ASSESSMENTS - 75A.[Repealed by Act No. 38 of 2016, s. 13.]
Section 75A has been repealed by Act No. 38 of 2016, s. 13.
Section 75A.[Repealed by Act No. 38 of 2016, s. 13.] - 75B Verify source ↗
ASSESSMENTS - 75B.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 75B has been deleted by Act No. 29 of 2015, 2nd Schedule.
Section 75B.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 76 Verify source ↗
ASSESSMENTS - 76. Assessment not to be made on certain employees
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.
Section 76. Assessment not to be made on certain employees Section The Commissioner shall not assess an employee for any year of income– (a) if such employee had no income chargeable to tax for such year of income other than income consisting of emoluments; and (b) if on the basis of such emoluments and the personal reliefs to which such employee is entitled the tax payable by that employee in respect of those emoluments has been recovered by deduction under section 37 of this Act, unless, prior to the expiry of seven years after that year of income, such employee applies to the Commissioner to be assessed, whether in connexion with a claim for repayment of tax or otherwise, or the Commissioner considers an assessment to be necessary or expedient so as to arrive at the correct amount of the tax to be charged upon or to be payable by such employee for such year of income. - 76A Verify source ↗
ASSESSMENTS - 76A. Assessment not to be made on certain incomes
The Commissioner must not assess a person on income already subject to withholding tax that is a final tax.
Section 76A. Assessment not to be made on certain incomes Section The Commissioner shall not assess any person for any year of income on that portion of income which has been subject to withholding tax which is also a final tax. [Act No. 8 of 1991, s. 67.] - 77 Verify source ↗
ASSESSMENTS - 77.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 77 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 77.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 78 Verify source ↗
ASSESSMENTS - 78.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 78 was deleted by Act No. 29 of 2015, 2nd Sch.
Section 78.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 79 Verify source ↗
ASSESSMENTS - 79.[Deleted by Act No. 29 of 2015, 2nd Sch.]
This section has been deleted.
Section 79.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 80 Verify source ↗
ASSESSMENTS - 80.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 80 has been deleted.
Section 80.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 81 Verify source ↗
ASSESSMENTS - 81.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 81 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 81.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Part V
PERSONAL RELIEF
- 29 Verify source ↗
PERSONAL RELIEF - 29. General
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.
Section 29. General Section 29(1) Subject to this section and to section 77, a resident individual who for a year of income is in receipt of taxable income and has furnished a return of income in respect of that year of income, shall, in respect of that year of income, be entitled to a personal relief which shall be set off against tax payable by him for that year of income at the rate and subject to the limitation specified in Head A of the Third Schedule: Provided that– (i) notwithstanding that an individual has furnished no such return of income, he shall, for the purposes of section 37, be given the personal relief which he will be entitled to for that year of income; and (ii) nothing in this section shall prevent the Commissioner from granting to an individual in an assessment made under subsection (3) of section 73 that personal relief. Section 29(2) On any change of relevant circumstances occurring during any year of income, an individual shall be entitled only to the proportion of the amount of the personal relief which he was entitled to at the commencement of such year of income as– (a) the number of full months in such year of income up to the end of the month in which he ceased to be resident; or (b) the number of full months in such year of income from the commencement of the month in which he become resident, as the case may be, bears to twelve; and in this subsection "relevant circumstances" means the death or departure referred to in subsection (3) or the arrival referred to in subsection (4) of this section. Section 29(3) Where an individual, having been a resident individual, dies or departs from Kenya with the intention of permanently leaving Kenya, he shall, in respect of that year of income, be deemed to have been resident for the number of months in such year of income up to and including the month in which he dies or so departs, as the case may be: Provided that, where such individual is entitled to leave with pay following cessation of his employment in Kenya and part of such leave relates to the period after his departure from Kenya, he shall be deemed for the purposes of this section to have departed from Kenya on the date when the leave expires. Section 29(4) When an individual arrives in Kenya with the intention of becoming resident therein at any time after the beginning of any year of income, he shall, in respect of such year of income, be deemed to have been resident for the number of months in such year of income from and including the month in which he arrived. [Act No. 8 of 1997, s. 38.] - 30 Verify source ↗
PERSONAL RELIEF - 30. Personal relief
A resident individual who receives taxable income is entitled to a tax relief called the personal relief.
Section 30. Personal relief Section A resident individual in receipt of taxable income shall be entitled to a tax relief in this Act referred to as the personal relief. [Act No. 12 of 1977, s. 5, Act No. 8 of 1996, s. 35.] - 30A Verify source ↗
PERSONAL RELIEF - 30A.[Repealed by Act No. 12 of 2024, s. 10.]
Section 30A has been repealed by Act No. 12 of 2024, s. 10.
Section 30A.[Repealed by Act No. 12 of 2024, s. 10.] Section [Act No. 9 of 2018, Sch., Act No. 2 of 2024, 3rd Sch., Act No. 12 of 2024, s. 10.] - 31 Verify source ↗
PERSONAL RELIEF - 31. Insurance relief
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.
Section 31. Insurance relief Section 31(1)(a) the individual has paid a premium for an insurance made by the individual on the individual’s life or the life of the individual’s spouse or child and that the insurance secures a capital sum whether or not in conjunction with another benefit, and that the insurance is made with an insurance company lawfully carrying on in Kenya the business of life insurance, and that sums payable under the insurance are payable in Kenya in the lawful currency of Kenya; or Section 31(1)(b) the individual's employer has paid a premium for that insurance on the life, and for the benefit, of that individual which is charged with tax under this Act on that individual; or Section 31(1)(c) the individual and the individual's employer, has paid a premium for the insurance referred to in paragraph (b), Section 31(1)(iv) the provisions of this section shall apply only to life or education policies whose term commences on or after 1st January, 2003; Section 31(1)(v) a health policy whose term commences on or after 1st January, 2007 shall qualify for relief; Section 31(1)(vi) where a policy is surrendered before its maturity, all the relief granted to the policyholder shall be recovered from the surrender value of the policy and remitted to the Commissioner by the insurer. Section 31(2) In this section "child", means any child of the resident individual and includes a step-child, an adopted child and an illegitimate child who was under the age of eighteen years on the date the premium was paid. - 31A Verify source ↗
PERSONAL RELIEF - 31A. Post-retirement medical fund relief
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 31A. Post-retirement medical fund relief Section A resident individual who proves that in a year of income the person has contributed to a post-retirement medical fund shall for that year of income be entitled to a personal relief in this Act referred to as the post-retirement medical fund relief. [ No. 4 of 2023, s. 20] - 32 Verify source ↗
PERSONAL RELIEF - 32.[Deleted by Act No. 8 of 1991, s. 62.]
Section 32 has been deleted.
Section 32.[Deleted by Act No. 8 of 1991, s. 62.] - 33 Verify source ↗
PERSONAL RELIEF - 33.[Repealed by Act No. 8 of 1991, s. 62.]
Section 33 has been repealed.
Section 33.[Repealed by Act No. 8 of 1991, s. 62.]
Part VI
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF
- 34 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 34. Rates of tax
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 34. Rates of tax Section 34(1) The tax chargeable on any income specified in this Act shall be at the rate specified in the Third Schedule. Section 34(2) Subject to subsection (1), the transfer of interest in a person shall be charged in accordance with the Ninth Schedule. Section 34(3) In this section “person” does not include a partnership. - 34A Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 34A.[Repealed by Act No. 8 of 1978, s. 9(k).]
Section 34A was repealed by Act No. 8 of 1978, s. 9(k).
Section 34A.[Repealed by Act No. 8 of 1978, s. 9(k).] - 35 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 35. Deduction of tax from certain income
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.
