Company registration process in Kenya is now a simplified. Upon registration, tax is one of the key considerations in laying down the new company’s plans and growth strategies. It is important to know the tax obligations associated with the business, that is the due dates of filing tax returns, payment of taxes and the records to be maintained. Corporation tax is of the taxes payable by companies or corporate entities.
Corporate Income Tax Rate
By and large, people prefer running their business as corporate entities therefore they are required to account for and pay corporation tax. This tax is payable by both resident companies at the rate of 30% and non-resident companies at the rate of 37.5%.
A company is considered resident in Kenya if it is incorporated under Kenyan Law or if the management and control of its affairs are exercised in Kenya for any given year of income. It is also considered resident if the Cabinet Secretary, National Treasury & Planning declares the company to be tax resident, for a particular year of income in a notice published in the Kenya Gazette.
Instalment Tax
Companies are required to pay tax in four equal instalments during their accounting period in what is known as instalment tax. The instalment tax is tax paid in advance and is due and payable by 20th of the 4th, 6th, 9th and 12th month of a company’s accounting period.
Upon determination of the total tax payable after the end of the accounting period, the instalment taxes paid during the year shall be deducted from the established total tax payable and balance of tax (if any) is due and payable by the last day of the 4th month after the accounting year. For example, if the accounting period runs from January to December every year, then the balance of tax is due and payable by the last day of April the following year.
How to file Corporate Income Tax return
At the end of the accounting period, Companies are required to have their books of accounts audited before filing their annual return within six months after the end of their accounting period. The Company tax return, popularly known as IT2C, is available on iTax under the returns menu, the ‘file return option.’
How to determine taxable income
The taxable income as declared in the corporation tax return is arrived at by declaring the gross income earned during the year and deducting expenses that have been wholly and exclusively incurred in the production of the income.
It is important to note that Corporation tax may not be the only obligation that a company is required to fulfil. It is therefore important for a company to consider all the tax obligations as part of its statutory responsibilities.
