tag:blogger.com,1999:blog-90200989273888165552023-11-16T13:55:42.680+03:00East African Tax ConsultingEast African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-9020098927388816555.post-46591994761679888012020-03-04T10:19:00.003+03:002020-03-04T10:19:54.231+03:00Tax Updates, March 2020 - Case Digest <h2 style="text-align: justify;">
<u><span style="font-size: large;">Kenya Revenue Authority vs Kenya Bankers Association (Court of Appeal, Nairobi Civil Appeal No. 213 of 2018)</span></u></h2>
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<span style="font-size: large;"><b><span style="color: #6fa8dc;">Summary:</span></b> A lender (chargee) upon exercise of its <i>statutory power of sale</i> (sale of charged property in case the borrower defaults) is not obligated to pay Capital Gains Tax (CGT).</span></div>
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<span style="color: #6fa8dc; font-size: large;">Background</span></h3>
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<span style="font-size: large;">On 4th October 2016, the Appellant, Kenya Revenue Authority (“KRA”) published a Notice discontinuing manual payment of both Stamp Duty and Capital Gains Tax (“CGT”). KRA required both taxes to be paid simultaneously online through the I-Tax System. I-Tax system was programmed not to allow payment of Stamp Duty unless CGT was also paid. </span></div>
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<span style="font-size: large;">The Respondent, Kenya Bankers Association, (“KBA”) being an Association of forty-two (42) licensed commercial banks, one mortgage finance bank and two microfinance banks was aggrieved KRA’s action to twin the payment of CGT and Stamp Duty. Consequently, KBA filed a Judicial Review application at the High Court challenging KRA’s action.</span></div>
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<span style="font-size: large;">The High Court declared that:</span></div>
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<li><span style="font-size: large;">KRA’s administrative action was unreasonable, unfair and influenced by an error of law. </span></li>
<li><span style="font-size: large;">CGT is payable by the chargor upon registration of the Transfer and not by the chargee or the purchaser, unless there is a surplus from the proceeds of the sale as to constitute the chargee a trustee for the chargor.</span></li>
<li><span style="font-size: large;">The High Court issued an order compelling KRA to allow payment of Stamp Duty on transfers, without requiring payment of Capital Gains Tax or an acknowledgment number for payment of CGT.</span></li>
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<span style="font-size: large;">KRA appealed the decision.</span></div>
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<span style="color: #6fa8dc; font-size: large;">Held</span></h3>
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<li><span style="font-size: large;">A charge facilitates the transfer upon a chargor's failure to repay the sum secured by the charge. A chargee becomes the proprietor of the charge. The chargor remains the proprietor of the land. In executing the Transfer (after exercising its statutory power of sale), a chargee does so in its capacity as a nominee of the chargor.</span></li>
<li><span style="font-size: large;">Money received after the exercise of the statutory power of sale is applied to pay rates, rents, taxes and charges. It is improper for the appellant to demand money that has not been received by a chargee.</span></li>
<li><span style="font-size: large;">CGT is a charge on the income of a person. In order for one to be liable to payment of CGT, it has to be established that there has been a gain. Section 19 of the Land Act is not applicable as it refers to “taxes to be paid on the charged land”.</span></li>
<li><span style="font-size: large;">KBA was not given an opportunity to present its points of view concerning the administrative action. KRA’s unilateral decision to demand collection of CGT from KBA members by twinning the payment of CGT and Stamp Duty was unfair and irregular.</span></li>
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<span style="font-size: large;">Appeal Dismissed.</span></div>
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<span style="color: #6fa8dc; font-size: large;">Statutes Referred to</span></h3>
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<li><span style="font-size: large;">Section 2 of the Land Registration Act, 2012;</span></li>
<li><span style="font-size: large;">Section 98(3) and (4) of the Land Act, 2012;Paragraph 5 (2) of the 8th Sch. to the Income Tax Act (Cap 470);</span></li>
<li><span style="font-size: large;">Section 101 (a) of the Land Act, 2012;</span></li>
<li><span style="font-size: large;">Section 3(1) and (2)(f) of the Income Tax Act;</span></li>
<li><span style="font-size: large;">Paragraph 2 of the 8th Sch. to the Income Tax Act;Section 15(3)(f) of the Income Tax Act;</span></li>
<li><span style="font-size: large;">Article 47 of the Constitution of Kenya, 2010;</span></li>
<li><span style="font-size: large;">Section (4)(1) and (2) of the Fair Administrative Action Act, 2015.</span></li>