Section 35. Deduction of tax from certain income Section 35(1)(a) a commission paid to a non-resident agent in respect of flowers, fruits or vegetables exported from Kenya and auctioned in any market outside Kenya and audit fees for analysis of maximum residue limits paid to a non-resident laboratory or auditor; or Section 35(1)(a)(i) a commission paid to a non-resident agent in respect of flowers, fruits or vegetables exported from Kenya and auctioned in any market outside Kenya and audit fees for analysis of maximum residue limits paid to a non-resident laboratory or auditor; or Section 35(1)(a)(ii) a commission paid by a resident air transport operator to a non-resident agent in order to secure tickets for international travel; Section 35(1)(a)(iii) payments made by the national carrier to a non-resident for specialized technical, maintenance, compliance, training, or digital systems support services, where such services are not available in Kenya or the service provider is certified or accredited by an international regulatory, standard-setting, or licensing body. Section 35(1)(b) a royalty or natural resource income; Section 35(1)(c) where the bond, loan, claim, obligation or other evidence of indebtedness is acquired by a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule from a non-resident person, such an exempt person or financial institution shall deduct tax from the difference between the acquisition price and the original issue price; and Section 35(1)(c)(i) where the bond, loan, claim, obligation or other evidence of indebtedness is acquired by a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule from a non-resident person, such an exempt person or financial institution shall deduct tax from the difference between the acquisition price and the original issue price; and Section 35(1)(c)(ii) where a non-resident person disposes of a bond, loan, claim, obligation or other evidence of indebtedness acquired from a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule, tax shall be deducted upon final redemption from the difference between the final redemption price and the acquisition price, if the exempt person or financial institution certifies the acquisition price to the satisfaction of the Commissioner; Section 35(1)(d) a dividend; Section 35(1)(e) interest and deemed interest; Section 35(1)(f) a pension or retirement annuity: Section 35(1)(g) any appearance at, or performance in, a place (whether public or private) for the purpose of entertaining, instructing, taking part in any sporting event or otherwise diverting an audience; Section 35(1)(h) any activity by way of supporting, assisting or arranging any appearance or performance referred to in paragraph (g) of this subsection, Section 35(1)(i) withdrawals; Section 35(1)(j) deleted by Act No. 38 of 2016, s. 9(a); Section 35(1)(k) deleted by Act No. 16 of 2014, s. 11; Section 35(1)(l) gains or profits from the business of transmitting messages which is chargeable to tax under section 9 (2); Section 35(1)(m) deleted by Act No. 23 of 2019, s. 12(i); Section 35(1)(n) insurance or reinsurance premium, except insurance or reinsurance premium paid in respect of aircraft; Section 35(1)(o) sales promotion, marketing, advertising services, and transportation of goods (excluding air and shipping transport services); Section 35(1)(p) gains from financial derivatives; Section 35(1)(q) digital content monetisation; Section 35(1)(r) supply of goods to a public entity; Section 35(1)(s) making or facilitating payment on a digital marketplace; and Section 35(1)(t) deleted by Act No. 9 of 2025, s. 18(a)(iii); Section 35(1)(u) gains or profits which are chargeable to tax under section 9(1) derived from the business of a ship owner or charterer; Section 35(1A) Subsection (1) shall not apply to payments made by filming agents and filming producers approved by the Kenya Film Commission to actors and crew members approved for purposes of paragraphs (g) and (h). Section 35(2) Deleted by Act No. 8 of 1978, s. 9(l)(ii). Section 35(3)(a) a dividend; Section 35(3)(b) where the bond, loan, claim, obligation or other evidence of indebtedness is acquired by a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule from the resident person, such an exempt person or financial institution shall deduct tax from the difference between the acquisition price and the original issue price; and Section 35(3)(b)(i) where the bond, loan, claim, obligation or other evidence of indebtedness is acquired by a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule from the resident person, such an exempt person or financial institution shall deduct tax from the difference between the acquisition price and the original issue price; and Section 35(3)(b)(ii) where the resident person disposes of a bond, loan, claim, obligation or other evidence of indebtedness acquired from a person exempt under the First Schedule or a financial institution specified in the Fourth Schedule, tax shall be deducted upon final redemption from the difference between the final redemption price and the acquisition price, if the exempt person or financial institution certifies the acquisition price to the satisfaction of the Commissioner; Section 35(3)(c) an annuity payment excluding that portion of the payment which represents the capital element; Section 35(3)(d) a commission or fee paid or credited by an insurance company to any person for the provision, whether directly or indirectly, of an insurance cover to any person or group of persons (except a commission or fee paid or credited to another insurance company); Section 35(3)(e) a pension or a lump sum commuted or withdrawn from a registered pension fund or a lump sum out of a registered provident fund in excess of the tax exempt amounts specified in section 8(4) and (5), or any amount paid out of a registered individual retirement fund, or a benefit paid out of the National Social Security Fund in excess of the tax exempt amount specified in section 8(5); Section 35(3)(ee) surplus funds withdrawn from or paid out of registered pension or provident funds; Section 35(3)(f) management or professional fee or training fee, the aggregate value of which is twenty-four thousand shillings or more in a month: Provided that for the purposes of this paragraph, contractual fee within the meaning of "management or professional fee" shall mean payment for work done in respect of building, civil or engineering works; Section 35(3)(g) a royalty or natural resource income; Section 35(3)(h) withdrawals; Section 35(3)(i) deleted by Act No. 38 of 2016, s. 9 (b)(ii); Section 35(3)(j) rent, premium or similar consideration for the use or occupation of immovable property; Section 35(3)(k) sales, promotion, marketing and adverttising services; Section 35(3)(l) digital content monetisation; Section 35(3)(m) supply of goods to a public entity; Section 35(3)(n) making or facilitating payment on a digital marketplace; and Section 35(3)(o) Deleted by Act No. 9 of 2025, s. 18(b)(i). Section 35(3A) Notwithstanding the provisions of subsection (3), only a person appointed for that purpose by the Commissioner, in writing, shall deduct tax under paragraph (j) of that subsection. Section 35(3AA) A person who receives rental income on behalf of the owner of the premises shall deduct tax therefrom: Provided that only a person appointed by the Commissioner in writing for that purpose may deduct tax under this section. Section 35(3AB) A person who deducts rental income tax under this section shall, within five working days after the deduction was made, remit the amount so deducted to the Commissioner together with a return in writing of the tax deducted and such other information as the Commissioner may require. Section 35(3AC) The Commissioner shall, upon receipt of the amount remitted under subsection (3AB), furnish the person from whom the rental income tax was withheld with a certificate stating the amount of the rent and tax deducted therefrom. Section 35(3B) Deleted by Act No. 16 of 2014, s. 11(c). Section 35(3C) Deleted by Act No. 9 of 2007, s. 23. Section 35(4) No deduction shall be made under subsection (1) or (3) from a payment which is income exempt from tax under this Act, or to which an order made under this Act, or to which an order made under subsection (7) or (8) applies. Section 35(5)(a) remit the amount so deducted to the Commissioner together with a return in writing of the amount of the payment the amount of tax deducted, and such other information as the Commissioner may specify; and Section 35(5)(b) furnish the person to whom the payment is made with a certificate stating the amount of the payment and the amount of the tax deducted. Section 35(5A) The Commissioner shall pay the tax deducted from withdrawals under subsection (1)(i) and (3)(h) into the Sports, Arts and Social Development Fund established under section 24 of the Public Finance Management Act, (Cap 412A). Section 35(6) Deleted by Act No. 38 of 2016, s. 9(d). Section 35(6A) Deleted by Act No. 9 of 2025, s. 18(d). Section 35(6B) Deleted by Act No. 29 of 2015, 2nd Sch. Section 35(6C) Deleted by Act No. 9 of 2025, s. 18(e). Section 35(6D) A person aggrieved by the imposition, by the Commissioner, of a penalty under this section may, by notice in writing to the Commissioner, object to the imposition within thirty days of the date of service of the notice of the imposition. Section 35(6E) Deleted by Act No. 9 of 2025, s. 18(f). Section 35(7) The Cabinet Secretary may, by notice in the Gazette , exempt from the provisions of subsection (3) of this section any payment or class of payments made by any person or class of persons resident or having a permanent establishment in Kenya. Section 35(8) The Cabinet Secretary may, by notice in the Gazette , amend or add to the Fourth Schedule in respect of financial institutions resident or having a permanent establishment in Kenya. - 36 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 36. Deduction of tax from annuities, etc., paid under a will, etc.
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.
Section 36. Deduction of tax from annuities, etc., paid under a will, etc. Section 36(1) The trustees of a will or settlement shall, upon payment of any annuity under such will or settlement, deduct therefrom tax at the rate paid or payable on the income out of which such annuity is payable: Provided that– (i) no deduction of tax shall be made from such part of an annuity as such is paid out of income in respect of which no tax is paid or payable; (ii) any annuity directed to be paid free of tax shall be paid without deduction of tax, and any sums paid by the trustees to the annuitant to meet his liability to tax on the annuity shall also be paid without deduction of tax and the trustees shall be entitled to repayment of the tax paid by deduction or otherwise on such an amount of the income of the trust as is equal to the total of the annuity and the sums so paid; (iii) the Commissioner may authorize the trustees on payment of any annuity other than an annuity directed to be paid free of tax to deduct, from the amount of such annuity, tax at a rate lower than the rate paid or payable on the income, or no tax, and thereupon the trustees shall deduct from the amount of any such annuity so paid tax at the lower rate, or no tax, as the case may be. Section 36(2) For the purposes of this section, where an annuity is not payable out of income of specified assets, it shall be deemed to be payable out of income liable to tax under this Act to the extent to which such income is available for the payment thereof. Section 36(3) Where section 11(2)(a) applies the trustee shall furnish each person to whom or on whose behalf amounts are paid in a year of income with a certificate setting out the gross amount of the payments, the amount of tax appropriate thereto, and the net amount so paid in such year of income. - 37 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 37. Deductions of tax from emoluments
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.
