Laws of Kenya the Income Tax Act Chapter
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LAWS OF KENYA THE INCOME TAX ACT CHAPTER 470 Note: This edition contains amendments to The Finance Act 2016 dated 20 September 2016 Disclaimer While all reasonable care has been taken in the preparation and updating of this Act, Ernst & Young LLP (EY), accepts no responsibility for any errors it may contain, whether caused by negligence or otherwise, or for any loss, however caused, or sustained by any person that relies on it. CHAPTER 470 – THE INCOME TAX ACT ...................................................................................1 PART 1 – PRELIMINARY ................................................................................................................ 1 Section ......................................................................................................................................... 1 1. Short title and commencement 1 2. Interpretation 1 PART II – IMPOSITION OF INCOME TAX ....................................................................................... 14 3. Charge of tax 14 4. Income from businesses 15 4A Income from business where foreign exchange gain or loss is realized 16 4B Export processing zone enterprise 18 5. Income from employment, etc 18 6. Income from the use of property 28 6A. Imposition of residential rental Income Tax. 28 7. Income from dividends 28 7A Dividend Tax Account 29 8. Income from pensions, etc 31 9. Income of certain non resident persons deemed derived from Kenya 35 10. Income from management or professional fees, royalties, interest and rents 35 11. Trust income, etc., deemed income of trustee beneficiary, etc. 37 12. Imposition of instalment tax 38 12A Imposition of advance tax 38 12B Imposition of fringe benefit tax 39 12C Imposition of turnover tax 40 PART III – EXEMPTION FROM TAX ............................................................................................... 41 13. Certain income exempt from tax, etc. 41 14. Income on Government loans, etc., exempt from tax 41 PART IV – ASCERTAINMENT OF TOTAL INCOME ......................................................................... 42 15. Deduction allowed 42 16. Deduction not allowed 51 17. Ascertainment of income of farmers in relation to stock 54 17A Presumptive income on tax from certain farm produce 56 18. Ascertainment of gains or profits of business in relation to certain non-resident persons. 57 19. Ascertainment of income of insurance companies 59 19A Co-operative societies 63 20. Collective Investment Schemes 65 21. Members’ clubs and trade associations 65 22. Purchased annuities other than retirement annuities, etc. 66 22A Deductions in respect of contributions to registered pension or provident funds 68 22B Deductions in respect of registered individual retirement fund 71 22C Registered home ownership savings plan 72 23. Transactions designed to avoid liability of tax 73 24. Avoidance of tax liability by non-distribution of dividends 74 25. Income settled on children 75 26. Income from certain settlements deemed to be income of settler 78 27. Accounting periods not coinciding with year of income etc. 80 28. Income and expenditure after cessation of business 81 PART V - PERSONAL RELIEF ...................................................................................................... 82 29. General 82 30. Personal relief 83 31. Insurance relief 83 32. Special single relief (repealed) 84 33. Insurance relief (repealed) 84 PART VI - RATES, DEDUCTIONS AND SET-OFF OF TAX AND DOUBLE TAXATION RELIEF............ 85 A-Rates of Tax ............................................................................................................................ 85 34. Rate of tax 85 34A Deduction in respect of certain rates of tax (Repealed) 88 B-Deduction of Tax...................................................................................................................... 88 35. Deduction of tax from certain income 88 36. Deduction of tax from annuities etc paid under a will, etc. 95 37. Deduction of tax from emoluments 96 37A Penalty for failure to make deductions under section 35, 36 and 37 98 38. Application to Government 98 C-set-off of Tax ........................................................................................................................... 98 39. Set-off tax 98 39A Set-off of import duty 99 Cap 472 99 39B Set-off tax rebate for apprenticeships 99 D-Double Taxation Relief ............................................................................................................. 99 40. Relief in respect of inter-state tax (repealed) 99 41. Special arrangements for relief from double taxation 99 41A. Agreements for exchange of information 100 42. Computation of Credits under special arrangement 100 43. Time limit 102 PART VII - PERSONS ASSESSABLE ........................................................................................... 