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<span style="color: #6fa8dc; font-size: large;">Cases referred to</span></h3>
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<li><span style="font-size: large;">Selle & Another vs. Associated Motor Boat Company Limited & Others [1968] E.A. 123</span></li>
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<span style="color: #6fa8dc; font-size: large;">Implications</span></h3>
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<li><span style="font-size: large;">The decision is a draw back on KRA’s aggressive tax collection approach. A change in the law may be necessary to appoint chargees as statutory agents for collection of CGT on charged property.</span></li>
<li><span style="font-size: large;">It is the responsibility of the borrower to compute and pay CGT on their charged property. The borrower should liaise with the lender to ensure that surpluses from the statutory sale (if any) are applied to settle CGT.</span></li>
<li><span style="font-size: large;">This decision is binding on the High Court, Sub-ordinate Courts and the Tax Appeals Tribunal unless KRA appeals to the Supreme Court, with leave of the Court.</span></li>
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<b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><u>Contact us for assistance:-</u></span></b></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">East African Tax Consulting</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Starlings Muchiri (Director); or Samuel Karanja (Director)</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Tel. +254 722 332729</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Email.: advisor@taxeac.com</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Website: </span><span style="color: blue; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><a href="http://www.taxeac.com/" style="font-family: "helvetica neue", arial, helvetica, sans-serif;" target="_blank">www.taxeac.com</a></span><br />
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<i style="font-family: "helvetica neue", arial, helvetica, sans-serif; text-align: justify;">East African Tax Consulting is an Associate of Muthomi & Karanja Advocates</i></div>
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East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-91725830997044022942020-03-04T10:17:00.000+03:002020-03-04T14:55:33.219+03:00Tax Updates March 2020 - In the News<div>
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<span style="font-size: large;">The government seeks to have the Finance Bill passed by Parliament and assented by the President by 30th June every year. This is in response to declaratory orders by the High Court in </span><b style="font-size: x-large;"><i>Okiya Omtatah Okoiti v Cabinet Secretary, National Treasury & 3 others</i> [2018] eKLR</b><span style="font-size: large;"> whereby the Court declared the Provisional Collection of Taxes and Duties Act No.44 of 1959 unconstitutional. </span><a href="https://bit.ly/2T97PFe" style="font-size: x-large;">https://bit.ly/2T97PFe</a></div>
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<span style="color: #6fa8dc; font-size: large;">Legacy data migrated to iTAX</span></h3>
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<span style="font-size: large;">KRA has begun migrating all historical tax balances to the iTax system. The move is welcome especially for taxpayers with tax credits brought forward from previous years. On the other hand the legacy system was error laden. Correcting the errors will be a difficult task more so because tax payers are not obligated to keep records beyond a period of 5 years. </span><a href="https://bit.ly/3aeiOnR" style="font-size: x-large;">https://bit.ly/3aeiOnR</a></div>
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<span style="color: #6fa8dc; font-size: large;">LSK and KRA disagree on representation at the Tax Tribunal</span></h3>
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<span style="font-size: large;">The Law Society of Kenya has disagreed with KRA’s move to vet lawyers who represent taxpayers at the Tax Appeals Tribunal. LSK argues that the move is procedurally unfair. It is our opinion that the move is unconstitutional since every person has a constitutional right to be represented by a lawyer of his or her choice. </span><a href="https://bit.ly/2wfZx6v" style="font-size: x-large;">https://bit.ly/2wfZx6v</a></div>
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<span style="color: #6fa8dc; font-size: large;">High Court rules that Demurrage is subject to income tax</span></h3>
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<span style="font-size: large;">The High Court ruled that demurrage is not part of freight cost for goods. The Kenya Income Tax Act doesn’t explicitly classify demurrage as income for the owner of the intermodal container. Modern income tax legislation e.g. the Tanzanian Income Tax Act of 2004 explicitly classify demurrage as income subject to income tax. We expect the Shipping lines/ agents to appeal to the Court of Appeal for final determination of the matter. </span><a href="https://bit.ly/2vmdWy6" style="font-size: x-large;">https://bit.ly/2vmdWy6</a></div>