Section 37. Deductions of tax from emoluments Section 37(1) An employer paying emoluments to an employee shall deduct therefrom, and account for tax thereon, to such extent and in such manner as may be prescribed. Section 37(1A) An employer shall, in computing the allowable deductions under subsection (1), grant an employee all applicable deductions, reliefs and exemptions provided under this Act. Section 37(2)(a) to deduct tax thereon; or Section 37(2)(b) to account for tax deducted thereon; Section 37(2)(c) deleted by Act No. 9 of 2025, s. 19(b). Section 37(3) Deleted by Act No. 22 of 2022, s. 17. Section 37(4) Any tax deducted under this section from the emoluments of an employee shall be deemed to have been paid by that employee and shall be set-off for the purposes of collection against tax charged on that employee in respect of those emoluments in any assessment for the year of income in which such emoluments are received. Section 37(5) Where a person who is required under this section to deduct tax fails to remit the amount of any deduction to such person as the Commissioner may direct within the time limit specified in rules made under section 130, the provisions of this Act relating to the collection and recovery of tax, and the payment of interest thereon, shall apply to the collection and recovery of that amount as if it were tax due and payable by that person, the due date for the payment of which is the date specified in rules made under section 130 by which that amount should have been remitted to the payee. Section 37(5A) An employer aggrieved by the imposition of a penalty by the Commissioner or any other decision taken by the Commissioner under this section may, by notice in writing to the Commissioner, within thirty days, object to such imposition or decision. Section 37(5B) deleted by Act No. 9 of 2025, s. 19(b). Section 37(6) Deleted by Act No. 38 of 2016, s. 10(a). Section 37(7) Deleted by Act No. 38 of 2016, s. 10(b). [Act No. 7 of 1976, s. 2, Act No. 1 of 1982, s. 3, Act No. 8 of 1983, s. 15, Act No. 8 of 1997, s. 39, Act No. 5 of 1998, s. 37, Act No. 9 of 2000, s. 47, Act No. 8 of 2008, s. 34, Act No. 10 of 2010, s. 26, Act No. 29 of 2015, Sch., Act No. 38 of 2016, s. 10, Act No. 22 of 2022, s. 17, Act No. 9 of 2025, s. 19.] - 37A Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 37A. Penalty for failure to make deductions under section 35, 36 or 37
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 37A. Penalty for failure to make deductions under section 35, 36 or 37 Section Where a corporate body which is required to make a deduction under sections 35, 36 or 37, fails to remit the deducted amount as required or directed by the Commissioner, every director and every officer of the corporate body concerned with the management thereof, shall be guilty of an offence, unless he proves to the satisfaction of the Court that he did not know, and could not reasonably be expected to know that the deducted amount had not been remitted and that he took all reasonable steps to ensure that the offence was not committed, and shall be liable to a fine of not less than ten thousand shillings but not more than two hundred thousand shillings or to imprisonment for a term not exceeding two years, or to both. [Act No. 8 of 1991, s. 63.] - 38 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 38. Application to Government
Section 38. Application to Government
Section 38. Application to Government - 39 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 39. Set-off of tax
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 39. Set-off of tax Section 39(1) An amount of tax which– (a) has been deducted under sections 35, 36 or 37; (b) has been borne by a trustee, executor or administrator in his capacity as such on an amount paid as income to a beneficiary; or (c) has been paid by a person under section 12A, shall be deemed to have been paid by the person chargeable with that tax and shall be set off for the purposes of collection against the tax charged on that person for the year of income in respect of which it was deducted, and where an assessment is made by the Commissioner on a person for a year of income under section 73 the amount of tax which has already been paid under a provisional assessment on that person for that year of income shall be set off for the purposes of collection against the tax charged in the assessment made under section 73; Section 39(2) If any citizen of Kenya chargeable to tax in Kenya for any year of income on employment income or income in respect of any activity under section 10 (1)(e) of this Act accrued in or derived from another country proves to the satisfaction of the Commissioner that he has paid tax in such other country for such year of income in respect of the same income, he shall be entitled to set-off by way of credit of the same tax against the tax charged in Kenya on such income. Section 39(3) The tax chargeable on the income of any person in respect of which set-off is to be allowed under this section shall be taken to be the amount by which the tax chargeable (before set-off under this section) in respect of his employment income or income specified under section 10 (1)(e) is increased by the inclusion of such income in his employment income or income specified under section 10(1)(e). Section 39(4) Credit under this section shall not exceed the amount of tax payable in Kenya on such employment income or income in respect of any activity under section 10(1)(e). [Act No. 20 of 1989, Sch., Act No. 7 of 1990, Sch., Act No. 6 of 2001, s. 50, Act No. 9 of 2007, s. 24, Act No. 8 of 2008, s. 35, Act No. 22 of 2022, s. 18, Act No. 9 of 2025, s. 20.] - 39A Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 39A.[Repealed by Act No. 8 of 2009, s. 26.]
Section 39A was repealed by Act No. 8 of 2009, s. 26.
Section 39A.[Repealed by Act No. 8 of 2009, s. 26.] - 39B Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 39B. Set-off tax rebate for apprenticeships
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 39B. Set-off tax rebate for apprenticeships Section 39B(1) Any employer who engages at least ten university or technical and vocational education and training graduates as apprentices for a period of six to twelve months during any year of income shall be eligible for tax rebate in the year subsequent to the year of such engagement. Section 39B(2) The Cabinet Secretary may by notice in the Gazette make regulations for the better carrying out of the provisions of this section. [Act No. 14 of 2015, s. 13, Act No. 8 of 2021, s. 14.] - 40 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 40.[Repealed by Act No. 8 of 1978, s. 9(m).]
Section 40 was repealed.
Section 40.[Repealed by Act No. 8 of 1978, s. 9(m).] - 41 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 41. Special arrangements for relief from double taxation
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.
Section 41. Special arrangements for relief from double taxation Section 41(1) Every special arrangement for relief from double taxation made with the Government of any country outside of the Republic of Kenya with a view of affording relief from double taxation in relation to income tax and any taxes of similar character imposed by the laws of that country shall, subject to subsection (2) but notwithstanding any other provision to the contrary in this Act or in any other written law, have effect in relation to income tax, and every such agreement shall be subject to the provisions of the Treaty Making and Ratification Act (Cap. 4D). Section 41(2) Subject to subsection (3), where an arrangement made under this section provides that income derived from Kenya is exempt or excluded from tax, or the application of the arrangement results in a reduction in the rate of Kenyan tax, the benefit of that exemption, exclusion, or reduction shall not be available to a person who, for the purposes of the arrangement, is a resident of the other contracting state if fifty per cent or more of the underlying ownership of that person is held by a person or persons who are not residents of that other contracting state for the purposes of the agreement. Section 41(3) Subsection (2) shall not apply if the resident of the other contracting state is a company listed in a stock exchange in that other contracting state. Section 41(4) In this section, the terms "person" and "underlying ownership" have the respective meanings assigned to them in the Ninth Schedule. [Act No. 7 of 1976, s. 2, Act No. 16 of 2014, s. 12, Act No. 8 of 2021, s. 15.] - 41A Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 41A. Agreements for exchange of information
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.
Section 41A. Agreements for exchange of information Section The Cabinet Secretary may, by notice in the Gazette , from time to time declare that arrangements made with the government of any country with the view of exchanging information relating to income tax or other taxes of a similar character imposed by the laws of that country, shall, notwithstanding anything to the contrary in this Act or any other written law, have effect in relation to income tax, and that notice shall, subject to the provisions of this section, have effect accordingly. [Act No. 4 of 2012, s. 17, Act No. 8 of 2021, s. 16.] - 42 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 42. Computation of credits under special arrangements
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.