103 44. Income of a person assessed on him 103 45. Wife’s income, etc 103 46. Income of incapacitated person 103 47. Income of non-resident person 104 48. Income of deceased person etc. 104 49. Liability of joint trustees 104 50. Liability of person in whose name income of another person is assessed 104 51. Indemnification of representative 105 ______ iii iii PART VIII - RETURNS AND NOTICES ......................................................................................... 106 51A. Returns, records, etc to be in official languages 106 52. Returns of income and notice of chargeability 106 52A Return of income and notice of chargeability (repealed) 107 52B Final return with self assessment 107 53. Provisional returns 108 54. Documents to be included in return of income 110 54A Keeping of records of receipts, expenses, etc 112 54B Supply of information upon change in particulars 112 55. Books and accounts 112 56. Production and preservation of books, attendance, etc. 113 57. Returns of salaries pension, etc. 114 58. Returns as to fees, commissions, royalties etc. 114 59. Occupier’s return of rent 115 60. Return of lodges and inmates 115 61. Return of income received on account of other persons 116 62. Return as to income exempt from tax 116 63. Return in relation to settlements 116 64. Return in relation to registered pension funds, etc. 116 65. Return of annuity contract benefits 117 66. Return of resident company dividends 117 67. Return as to interest paid or credited by banks etc. 117 68. Returns as to dividends paid by building societies. 118 69. Access to official information 118 70. Further returns and extension of time 119 71. Return deemed to be furnished by due authority 119 72. Additional tax in event of failure to furnish return or fraud in relation to a return. 119 72A Offences in respect of failure to furnish return or fraud in relation to a return 122 72B Penalty for the negligence of authorized tax agent 122 72C Penalty on underpayment of instalment tax 122 72D Penalty on unpaid tax 123 PART IX- ASSESSMENTS .......................................................................................................... 124 73. Assessments 124 74. Provisional assessments 124 74A Instalment assessments 125 74B Minimum additional tax or penalty. 125 75. Assessment of person about to leave or having left Kenya 125 75A Assessment in certain cases 125 76. Assessment not to be made on certain employees 125 76A Assessment not to be made on certain income. 126 77. Additional Assessment 126 78. Service of notice of assessment, etc 126 79. Time limit for making assessments, etc. 126 80. Assessment list 127 81. Errors, etc in assessments or notices 127 PART X-OBJECTIONS, APPEALS AND RELIEF FOR MISTAKES .................................................. 129 ______ iv iv 82. Local Committees 129 83. The Tribunal 130 84. Notice of objection to assessment 131 85. Powers of Commissioner on receipt of objection 132 86. Right of appeal from Commissioner’s determination of objection 133 87. Procedure on appeal 134 88. Finality of assessment 135 89. Application of appeal procedure to other decisions etc, of the Commissioner 136 90. Relief in respect of error or mistake. 137 91. Rules for appeals to the court 137 91A Appeals to court of appeal 138 PART XI – COLLECTION, RECOVERY AND REPAYMENT OF TAX ................................................ 139 92. Time within which payment to be made 139 92A Due date for payment of tax under self- assessment 140 93. Payment of tax where notice of objection etc. 141 94. Interest on unpaid tax 142 95. Interest on underestimated tax 143 95A Penalty in respect of instalment tax 143 96. Appointment and duties of agent 143 96A Preservation of funds 145 97. Deceased persons 146 98. Collection of tax from persons leaving or having left Kenya 146 99. Exchange control income tax leaving or having left Kenya (repealed) 148 100. Collection of tax from guarantor 149 101. Collection of tax by suit 149 102. Collection of tax by distraint 149 103. Security on property for unpaid tax 150 104. Collection of tax from shipowner, etc. 151 105. Refund of tax overpaid 151 106. Repayment of tax in respect of income accumulated under trusts 152 PART XII - OFFENCES AND PENALTIES ..................................................................................... 153 107. General penalty 153 108. Additional penalties 153 109. Failure to comply with notice, etc. 153 110. Incorrect returns, etc 154 111. Fraudulent returns, etc. 154 112. Obstruction of officer 156 113. Evidence in cases of fraud, etc. 156 114. Power of Commissioner to compound offences 156 115. Place of trial 158 116. Offences by corporate bodies 158 117.