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<span style="font-size: large;"><span style="color: #6fa8dc;">KRA to collect revenue for Nairobi County Government</span></span></h3>
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<span style="font-size: large;">Kenya Revenue Authority is set to start collecting parking fees, business licenses, land lease fees and buildings’ approval charges for Nairobi County with effect from mid-March 2020. This follows the transfer of some of the functions of the Nairobi County Government to the National Government. We expect KRA to integrate with iTax system with the Nairobi County revenue management systems. This will make it easier for KRA to widen the tax base especially among the small traders. </span><a href="https://bit.ly/2T3JKAU" style="font-size: x-large;">https://bit.ly/2T3JKAU</a><br />
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<span style="color: #6fa8dc; font-size: large;">Sugar Task force recommends re-introduction of Sugar levy</span></h3>
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<span style="font-size: large;">The president received the report by the sugar task force. The task force recommended the introduction of the sugar development levy. Reintroduction of the levy is likely to lead to higher prices of sugar for consumers. </span><a href="https://bit.ly/2T5fyoY" style="font-size: x-large;">https://bit.ly/2T5fyoY</a></div>
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<b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><u>Contact us for assistance:-</u></span></b></h4>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">East African Tax Consulting</span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Starlings Muchiri (Director); or Samuel Karanja (Director)</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Tel. +254 722 332729</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Email.: advisor@taxeac.com</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Website: </span><span style="color: blue; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><a href="http://www.taxeac.com/" style="font-family: "helvetica neue", arial, helvetica, sans-serif;" target="_blank">www.taxeac.com</a></span><br />
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<i style="font-family: "helvetica neue", arial, helvetica, sans-serif; text-align: justify;">East African Tax Consulting is an Associate of Muthomi & Karanja Advocates</i></div>
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East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-3002392280762978222017-02-24T19:51:00.000+03:002017-02-27T18:14:02.672+03:00Tax Planning for 2017<div class="MsoNormal" style="text-align: justify;">
<span style="color: #0b5394;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">2017 is an election year. </span><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">According to data from the World Bank and the Kenya National Bureau of Statistics, there is a 60% likelihood of a slump in economic growth during an election year in Kenya since 1990 when multiparty politics was introduced.</span></span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">You can alleviate financial challenges of the election year by utilizing the following tax optimization measures which were availed via the Finance Act, 2016.</span></span></div>
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">1. Be a smart landlord</span></span></b></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">The government made it easier for small sized landlords to pay tax. </span><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">If you earn </span><b style="color: #0b5394; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 14pt;"><i>KShs 144,000</i></b><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> per year or less from residential rental property, your rental income is exempt from Income Tax.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBNZISmyEXFg5Zlj1wgdN9Rsp6G5HWZ5KxGYGhieZqZgfDfTb3NhWXkfx1VKNYnufY7Wr6iR679YSNJcZDymMN2QxzJhm2EI1Tmsv7ccbQgjfOC-yUZT8zsGaBwP_8nEftZvtM81u893g/s1600/For+Rent.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="132" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBNZISmyEXFg5Zlj1wgdN9Rsp6G5HWZ5KxGYGhieZqZgfDfTb3NhWXkfx1VKNYnufY7Wr6iR679YSNJcZDymMN2QxzJhm2EI1Tmsv7ccbQgjfOC-yUZT8zsGaBwP_8nEftZvtM81u893g/s200/For+Rent.jpg" width="200" /></a><span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">In addition, if your residential rental income falls between <b><i>KShs 144,000</i></b> and <b><i>KShs 10 million</i></b> per annum, the gross rental income is taxable at a flat rate of 10%. The tax is final tax. <o:p></o:p></span></span></div>
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<span style="line-height: 115%;"><span style="color: #0b5394;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 18.6667px;">S</span><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">ave on compliance costs of record keeping, periodic tax computations and payments by taking advantage of the simplified rental income regime.</span></span></span><br />