Section 42. Computation of credits under special arrangements Section 42(1) This section shall have effect where, under a special arrangement, foreign tax payable in respect of income derived by a person resident in Kenya is to be allowed as a credit against tax chargeable in respect of that income. Section 42(2) Deleted by Act No. 7 of 1976, s. 2. Section 42(3) The tax chargeable upon the income of a person in respect of which a credit is to be allowed under a special arrangement shall be the amount by which the tax chargeable (before allowance of the credit) in respect of his total income is increased by the inclusion of that income in his total income; but where foreign tax is payable at different rates on different parts of the total income of that person, the tax chargeable on that income shall be apportioned to each part in such amounts as the Commissioner may determine to be just and reasonable. Section 42(4) A credit shall not exceed the lesser of the tax computed in accordance with subsection (3) of this section or the foreign tax chargeable upon the income in respect of which the credit is to be allowed or upon each part of that income. Section 42(5) Where– (a) any special arrangement provides, in relation to dividends of some classes but not in relation to dividends of other classes, that foreign tax not charged directly or by deduction in respect of dividends is to be taken into account in considering whether any, and if so, what, credit is to be given against tax in respect of those dividends; and (b) a dividend is paid which is not of a class to which those arrangements so apply, then, if such dividend is paid to a company which controls, directly or indirectly, not less than one half of the voting power in the company paying the dividend, a credit shall be allowed as if such dividend were a dividend of a class in relation to which such arrangements so provide. Section 42(6) A credit shall not be allowed under any special arrangement against tax chargeable upon the income of any person for a year of income if he elects by notice in writing to the Commissioner that credit shall not be allowed in the case of his income for such year of income. Section 42(7) Where the amount of a credit or exemption given under any special arrangement is rendered excessive or insufficient by reason of an adjustment of the amount of income tax, or tax of a similar nature, payable either in Kenya or elsewhere, nothing in this Act limiting the time for the making of assessments or claims for relief shall apply to any assessment or claim to which the adjustment gives rise, being an assessment or claim made within six years from the time when all such assessments, adjustments and other determinations have been made, whether in Kenya or elsewhere, that are material in determining whether any and, if so, what credit is to be given. Section 42(8) In this section, "credit" means a credit mentioned in subsection (1). [Act No. 7 of 1976, s. 2.] - 43 Verify source ↗
RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF - 43. Time limit
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).
Section 43. Time limit Section Subject to section 42(7) of this Act, any claim for an allowance by way of credit under this Part shall be made to the Commissioner within six years from the end of the year of income to which it relates.
Part VII
PERSONS ASSESSABLE
- 44 Verify source ↗
PERSONS ASSESSABLE - 44. Wife’s income, etc.
If a person's income is chargeable to tax, that income is assessed on that person and the tax charged on that person.
Section 44. Wife’s income, etc. Section Where under this Act the income of any person is chargeable to tax, then, subject to this Act, such income shall be assessed on, and the tax thereon charged on, such person. - 45 Verify source ↗
PERSONS ASSESSABLE - 45.[Repealed by Act No. 4 of 2023, s. 22.]
Section 45 has been repealed by Act No. 4 of 2023, s. 22.
Section 45.[Repealed by Act No. 4 of 2023, s. 22.] - 46 Verify source ↗
PERSONS ASSESSABLE - 46. Income of incapacitated person
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.
Section 46. Income of incapacitated person Section The income of an incapacitated person shall be assessed on, and the tax thereon charged on, such person in the name of his trustee, guardian, curator, committee or receiver appointed by a court, in the same manner and to the like amount as such incapacitated person would have been assessed and charged if he were not an incapacitated person. - 47 Verify source ↗
PERSONS ASSESSABLE - 47. Income of non-resident person
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.
Section 47. Income of non-resident person Section 47(1) The income of a non-resident person shall be assessed on, and the tax thereon charged on, such person either in his name or in the name of his trustee, guardian, curator or committee, or of any attorney, factor, agent, receiver or manager. Section 47(2) The master of any ship, or the captain of any aircraft, owned or chartered by a non-resident person who is chargeable to tax under section 9 of this Act shall (though not to the exclusion of any other agent) be deemed the agent of such non-resident person for the purposes of this section. Section 47(3) Nothing in this section shall render a non-resident person assessable or chargeable in the name of a broker, general commission agent or other agent where such broker, general commission agent or other agent is not the normal agent of the non-resident person. - 48 Verify source ↗
PERSONS ASSESSABLE - 48. Income of deceased person, etc.
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.
Section 48. Income of deceased person, etc. Section 48(1) The income accrued to, or received prior to, the date of the death of a deceased person which would, but for his death, have been assessed and charged to tax on him for a year of income shall, subject to section 79(1)(d) of this Act, be assessed on, and the tax charged on, his executors or administrators for such year of income. Section 48(2) Any amount received by the executors or administrators of such deceased person which would, but for his death, have been his income for any year of income shall be deemed to be income of his executors or administrators and shall be assessed on, and the tax charged on them for such year of income. Section 48(3) Where any executors or administrators distribute the estate of a deceased person before any change in the rate of tax at which they are liable in respect of a year of income, they shall not be liable in respect of any increased tax resultant from that change. - 49 Verify source ↗
PERSONS ASSESSABLE - 49. Liability of joint trustees
Each trustee is jointly and severally liable to pay any tax charged in an assessment.
Section 49. Liability of joint trustees Section Where two or more persons are trustees, then any assessment made on the trustees in that capacity may be made on any one or more of them but each trustee shall be jointly and severally liable for the payment of tax charged in the assessment. - 50 Verify source ↗
PERSONS ASSESSABLE - 50. Liability of person in whose name income of another person assessed
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.
Section 50. Liability of person in whose name income of another person assessed Section Any person in whose name the income of any other person is assessable under this Act shall be responsible, in relation to the assessment of such income, for doing all such things that are under this Act required to be done by a person whose income is chargeable to tax, and shall be responsible for the payment of tax so charged on him to the extent of any assets of such other person which are in his possession on, or may come into his possession after, the date of the service of a notice of assessment on him. - 51 Verify source ↗
PERSONS ASSESSABLE - 51. Indemnification of representative
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 51. Indemnification of representative Section A person responsible under this Act for the payment of tax on behalf of another person may retain out of any money coming to his hands on behalf of such other person so much thereof as is sufficient to pay such tax, and such person is hereby indemnified against any claim whatsoever for all payments so made by him. - 51A Verify source ↗
PERSONS ASSESSABLE - 51A.[Repealed by Act No. 38 of 2016, s. 11.]
Section 51A has been repealed by Act No. 38 of 2016, s. 11.
Section 51A.[Repealed by Act No. 38 of 2016, s. 11.]
Part VIII
RETURNS AND NOTICES
- 52 Verify source ↗
RETURNS AND NOTICES - 52. Returns of income and notice of chargeability
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 52. Returns of income and notice of chargeability Section 52(1) The Commissioner may, by notice in writing, require a person to furnish him within a reasonable time, not being less than thirty days from the date of service of the notice, with a return of income for any year of income containing a full and true statement of the income of such person, including income deemed to be his under this Act, liable to tax and of those particulars that may be required for the purposes of this Act; and such return shall include a declaration signed by such person, or by the person in whose name he is assessable, that such return is a full and true statement: Provided that in the case of a person carrying on a business has made a provisional return of income, the return of income under this subsection may be made within a period not exceeding nine months from the date to which he makes up the accounts of such business. Section 52(2) In the case of the executors or administrators of a deceased person, or of the liquidator of a resident company, or of a bankrupt, or of a person whom the Commissioner has reason to believe is about to leave Kenya, the Commissioner may, by notice in writing, require him to furnish a return of income at any time whether before or after the end of the year of income to which such return relates. Section 52(3) Every person chargeable to tax for a year of income who– (a) within four months after the end of such year of income; or (b) being a person carrying on a business the accounting period for which ends on some day other than 31st December in such year of income, has not made a provisional return of income for that year of income within four months of the end of such accounting period, has not been required to make a return of income for such year of income under subsection (1) shall, within fourteen days after the expiration of the period of four months, give notice in writing to the Commissioner that he is so chargeable: Provided that an employee shall not be required to give notice– (i) if he had no income chargeable to tax for such year of income other than from emoluments; and (ii) if the tax payable in respect of those emoluments has been recovered by deduction under section 37 of this Act. Section 52(4) Where any business is carried on by two or more persons in partnership, the Commissioner may, by notice in writing, require the precedent resident partner, that is the partner who, of the resident partners– (a) is first named in the agreement of partnership; or (b) if there be no agreement, is specified by name or initials singly, or with precedence to the other partners, in the usual name of the partnership; or (c) is first named in any statement required for the purposes of registration of the business under any law of Kenya; or (d) is the precedent resident active partner if the partner named with precedence is not an active partner, to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return of income of the partnership, ascertained under this Act as if the partnership were a person liable to tax, for any year of income prior to that in which the notice is served containing a full and true statement of the income and of such particulars as may be required for the purposes of this Act, including the names and addresses of the partners together with the amount of the share of the income to which each partner was entitled for such year of income. - 52A Verify source ↗
RETURNS AND NOTICES - 52A.[Deleted by Act No. 8 of 1996, s. 40.]
Section 52A deleted by Act No. 8 of 1996, s. 40.
