What are the statutory obligations for a foreign investor in Kenya need to know?

The company is required to obtain KRA PIN. Upon issuance of a certificate of registration, the Personal Identification Number (PIN) is one of the next obligations for a company to operate in Kenya. This is a unique identification tax number issued by the Kenya Revenue Authority (KRA). The PIN enables KRA to track the company’s compliance with tax, returns, and statutory obligations as per Kenyan law. Note that, when it comes to taxes, compliance applies for any type of Permanent Establishment (PE). Both corporate and individuals. Upon registering for KRA PIN, one is issued a KRA PIN certificate. A permanent establishment (PE) is a fixed place of business that gives rise to income or value-added tax liability in a particular jurisdiction.

Kenya essentially operates a source-based tax regime and effectively taxes all income accrued in or derived from Kenya. In essence, therefore, Kenya would tax all residents and non-residents. Non-residents can either have a permanent establishment in Kenya or have absolutely no physical presence. Non-residents with no physical presence are taxed through the withholding tax system, where withholding tax is applicable, whilst those with a permanent establishment are taxed through the corporate tax system. There are very minor differences in the taxation of Kenyan residents and that of non-residents who have permanent establishments.

Under the KRA regulatory body, the company should comply with the following regulations:

a. Income tax: Here, the company is required to file and submit an income tax return on or before the end of the 6 th month of the following fiscal year. Also, to pay and submit PAYE returns on or before the 9 th day of the following month. PAYE is chargeable for salaries of Kshs. 24,000 and above per month. The Corporate Income Tax is one of the obligations of a company in Kenya. The rate of Corporate Income Tax for resident companies, including subsidiary companies of foreign parent companies, is 30%. The CIT rate for branches of foreign companies and PEs is 37.5%. Resident companies are taxable in Kenya on income accrued or derived from Kenya. Resident companies with
business activities outside Kenya are also taxed on income derived from business activities outside of Kenya.

b. Installment tax: The Company is required to pay installment tax in four equal installments in the 4th, 6th, 9th, and 12th months of the fiscal year. The final tax is calculated and paid as part of the last installment.

c. Withholding tax: WHT is levied at varying rates (3% to 30%) on a range of payments to residents and non residents. Resident WHT is either a final tax or creditable against CIT. Non-resident WHT is a final tax. In the case of management or professional services, 5% Withholding Tax applies to the taxable amount, which is remitted to KRA on behalf of the taxpayer on or before the 20 th day of the following month who receives the WHT certificate.

d. FBT: This is a benefit obtained by the director, employee, or relative to the director when he or she gets a loan at a low-interest rate than the prevailing market rate. The charge is 30% of the benefit which is payable on or before the 20th day of the following month.

e. VAT: Regarding VAT (Value Added Tax) registration can either be mandatory or voluntary on the following basis: voluntary where the activities of the company involve purchase and sale of vatable goods or services. VAT currently is at 16%, it is remitted to KRA on or before the 20th of the following month. However, the only time registration for VAT becomes a mandatory exercise is when the company reaches the threshold of 5 Million turnover per year.

f. Tax compliance certificate: Lastly, you may request a Tax Compliance Certificate (TCC). This certificate is important for companies in Kenya as it is an indicator that the company is complying with tax laws, thus it facilitating several administrative procedures.