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">2. Employees’ relief</span></span></b></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">Employees enjoy lower rates of tax from 1 January 2017.</span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">The government expanded the personal income tax brackets by <b>10%</b> and also increased the personal relief by <b>10%</b> for the first time in 12 yrs.</span></span></div>
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<span style="color: #0b5394;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">In addition,<i><b> b</b></i></span><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"><i><b>onuses</b></i>, <i><b>overtime</b></i> and<b><i> retirement benefits</i></b></span><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> for employees earning </span><b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; font-size: 14pt;"><i>KShs 11,180</i></b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> or less per month before the bonuses, overtime or retirement benefits are exempt from income tax.</span></span><br />
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">3. Invest in the youth</span></span></b></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">If you employed 10 or more university graduates as apprentices for 6-12 months in 2016, you are entitled to deduct 50% of the salaries and wages paid to the graduate apprentices from your taxable income in 2017. </span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">The incentive is ongoing and you can benefit from the rebate by hiring graduate apprentices in 2017.</span></span><br />
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">4. Developer’s paradise!</span></span></b></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">Residential real estate developers who construct </span><b style="color: #0b5394; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 14pt;">400</b><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> or more houses in a year will pay corporate tax at a reduced rate of <b>15%</b>. This is <b>50%</b> of the ordinary corporate tax rate.</span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">If you are a residential housing developer we advise that you take advantage of this incentive.</span></span><br />
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">5. Reward for play</span></span></b><br />
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">"<i>A</i></span><span style="background: white; color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"><i>ll work and no play makes Jack a dull boy</i>" - English Proverb</span></blockquote>
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<span style="background-color: white; color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">The government takes play seriously. Companies and individuals who sponsor sports activities are now entitled to deduct the sports sponsorship costs from their taxable income.</span></div>
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="background: white; font-size: 14pt; line-height: 115%;"><span style="color: orange;">6. Gifts of love exempt from tax</span></span></b></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><span style="color: black; font-family: "times new roman"; font-size: 14pt; line-height: 21.4667px;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">“<i>There is nothing more important than a good, safe, secure home</i>” - </span></span><span style="font-size: 14pt;">Rosalynn Carter, former first lady of the USA.</span></span></span></blockquote>
<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Transfers of property between spouses or former spouses as part of divorce or separation settlement, the immediate family or to a company where spouses or a spouse and the immediate family hold 100% shareholding are exempted from Capital Gains Tax. <o:p></o:p></span></span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">This provision enhances tax optimal succession planning. </span></span><br />
<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></span><b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">7. Invest in EADB bonds</span></span></b></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">Diversify your portfolio by investing in bonds of the East African Development Bank (EADB). Interest therefrom is exempt from income tax. Besides, the bank is engaged in socially impactful financing in East Africa. </span></div>
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">8. Say goodbye to the landlord</span></span></b></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">The mortgage interest relief on owner occupied house has been doubled from </span><i style="color: #0b5394; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 14pt;"><b>KShs 12,500</b></i><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> per month to </span><i style="color: #0b5394; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 14pt;"><b>KShs 25,000</b></i><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> per month. consequently, </span><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">you can knockoff as much as </span><b style="color: #0b5394; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 14pt;"><i>KShs 100,000</i></b><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> from your tax liability every year by financing your home through a mortgage.</span><br />