Section 52A.[Deleted by Act No. 8 of 1996, s. 40.] - 52B Verify source ↗
RETURNS AND NOTICES - 52B. Final return with self-assessment
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 52B. Final return with self-assessment Section 52B(1) Notwithstanding any other provision of this Act– (a) every individual chargeable to tax under this Act shall for any year of income commencing with the year of income 1992, furnish to the Commissioner a return of income, including a self-assessment of his tax from all sources of income, not later than the last day of the sixth month following the end of his year of income; and (b) every person, other than an individual chargeable to tax under the Act, shall for any accounting period commencing on or after 1st January, 1992, furnish to the Commissioner a return of income, including a self-assessment of his tax on such income, not later than the last day of the sixth month following the end of the year of income. Section 52B(2) The return of income together with the declared self-assessment of tax on the declared income, shall be prepared on such a form or forms as shall be prescribed by the Commissioner. Section 52B(3) The declared self-assessment shall be calculated by reference to the appropriate relief and rates of tax in force for the year of income. Section 52B(4) Every company liable to tax under this Act shall also include with the self-assessment and return of income, an assessment and return of any dividend distributed out of untaxed gains or profits due with respect to such tax year and the tax so calculated shall be payable at the due date for the self-assessment. Section 52B(5) Deleted by Act No. 9 of 2025, s. 21(b). - 53 Verify source ↗
RETURNS AND NOTICES - 53.[Repealed by Act No. 16 of 2014, s. 13.]
Section 53 was repealed by Act No. 16 of 2014, s. 13.
Section 53.[Repealed by Act No. 16 of 2014, s. 13.] - 54 Verify source ↗
RETURNS AND NOTICES - 54. Documents to be included in return of income
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.
Section 54. Documents to be included in return of income Section 54(1) Where any person who carries on any business makes a return of income for any year of income, and accounts of his business for any accounting period relating to such year of income have been prepared or examined by another person in a professional capacity, then he shall furnish with such return of income– (a) a copy of such accounts signed by himself and by such other person together with a certificate signed by such other person– (i) where such accounts were prepared by such other person, specifying the nature of the books of accounts and documents from which the accounts were so prepared; and (ii) stating whether and subject to what reservations, if any, he considers that such accounts present a true and fair view of the gains or profits from such business for that accounting period; (b) in the case of a company or partnership, a certificate specifying the nature and amounts of all payments of whatever kind made, and the nature of any benefit, advantage, or facility of whatever kind granted, in the case of a company to the directors thereof and to employees whose emoluments are at the rate of eighty thousand shillings a year or more, or, in the case of a partnership, to the partners; and the certificate shall be signed by a majority of the directors or partners (of whom one shall be the partner who signed the return of income of the partnership), as the case may be, or, if there are less than three such directors or partners, by all such directors or partners: Provided that, in the case of a company, other than a private company, or a wholly owned subsidiary of such a company, the certificate referred to in paragraph (b) of this subsection shall not be furnished unless the Commissioner in a particular case so requires. Section 54(2) The Commissioner may, by notice in writing, require any person who has made a return of income and to whom subsection (1) applies to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a certificate signed by the professional person who prepared or examined the accounts a copy of which was sent with such return– (a) stating whether to the best of his knowledge and belief the certificate referred to in subsection (1)(b) is true and correct; (b) where such accounts were prepared by such professional person, recording the extent of his verification of the books of account and documents produced to him; (c) where such accounts were examined by such professional person, specifying the nature of the books of account and documents produced to him and the extent of his examination thereof. Section 54(3) Where any professional person refuses to give any certificate referred to in subsection (1) or (2) of this section he shall furnish to the person who made the return a statement in writing of his refusal and of the reasons therefor and the person who made such return shall send such statement to the Commissioner. Section 54(4) Where any person who carries on any business makes a return of income for a year of income and accounts of his business for any accounting period relating to such year of income have not been prepared or examined by another person in a professional capacity, then he shall furnish with such return of income such accounts of his business for the accounting period relating to that year of income as are necessary to support the information contained in the return together with– (a) a certificate signed by himself– (i) specifying the nature of the books of account and documents from which the accounts were prepared; (ii) stating whether the accounts reflect all the transactions of his business and present a true and fair view of the gains or profits from such business for such period; (b) in the case of a company or partnership, a certificate specifying the nature and amounts of all payments of whatever kind made to, and the nature of any benefit, advantage, or facility, of whatever kind, granted, in the case of a company, to the directors thereof and to employees whose emoluments are at the rate of forty thousand shillings a year or more, or, in the case of a partnership, to the partners; and the certificate shall be signed by a majority of the directors or partners (of whom one shall be the partner who signed the return of income of the partnership), as the case may be, or, if there are less than three directors or partners, by all the directors or partners. Section 54(4A) Deleted by Act No. 57 of 2012, s. 19. Section 54(4B) Deleted by Act No. 57 of 2012, s. 19. Section 54(5) For the purposes of this section– "accounts" means a balance sheet or statement of assets and liabilities, and a trading account, profit and loss account, receipts and payments accounts, or other similar account however named; "professional person", in the case of a company, means a holder of a practicing certificate or a written authority to practice issued in accordance with the provisions of the Accountants Act (Cap. 531). [Act No. 13 of 1979, s. 5, Act No. 18 of 1979, Sch., Act No. 4 of 1993, s. 47, Act No. 6 of 2001, s. 51, Act No. 4 of 2004, s. 52, Act No. 8 of 2008, s. 36, Act No. 57 of 2012, s. 19.] - 54A Verify source ↗
RETURNS AND NOTICES - 54A. Keeping of records of receipts, expenses, etc.
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 54A. Keeping of records of receipts, expenses, etc. Section 54A(1) A person carrying on a business shall keep records of all receipts and expenses, goods purchased and sold and accounts, books, deeds, contracts and vouchers which in the opinion of the Commissioner, are adequate for the purpose of computing tax. Section 54A(1A) For the purposes of this section, the carrying on of business includes any activity giving rise to income other than employment income. Section 54A(2) Any person who contravenes the provisions of subsection (1) shall be liable to such penalty, not exceeding twenty thousand shillings, as the Commissioner may deem fit to impose. [Act No. 8 of 1996, s. 41, Act No. 16 of 2014, s. 14.] - 54B Verify source ↗
RETURNS AND NOTICES - 54B.[Repealed by Act No. 9 of 2025, s. 22]
Section 54B has been repealed by Act No. 9 of 2025, s. 22.
Section 54B.[Repealed by Act No. 9 of 2025, s. 22] - 55 Verify source ↗
RETURNS AND NOTICES - 55. Books and accounts
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 55. Books and accounts Section 55(1) Where a person appearing to be chargeable with tax fails or refuses to keep the records, books or accounts which, in the opinion of the Commissioner are adequate for the purpose of computing tax, the Commissioner may, by notice in writing, require that person to keep such records, books, and accounts, and to keep them in such language, specified in the notice. Section 55(2) Every person carrying on a business shall preserve every book of account, and every document which is essential to the explanation of any entry in any book of account, relating to the business for a period of not less than ten years after the year of income to which that book of account or document relates: Provided that, subject to section 56, this section shall not require the preservation of a document or book of account– (i) in respect of which the Commissioner has notified that person in writing that its preservation is not required; or (ii) in the case of a company which has gone into liquidation and has been finally dissolved or in the case of the cessation of a business other than one carried on by a company, for more than three months after the date on which the person having custody of the documents or books of account relating to the company or business as the case may be, informs the Commissioner that he proposes to destroy them. For the purposes of this section the “record” means records of all receipts and expenses, goods purchased and sold and accounts, books, deeds contract and vouchers. - 56 Verify source ↗
RETURNS AND NOTICES - 56.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 56 deleted by Act No. 29 of 2015, 2nd Sch.
Section 56.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 57 Verify source ↗
RETURNS AND NOTICES - 57. Return as to salaries, pensions, etc.
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.
Section 57. Return as to salaries, pensions, etc. Section 57(1) The Commissioner may, by notice in writing, require any employer or any other person making the payments herein referred to, to furnish him within reasonable time, not being less than thirty days from the date of service of such notice, with a return containing– (a) the names and addresses of all persons to whom or in respect of whom payments and allowances were made by him in respect of their employment, and the amounts of the payments and allowances made to each of such persons; (b) the names and addresses of all persons to whom he paid pensions in respect of past employment with him or with any other person and the amount of the pension paid to each of such persons: Provided that the Commissioner may by notice in writing exclude from the return any class of person or payment or allowance. Section 57(2) For the purposes of this section, references in subsection (1) thereof– (a) to payments and allowances made to persons in respect of their employment include all payments, and all benefits, advantages and facilities which are referred to in section 5(2)(a), (b), (c) and (e) of this Act; (b) to persons employed include, in relation to a company, a director of that company. Section 57(3) By notice published in two successive issues of the Gazette , the Commissioner may require all employers, or any employer or class of employer, to furnish him within a reasonable time, not being less than thirty days from the date of publication of the second notice, with a written return containing the name and address of the employer and the number of this employees from whose emoluments tax is to be deducted in accordance with section 37 and with such other information as the Commissioner may by that notice require. - 58 Verify source ↗
RETURNS AND NOTICES - 58. Return as to fees, commissions, royalties, etc.
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.