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 18.6667px;">This is a good incentive to say goodbye to your landlord.</span><br />
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<b style="color: orange; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 18.6667px;">9. Be charitable</b></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">Vehicles for use in aid funded projects are now exempted from VAT. This is good news for donor funded projects.</span><br />
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<b style="font-family: "Helvetica Neue", Arial, Helvetica, sans-serif; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 115%;"><span style="color: orange;">10. Industries to invest in</span></span></b></div>
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<i style="color: #0b5394; font-family: "helvetica neue", arial, helvetica, sans-serif; font-size: 14pt;"><b>Entertainment and Leisure</b></i><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;"> - Goods imported for construction of recreational parks of 100 acres or more are exempt from VAT. Previously the exemption only applied to recreational parks located in Special Economic Zones.</span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><b><i>Agriculture</i></b> - Raw materials used in the manufacture of animal feeds have been exempted from VAT. Wheat seeds are also exempted from VAT.<o:p></o:p></span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9Zsm0bqlvb_58WTxDRosIOitMyYSbtA3z3LfTeFpKYM070gh30SVCfVEB6s3CJYu50pQzdS4AjQUz7Or0Fb8dxlV2Xpql8ff-myljwfnLyeHubuIc9LGNwurAlvQiuSCbWoeRlyjKIAQ/s1600/Tax+Cut.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9Zsm0bqlvb_58WTxDRosIOitMyYSbtA3z3LfTeFpKYM070gh30SVCfVEB6s3CJYu50pQzdS4AjQUz7Or0Fb8dxlV2Xpql8ff-myljwfnLyeHubuIc9LGNwurAlvQiuSCbWoeRlyjKIAQ/s320/Tax+Cut.png" width="312" /></a><span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><i><b>Tourism, Hospitality and Entertainment </b></i>- Historically these industries suffer the most in an election year. Government has taken measures to ensure that the sector survives the hard times. Museum equipment, park entry fees, tour services, service charge and film equipment are exempted from VAT. <o:p></o:p></span></span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><i><b>Clean energy</b></i> - Liquid Petroleum Gas is Zero-rated. Non-electric cooking stoves as well as raw materials to make cooking stoves are exempt from VAT. <o:p></o:p></span></span></div>
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<span style="line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><span style="font-size: 14pt;"><i><b>Manufacturing</b></i> - </span><span style="font-size: 18.6667px;">Industrialization</span><span style="font-size: 14pt;"> is on the radar of GOK. Supplies to enterprises operating in Special Economic Zones (SEZ) are zero-rated. Further, SEZs are allowed to sell garments and leather </span><span style="font-size: 18.6667px;">footwear</span><span style="font-size: 14pt;"> to the local market free from VAT. <o:p></o:p></span></span></span></div>
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<span style="font-size: 14pt; line-height: 115%;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><span style="color: #0b5394;"><i><b>Vehicle assembly</b></i> - Locally assembled motorcycles and school buses are exempt from Excise Duty. </span><o:p></o:p></span></span></div>
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<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt;">Taxpayers can now apply for waiver of <b><i>interest </i></b>on late payment of taxes in additional to waiver of penalties.</span></div>
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<b style="font-family: "helvetica neue", arial, helvetica, sans-serif; text-align: justify; text-indent: -18pt;"><span style="font-size: 14pt; line-height: 21.4667px;"><span style="color: orange;">12. Interest for late refunds - unbelievable!</span></span></b><span style="color: orange; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><b> </b></span><br />
<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt; text-align: justify;">Kenya Revenue Authority (KRA) is now required to pay interest on overpaid taxes not refunded to the taxpayer within <b>2 years</b> </span><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 18.6667px; text-align: justify;">at <b>1%</b> per month</span><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: 14pt; text-align: justify;">. </span><br />
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</span></span> <span style="font-size: 14pt; line-height: 115%;"><span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">The above measures will help you as a taxpayer to manage your cashflow in 2017. </span></span></div>
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<b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><u>Contact us for assistance:-</u></span></b></h4>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">East African Tax Consulting</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Tel. +254 722 332729</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Email.: advisor@taxeac.com</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Website: </span><span style="color: blue; font-family: "helvetica neue", arial, helvetica, sans-serif;"><a href="http://www.taxeac.com/" style="font-family: "helvetica neue", arial, helvetica, sans-serif;" target="_blank">www.taxeac.com</a></span><br />
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<span style="font-family: "helvetica neue", arial, helvetica, sans-serif;"><i>East African Tax Consulting is an Associate of Muthomi & Karanja Advocates</i></span></div>
East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-57762833038676113522017-02-22T15:48:00.000+03:002017-02-27T18:11:36.973+03:00Tax Alert - Filing of VAT Returns and Invalid Tax Invoices<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Kenya Revenue Authority (KRA) published a “Public Notice” on filing of VAT returns and claiming of inputs using invalid tax invoices on 16th and 17th February 2017. </span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">KRA stated that they validated all invoices credited in the VAT returns of taxpayers from July 2016. According to the Notice, all invalid invoices not recognized by iTAX system will automatically be disallowed. </span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Taxpayers were advised to visit the KRA website to check whether they were affected by the validation and amend their returns to avoid tax penalties.</span></div>
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<span style="color: orange;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span><b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Invalid Input Invoices</span></b></span></h3>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">The iTAX system is able to match and validate input VAT claimed by purchases against output VAT declared by sellers.</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Input invoices are invalidated in the following circumstances:</span></div>
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<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">1. A purchaser claims input tax on an improper tax invoice;</span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">2. A purchaser claims input VAT on an invoice that is not declared by the seller;</span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">3. The details of the invoice declared by the purchaser do not match the details declared by the seller, namely;</span></div>
<div style="text-align: justify;">
</div>
<ul>
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiM9p0M0pWHJYPnf6lqC-WDlFH6YG6im1qavhehOdN9SSuxAhtfgo3YwftoGjH97gRjwnLVp8Ez51woyE3UNSXPdXCuJ29LoZOZo9vhBuTxJCl4GlsGRMzvzp1RHlRf8D3MSjMzcl1XZgM/s1600/Invoice.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiM9p0M0pWHJYPnf6lqC-WDlFH6YG6im1qavhehOdN9SSuxAhtfgo3YwftoGjH97gRjwnLVp8Ez51woyE3UNSXPdXCuJ29LoZOZo9vhBuTxJCl4GlsGRMzvzp1RHlRf8D3MSjMzcl1XZgM/s200/Invoice.png" width="200" /></a>
<li><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Type of purchase;</span></li>
<li><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">PIN of the seller/ Custom Entry Number;</span></li>
<li><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Name of Supplier;</span></li>
<li><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Invoice Date;</span></li>
<li><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Invoice Number;</span></li>
<li><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Description of goods; and</span></li>
<li><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Taxable Value. </span></li>
</ul>
<div>
<b style="color: orange; font-family: "helvetica neue", arial, helvetica, sans-serif; text-align: justify;"><br /></b></div>
<div>
<b style="color: orange; font-family: "helvetica neue", arial, helvetica, sans-serif; text-align: justify;">Our recommendations</b></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">We recommend that taxpayers should visit the KRA website to check whether their PINs are affected by the validation.<span style="color: blue;"> </span><a href="http://www.kra.go.ke/notices/pdf2017/pin_station_1_16022017.pdf" target="_blank"><span style="color: blue;">Download KRA List</span></a></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Going forward we recommend that taxpayers should take care to claim input VAT on proper tax invoices. Proper tax invoices are generated through Electronic Tax Register (ETR) or Electronic Signature Device (ESD).</span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Taxpayers should also enter the correct details of the tax invoices on which input VAT is claimed. </span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<h4 style="text-align: justify;">
<b><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><u>Contact us for assistance:-</u></span></b></h4>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">East African Tax Consulting</span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Tel. +254 722 332729 </span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Email: advisor@taxeac.com</span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Website: </span><span style="color: blue; font-family: "helvetica neue", arial, helvetica, sans-serif;"><a href="http://www.taxeac.com/" style="font-family: "helvetica neue", arial, helvetica, sans-serif;" target="_blank">www.taxeac.com</a></span><br />