Section 58. Return as to fees, commissions, royalties, etc. Section 58(1) The Commissioner may, by notice in writing, require a person carrying on any business to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return of all payments made by such person of any kind specified in the notice, being– (a) payments made in the course of the business for services rendered, or in anticipation of services to be rendered, by persons not employed in such business; or (b) payments for services rendered, or in anticipation of services to be rendered, in connexion with the formation, acquisition, development, or disposal of the business or a part of it, by persons not employed in such business; or (c) periodical or lump sum payments in respect of any royalty. Section 58(2) A return made under this section shall give the names and addresses of all persons to whom payments were made, the amounts of the payments and such other particulars as may be specified in the notice. Section 58(3) For the purposes of this section– (a) references to payments for services include references to payments in the nature of commission of any kind and references to payments in respect of expenses incurred in connexion with the rendering of services; and (b) references to the making of payments include references to the giving of any form of valuable consideration, and the requirement imposed by subsection (2) to state the amount of a payment shall, in relation to any consideration given otherwise than in the form of money, be construed as a requirement to give particulars of the consideration. - 59 Verify source ↗
RETURNS AND NOTICES - 59. Occupier’s return of rent
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.
Section 59. Occupier’s return of rent Section The Commissioner may, by notice in writing, require any person who is the occupier of premises to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return containing– (a) the name and address of the owner or lessor of such premises; and (b) a full and true statement of the rent or any other consideration payable for the occupation thereof. - 60 Verify source ↗
RETURNS AND NOTICES - 60. Return of lodgers and inmates
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).
Section 60. Return of lodgers and inmates Section The Commissioner may, by notice in writing, require a person who provides accommodation for any lodger or inmate to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return containing the name of every lodger or inmate who is at the date of the notice resident in his house, hotel or institution, and who has (except for temporary absences) been so resident throughout the three months prior to such date of the notice. - 61 Verify source ↗
RETURNS AND NOTICES - 61. Return of income received on account of other persons
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.
Section 61. Return of income received on account of other persons Section The Commissioner may, by notice in writing, at any time require any person who is in receipt of income as the representative of, or on behalf of, any other person who is chargeable to tax in respect thereof, or who would be so chargeable if he were a resident person, to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return containing– (a) a full and true statement of the income; and (b) the name and address of the person to whom it belongs. - 62 Verify source ↗
RETURNS AND NOTICES - 62. Return as to income exempt from tax
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.
Section 62. Return as to income exempt from tax Section The Commissioner may, by notice in writing, require a person to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return containing a full and true statement– (a) of all the income of that person which is exempt from tax or which such person claims to be so exempt; (b) of all such particulars as the Commissioner may specify in such notice in relation to such income and in relation to any assets from which that income is derived. - 63 Verify source ↗
RETURNS AND NOTICES - 63. Return in relation to settlements
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.
Section 63. Return in relation to settlements Section The Commissioner may, by notice in writing, require the trustees of, or a party to, a settlement referred to in section 25 or 26 of this Act to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return containing such particulars as he may consider necessary for the purposes of those sections. - 64 Verify source ↗
RETURNS AND NOTICES - 64. Return in relation to registered pension fund, etc.
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.
Section 64. Return in relation to registered pension fund, etc. Section The Commissioner may, by notice in writing, require the trustees of a registered pension fund or pension scheme and an employer who contributes to any such fund to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return containing– (a) the name and place of residence of every person in receipt of any payment made under the regulations of such fund or scheme; (b) the amount and nature of any such payment; (c) a copy of the accounts of any such fund or scheme up to the last date prior to such notice to which such accounts have been made up; and (d) such further information and particulars in connexion with any such fund or scheme or the regulations relating thereto as the Commissioner may require. - 65 Verify source ↗
RETURNS AND NOTICES - 65. Return of annuity contract benefits
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.
Section 65. Return of annuity contract benefits Section The Commissioner may, by notice in writing, at any time require any person by whom benefits are payable under any annuity contract to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return giving the full name and address of each person to whom any annuity has been paid and the amount of the annuity so paid during any year of income. - 66 Verify source ↗
RETURNS AND NOTICES - 66. Return of resident company dividends
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.
Section 66. Return of resident company dividends Section The Commissioner may, by notice in writing, at any time require any resident company which pays a dividend to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return giving the full name and address of each shareholder to whom such dividend was paid and, in respect of each shareholder, full particulars of his shareholding at the date of declaration of such dividend, the gross amount paid or payable to him, the tax deducted thereupon and such other particulars that the Commissioner may require, as notified generally by notice published in the Gazette or as specified by notice in writing to any particular resident company. - 67 Verify source ↗
RETURNS AND NOTICES - 67. Return as to interest paid or credited by banks, etc.
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.
Section 67. Return as to interest paid or credited by banks, etc. Section 67(1) The Commissioner may, by notice in writing, require any person carrying on a business who, in the ordinary course of the operations thereof, receives or retains money in such circumstances that interest becomes payable thereon, and in particular, any person carrying on the business of banking, to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return of all interest paid or credited by such person during a year specified in such notice in the course of his business, or any part of his business as may be so specified, on money received or retained in Kenya giving the names and addresses of the persons to whom the interest was paid or credited and stating, in each case, the amount of the interest: Provided that the year specified in such notice shall not be a year ending more than three years before the date of the service of the notice. Section 67(2) Without prejudice to the powers conferred by subsection (1) of this section, a separate notice may be served under that subsection as respects the transactions carried on at any branch of a business that may be specified in such notice, and any such separate notice shall, if served on the manager or other person in charge of such branch, be deemed to have been duly served on the person carrying on the business, and where a separate notice is so served as respects the transactions carried on at any branch, any notice subsequently served under subsection (1) on the person carrying on the business shall not be deemed to extend to a transaction to which such separate notice extends. Section 67(3) This section shall, with any necessary adaptation, apply in relation to any Kenya Post Office Savings Bank, and shall have effect notwithstanding anything in any written law precluding the disclosure of the name of a depositor or of information in relation to his deposit. [Act No. 8 of 1978, s. 9.] - 68 Verify source ↗
RETURNS AND NOTICES - 68. Return as to dividends paid by building societies
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 68. Return as to dividends paid by building societies Section 68(1) The Commissioner may, by notice in writing, require any building society to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice, with a return of dividends paid or credited during a year specified in the notice in respect of shares held– (a) in the case of a foreign building society, by a person who is resident in Kenya; and (b) in the case of a resident building society, by any person, Provided that and any such return shall give the names and addresses of the persons to whom the dividends were paid or credited and shall state, in each case, the amount of the dividends: the year specified in any such notice shall not be a year ending more than three years before the date of the service of the notice. Section 68(2) For the purposes of this section– "foreign building society" means a building society registered under section 75 of the Building Societies Act ( Cap. 489 ); "resident building society" means a building society registered under section 6 of the said Act. - 69 Verify source ↗
RETURNS AND NOTICES - 69.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 69 has been deleted.
Section 69.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 70 Verify source ↗
RETURNS AND NOTICES - 70.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 70 was deleted by Act No. 29 of 2015, 2nd Schedule.
Section 70.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 71 Verify source ↗
RETURNS AND NOTICES - 71.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 71 is deleted (Deleted by Act No. 29 of 2015, 2nd Sch.).
Section 71.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 72 Verify source ↗
RETURNS AND NOTICES - 72.[Repealed by Act No. 38 of 2016, s. 12.]
Section 72 has been repealed.
Section 72.[Repealed by Act No. 38 of 2016, s. 12.] - 72A Verify source ↗
RETURNS AND NOTICES - 72A.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 72A has been deleted by Act No. 29 of 2015, 2nd Schedule.
Section 72A.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 72B Verify source ↗
RETURNS AND NOTICES - 72B.[Repealed by Act No. 9 of 2025, s. 23]
Section 72B was repealed by Act No. 9 of 2025, s. 23.
Section 72B.[Repealed by Act No. 9 of 2025, s. 23] - 72C Verify source ↗
RETURNS AND NOTICES - 72C.[Repealed by Act No. 9 of 2025, s. 24]
Section 72C was repealed by Act No. 9 of 2025, s. 24.
Section 72C.[Repealed by Act No. 9 of 2025, s. 24] - 72D Verify source ↗
RETURNS AND NOTICES - 72D.[Repealed by Act No. 23 of 2019, s. 13.]
Section 72D was repealed by Act No. 23 of 2019, s. 13.
Section 72D.[Repealed by Act No. 23 of 2019, s. 13.]
Part X
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES
- 82 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 82.[Repealed by Act No. 40 of 2013, s. 42.]
Section 82 was repealed by Act No. 40 of 2013, s. 42.
Section 82.[Repealed by Act No. 40 of 2013, s. 42.] - 83 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 83.[Repealed by Act No. 40 of 2013, s. 42.]
This section has been repealed.
Section 83.[Repealed by Act No. 40 of 2013, s. 42.] - 84 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 84.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 84 has been deleted: "[Deleted by Act No. 29 of 2015, 2nd Sch.]"
Section 84.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 85 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 85.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 85 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 85.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 86 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 86. Deleted by Act No. 29 of 2015, 2nd Sch.
Section 86 was deleted by Act No. 29 of 2015, 2nd Sch.
Section 86. Deleted by Act No. 29 of 2015, 2nd Sch. - 87 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 87.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 87 deleted by Act No. 29 of 2015, 2nd Sch.
Section 87.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 88 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 88.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 88 has been deleted.
Section 88.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 89 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 89.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 89 deleted by Act No. 29 of 2015, 2nd Sch.
Section 89.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 90 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 90.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 90 has been deleted.
Section 90.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 91 Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 91.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 91 has been deleted.
Section 91.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 91A Verify source ↗
OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES - 91A.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 91A has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 91A.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Part XI
COLLECTION, RECOVERY AND REPAYMENT OF TAX
- 100 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 100.[Deleted by Act No. 9 of 2000, s. 53.]
Section 100 has been deleted by Act No. 9 of 2000, s. 53.
Section 100.[Deleted by Act No. 9 of 2000, s. 53.] - 101 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 101.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 101 deleted by Act No. 29 of 2015, 2nd Sch.
Section 101.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 102 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 102.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 102 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 102.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 103 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 103.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 103 has been deleted.
Section 103.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 104 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 104. Collection of tax from ship owner, etc.
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 104. Collection of tax from ship owner, etc. Section 104(1) In addition to any other powers of collection of tax provided in this Act, the Commissioner may, in a case where tax recoverable has been charged on the income of a person who carries on the business of shipowner, charterer or air transport operator, issue to the proper officer of Customs by whom clearance may be granted a certificate containing the name of that person and the amount of the tax due and payable and on receipt of that certificate the proper officer of Customs shall refuse clearance from any port or airport in Kenya to any ship or aircraft owned by that person until the tax has been paid. Section 104(2) No civil or criminal proceedings shall be instituted or maintained against the proper officer of Customs or any other authority in respect of a refusal of clearance under this section, nor shall the fact that a ship or aircraft is detained under this section affect the liability of the owner, charterer or agent to pay harbour or airport dues and charges for the period of detention. - 105 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 105.[Repealed by Act No. 38 of 2016, s. 15.]
Section 105 was repealed by Act No. 38 of 2016, s. 15.
Section 105.[Repealed by Act No. 38 of 2016, s. 15.] - 106 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 106. Repayment of tax in respect of income accumulated under trusts
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.
Section 106. Repayment of tax in respect of income accumulated under trusts Section 106(1) Where under a will or settlement, other than a settlement to which section 25 or 26 of this Act applies, income (in this section referred to as the trust income) arising from a fund is accumulated for the benefit of a person contingently on his attaining some specified age or marrying then, if that person proves to the satisfaction of the Commissioner that the contingency has happened, he shall, on making to him a claim for that purpose, be entitled to have repaid to him a sum equal to the amount by which the total amount of tax borne by the trust income during the period of accumulation exceeds the total amount of additional tax which would have been borne by him during that period if the trust income and the income from any other fund subject to the same trust for accumulation had been included in his total income; but in calculating that sum a deduction shall be made in respect of tax borne by the trust fund and already repaid to him. Section 106(2) A claim for repayment under this section shall be made in writing to the Commissioner within six years after the expiry of the year of income in which the contingency happened. - 92 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 92. Time within which payment is to be made
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.
Section 92. Time within which payment is to be made Section 92(1) Save as otherwise provided by this Act and any rules made thereunder, tax charged in any assessment shall be due and payable in accordance with this section. Section 92(2) The tax charged in an assessment other than a provisional assessment shall be due and payable– (a) in the case of an individual– (i) where the date of service of an assessment made under section 73(2)(a) is before 31st August in the year following the year of income in respect of which the tax is charged, on or before 30th September in that following year; and (ii) in all other cases within thirty days from the date of the service of the notice of such assessment; (b) in the case of a person, other than an individual– (i) where the date of service of an assessment made under section 73(2)(a) is before 31st May in the year following the year of income in respect of which the tax is charged, on or before 30th June in that following year; and (ii) in all other cases, within thirty days from the date of service of the notice of the assessment. Section 92(2A) Where an instalment assessment is made for any year of income on any person under section 74A, the tax charged thereunder shall be due and payable on or before the twentieth day of the months in the current year of income as specified in the Twelfth Schedule: Provided that where the instalment assessment is made under section 74A (3), the tax shall be due and payable within thirty days of service of the notice of that assessment. Section 92(2B) Where the Commissioner makes an instalment assessment under section 74A (3), the amount payable in that assessment for the purpose of section 94 shall be deemed to be tax remaining unpaid after the due date on which interest under the section may be charged. Section 92(3) Deleted by Act No. 16 of 2014, s. 19. Section 92(4) Deleted by Act No. 8 of 1989, s. 21. Section 92(4A) Where a person has notified the Commissioner in writing as required by section 53(3), the provisional tax shall be due and payable within thirty days after the date of service by the Commissioner of the provisional assessment. Section 92(5) In the case of a company which is being wound up, the due dates for payment of tax on any income charged for the year of income in which the winding-up commences and for the preceding year of income shall be deemed for the purpose of priority of debts but for that purpose only, to be the date next before the date of the winding-up order or the resolution, special resolution or extraordinary resolution, as the case may be, passed for the winding-up of the company, and whether or not assessments have been made before that date. Section 92(6) Deleted by Act No. 29 of 2015, 2nd Sch. Section 92(7) Deleted by Act No. 29 of 2015, 2nd Sch. Section 92(8) Deleted by Act No. 29 of 2015, 2nd Sch. [Act No. 2 of 1975, s. 5, Act No. 7 of 1976, s. 2, Act No. 13 of 1979, s. 5, Act No. 8 of 1989, s. 21, Act No. 10 of 1990, s. 55, Act No. 4 of 1993, s. 54, Act No. 7 of 2002, s. 47, Act No. 16 of 2014, s. 19, Act No. 29 of 2015, 2nd Sch.] - 92A Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 92A. Due date for payment of tax under self-assessment
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 92A. Due date for payment of tax under self-assessment Section 92A(1) Where any person is required to furnish a return under section 52B, the tax chargeable thereunder shall be due and payable on the last day of the fourth month following the end of the year of income or accounting period. Section 92A(2) Where the Commissioner makes an additional assessment under section 73(2)(b), the tax charged thereunder shall be deemed to have been due and payable on the last day of the fourth month following the end of the year of income or accounting period. [Act No. 8 of 1991, s. 69, Act No. 4 of 1993, s. 54, Act No. 8 of 1997, s. 46, Act No. 5 of 1998, s. 38, Act No. 4 of 2004, s. 56.] - 93 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 93.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 93 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 93.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 94 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 94.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 94 deleted by Act No. 29 of 2015, 2nd Sch.
Section 94.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 95 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 95.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 95 deleted by Act No. 29 of 2015, 2nd Sch.
Section 95.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 95A Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 95A.[Repealed by Act No. 4 of 1993, s. 56.]
Section 95A was repealed by Act No. 4 of 1993, s. 56.
Section 95A.[Repealed by Act No. 4 of 1993, s. 56.] - 96 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 96.[Deleted by Act No. 4 of 1993, s. 56.]
Section 96.[Deleted by Act No. 4 of 1993, s. 56.]
Section 96.[Deleted by Act No. 4 of 1993, s. 56.] - 96A Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 96A.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 96A has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 96A.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 97 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 97. Deceased persons
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 97. Deceased persons Section Where a person dies, then to the extent to which– (a) tax charged in an assessment made upon him has not been paid; or (b) his executors are charged to tax in an assessment made under section 48 of this Act, the amount of tax unpaid or charged, as the case may be, in the assessment as finally determined shall be a debt due and payable out of his estate. - 98 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 98.[Repealed by Act No. 38 of 2016, s. 14.]
Section 98 has been repealed.
Section 98.[Repealed by Act No. 38 of 2016, s. 14.] - 99 Verify source ↗
COLLECTION, RECOVERY AND REPAYMENT OF TAX - 99.[Repealed by Act No. 9 of 2000, s. 53.]
Section 99 is repealed by Act No. 9 of 2000, s. 53.
Section 99.[Repealed by Act No. 9 of 2000, s. 53.]
Part XII
OFFENCES AND PENALTIES
- 107 Verify source ↗
OFFENCES AND PENALTIES - 107. General penalty
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 107. General penalty Section A person guilty of an offence under this Act for which no other penalty is specifically provided shall be liable to a fine not exceeding one hundred thousand shillings or to imprisonment for a term not exceeding six months or to both. [Act No. 8 of 1996, s. 43.] - 108 Verify source ↗
OFFENCES AND PENALTIES - 108.[Repealed by Act No. 15 of 2017, s. 14.]
Section 108 was repealed by Act No. 15 of 2017, s. 14.
Section 108.[Repealed by Act No. 15 of 2017, s. 14.] - 109 Verify source ↗
OFFENCES AND PENALTIES - 109. Failure to comply with notice, etc.
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 109. Failure to comply with notice, etc. Section 109(1) Any person shall be guilty of an offence if he, without reasonable excuse– (a) fails to furnish a return or give a certificate as required by section 35 (5) of this Act; or (b) fails to give notice to the Commissioner as required by section 52 (3) of this Act; or (c) deleted by Act No. 9 of 2025, s. 26(b); (d) fails to keep records, books or accounts in accordance with the requirements of a notice served on him under section 55(1) of this Act, or fails to keep those records, books or accounts in the language specified in the notice; or (e) fails to preserve a record, document or book of account in contravention of section 55 (2) of this Act; or (f) deleted by Act No. 9 of 2025, s. 26(c); (g) destroys, damages or defaces any accounts or other documents in contravention of a notice served on him under section 56 (1) of this Act; or (h) deleted by Act No. 9 of 2025, s. 26(d); (i) fails to answer any question lawfully put to him, or to supply any information lawfully required from him, under this Act; or (j) fails to supply prescribed certificates as required by section 37; (k) when requested by the Commissioner, fails to furnish the identifying number required under section 132, or fails to include in any return, in a statement or in other documents the identifying number when required to do so. Section 109(2) No prosecution for an offence under this section shall be instituted at any time subsequent to two years after the date of the commission of the offence or, in the case of the contravention of paragraph (d), (e) or (g) of subsection (1) after the date on which the fact of the commission of that offence came to the knowledge of the Commissioner. [Act No. 7 of 1976, s. 2, Act No. 8 of 1991, s. 72, Act No. 9 of 2025, s. 26.] - 110 Verify source ↗
OFFENCES AND PENALTIES - 110.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 110 has been deleted.
Section 110.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 111 Verify source ↗
OFFENCES AND PENALTIES - 111.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 111 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 111.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 112 Verify source ↗
OFFENCES AND PENALTIES - 112.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 112 has been deleted.
Section 112.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 113 Verify source ↗
OFFENCES AND PENALTIES - 113.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 113.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 113.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 114 Verify source ↗
OFFENCES AND PENALTIES - 114.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 114 has been deleted.
Section 114.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 115 Verify source ↗
OFFENCES AND PENALTIES - 115.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 115 has been deleted.
Section 115.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 116 Verify source ↗
OFFENCES AND PENALTIES - 116.[Deleted by Act No. 29 of 2015, 2nd Sch.]
This section has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 116.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 117 Verify source ↗
OFFENCES AND PENALTIES - 117.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 117 has been deleted.
Section 117.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 118 Verify source ↗
OFFENCES AND PENALTIES - 118.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 118 was deleted by Act No. 29 of 2015, 2nd Sch.
Section 118.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 119 Verify source ↗
OFFENCES AND PENALTIES - 119.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 119 has been deleted by Act No. 29 of 2015, 2nd Schedule.
Section 119.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 120 Verify source ↗
OFFENCES AND PENALTIES - 120.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 120 deleted by Act No. 29 of 2015, 2nd Sch.
Section 120.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 121 Verify source ↗
OFFENCES AND PENALTIES - 121.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 121 was deleted by Act No. 29 of 2015, 2nd Sch.
Section 121.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Part XIII
ADMINISTRATION
- 122 Verify source ↗
ADMINISTRATION - 122.[Deleted by Act No. 29 of 2015, 2nd Sch.]
This section has been deleted.
Section 122.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 123 Verify source ↗
ADMINISTRATION - 123.[Deleted by Act No. 29 of 2015, 2nd Sch.]
This section has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 123.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 123A Verify source ↗
ADMINISTRATION - 123A.[Deleted by Act No. 29 of 2015, 2nd Sch.]
This section has been deleted.
Section 123A.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 123B Verify source ↗
ADMINISTRATION - 123B.[Deleted by Act No. 29 of 2015, 2nd Sch.]
This section has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 123B.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 123C Verify source ↗
ADMINISTRATION - 123C.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 123C has been deleted.
Section 123C.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 124 Verify source ↗
ADMINISTRATION - 124.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 124 deleted by Act No. 29 of 2015, 2nd Sch.
Section 124.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 125 Verify source ↗
ADMINISTRATION - 125.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 125 was deleted by Act No. 29 of 2015, 2nd Schedule.
Section 125.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 126 Verify source ↗
ADMINISTRATION - 126.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 126 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 126.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Part XIV
MISCELLANEOUS PROVISIONS
- 127 Verify source ↗
MISCELLANEOUS PROVISIONS - 127.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 127 has been deleted.
Section 127.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 127A Verify source ↗
MISCELLANEOUS PROVISIONS - 127A.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 127A has been deleted by Act No. 29 of 2015, 2nd Schedule.
Section 127A.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 127B Verify source ↗
MISCELLANEOUS PROVISIONS - 127B.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 127B deleted by Act No. 29 of 2015, 2nd Sch.
Section 127B.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 127C Verify source ↗
MISCELLANEOUS PROVISIONS - 127C.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 127C.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 127C.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 127D Verify source ↗
MISCELLANEOUS PROVISIONS - 127D.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 127D has been deleted.
Section 127D.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 127E Verify source ↗
MISCELLANEOUS PROVISIONS - 127E.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 127E deleted by Act No. 29 of 2015, 2nd Sch.
Section 127E.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 128 Verify source ↗
MISCELLANEOUS PROVISIONS - 128.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 128 deleted by Act No. 29 of 2015, 2nd Sch.
Section 128.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 129 Verify source ↗
MISCELLANEOUS PROVISIONS - 129.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 129 deleted by Act No. 29 of 2015, 2nd Sch.
Section 129.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 130 Verify source ↗
MISCELLANEOUS PROVISIONS - 130. Rules
The Cabinet Secretary may make rules to prescribe anything required under this Act and to carry out its provisions.
Section 130. Rules Section The Cabinet Secretary may make rules prescribing anything which is to be prescribed under, and generally for carrying out the provisions of, this Act. - 131 Verify source ↗
MISCELLANEOUS PROVISIONS - 131.[Repealed by Act No. 9 of 2025, s. 27.]
Section 131 has been repealed.
Section 131.[Repealed by Act No. 9 of 2025, s. 27.] - 132 Verify source ↗
MISCELLANEOUS PROVISIONS - 132.[Deleted by Act No. 29 of 2015, 2nd Sch.]
Section 132 has been deleted by Act No. 29 of 2015, 2nd Sch.
Section 132.[Deleted by Act No. 29 of 2015, 2nd Sch.] - 133 Verify source ↗
MISCELLANEOUS PROVISIONS - 133. Repeals and transitional
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.
Section 133. Repeals and transitional Section 133(1) This Act shall have effect notwithstanding any Act of the Community and shall not be construed as being repealed by any Act of the Community enacted hereafter. Section 133(2) Subject to subsection (4) of this section, the East African Income Tax Management Act (E.A. Cap. 24) shall, notwithstanding anything contained in the Treaty for East African Co-operation Act (Cap. 4), cease to have the force of law in Kenya with effect from 1st January, 1974. Section 133(3) Subject to subsection (4) of this section, the Income Tax (Allowances and Rates) (No. 2) Act, 1971 (Act No. 29 of 1971), is repealed. Section 133(4) Notwithstanding subsections (2) and (3) of this section, the East African Income Tax Management Act and the Income Tax (Allowances and Rates) (No. 2) Act, 1971, shall remain in force for all purposes in relation to the year of income 1973 and previous years of income and the Income Tax (Allowances and Rates)(No. 2) Act, 1971, shall be read and construed as if, when enacted, the Second Schedule thereto contained the following additional paragraph– "3. The non-resident tax rates shall be the rates set out in paragraph 1 of the Third Schedule to this Act and for the purposes of this paragraph such rates shall be charged from 18th June, 1971." Section 133(5) The transitional provisions contained in the Sixth Schedule shall have effect notwithstanding anything contained in this Act. Section 133(6) Notwithstanding the repeal of the Second Schedule, the provisions of paragraph 24 E of the repealed Schedule shall continue to be in force until 31st December, 2024. Section 133(7) Subject to the provisions of section 12 of this Act, any investment allowance on any written down values as at the date of commencement of this Act, shall be claimed on a straight-line basis. [Act No. 2 of 1975, s. 5, Act No. 2 of 2020, Sch, Act No. 8 of 2021, s. 17, Act No. 22 of 2022, s. 19, Act No. 4 of 2023, s. 23]
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