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgS2BpuXShyRn5COFAgmwadIJ5PeFgfuidYQm8HrOx40sJf-FNSHwHn8HwLk6POWzIqd0EdAT9Gs-0YaODXW2d9Nw6MtjUcE8Ai1QpmlPhyblnrxyaUGsdXhyphenhyphenH9oiaQMWRDZs_tBY1Beus/s1600/MK%2526EATC+Signature-page-001.jpg" imageanchor="1" style="clear: left; display: inline !important; margin-bottom: 1em; margin-right: 1em; text-align: center;"><img border="0" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgS2BpuXShyRn5COFAgmwadIJ5PeFgfuidYQm8HrOx40sJf-FNSHwHn8HwLk6POWzIqd0EdAT9Gs-0YaODXW2d9Nw6MtjUcE8Ai1QpmlPhyblnrxyaUGsdXhyphenhyphenH9oiaQMWRDZs_tBY1Beus/s320/MK%2526EATC+Signature-page-001.jpg" width="320" /></a><br />
<br />
<span style="font-family: "helvetica neue", arial, helvetica, sans-serif;"><i>East African Tax Consulting is an Associate of Muthomi & Karanja Advocates.</i></span></div>
East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com2tag:blogger.com,1999:blog-9020098927388816555.post-16477470108708547822015-08-27T13:05:00.002+03:002017-02-24T21:20:31.102+03:00TAX ALERT - Tax amnesty for individual landlords!<span style="color: #0b5394; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: large;"><b><br /></b></span>
<span style="color: #6fa8dc; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: large;"><b>Overview </b></span><br />
<div style="text-align: justify;">
</div>
<ul>
<li style="text-align: justify;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">The Government has granted a tax amnesty for individual landlords on their rental income.</span></li>
<li style="text-align: justify;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Landlords are required to declare their rental incomes for the years of income 2014 and 2015, file returns and pay tax thereon by 30 June 2016 to qualify for the amnesty.</span></li>
<li style="text-align: justify;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">For 2013 and prior years of income, 100% of principal taxes, penalties and interest will be forgiven.</span></li>
<li style="text-align: justify;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">For the years of income 2014 and 2015, 100% of penalties and interest will be forgiven.</span></li>
<li style="text-align: justify;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">KRA will issue amnesty certificates for landlords who comply with terms of the amnesty.</span></li>
</ul>
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<span style="color: #6fa8dc; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: large;"><b>Terms of amnesty </b></span><br />
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">The government, through the Finance Bill 2015 has granted a tax amnesty for individual landlords on their rental income. To qualify for the amnesty, landlords will be required to declare their rental income, file returns online and pay principal taxes for the 2014 and 2015 years of income by the 30 June 2016.</span></div>
<div style="text-align: justify;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXcy3YQ09wz82Eg5Wvh3ObBBKanwFcBJ3Irl6PiRLW6HBuImGVQ4UqfCNaAItKo-Sun_lkDNXazgbOW2GzWIOsjsBwvaxnO6Hm-HMXSdRa6KT3hNGY2UX2bVIw-ivGqVCZD4epiXrTWsY/s1600/Amnesty.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="108" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXcy3YQ09wz82Eg5Wvh3ObBBKanwFcBJ3Irl6PiRLW6HBuImGVQ4UqfCNaAItKo-Sun_lkDNXazgbOW2GzWIOsjsBwvaxnO6Hm-HMXSdRa6KT3hNGY2UX2bVIw-ivGqVCZD4epiXrTWsY/s400/Amnesty.jpg" width="400" /></a></div>
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<div style="text-align: justify;">
<b><span style="color: #6fa8dc; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: large;">Implications</span></b></div>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;"><br /></span>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;">The amnesty effectively means that a taxpayer in default can declare and pay the principal taxes for the years of income 2014 and 2015 and all other taxes on the rental income, penalties and interest will be forgiven. </span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;"><br /></span>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;">In case of unavailability of expense receipts, the taxpayer is allowed to deduct 40% of the gross receipts as expenses. </span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;"><br /></span>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;"><i><b>Note however that the amnesty has not been extended to companies.</b></i></span><br />
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">In addition, the government has introduced simplified tax compliance for Resident landlords earning KShs 10 million or less per annum from residential properties with effect from 1 January 2016. They will pay a monthly flat rate of 10% of the gross rental income. This will be a final tax.</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Further, the government has introduced a withholding tax of 12% on rental income wef 1 January 2016. The commissioner will appoint withholding tax agents. The withholding tax will be an advance tax.</span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Resident landlords who wish to remain under the current tax regime will be required to write to the commissioner for approval. </span><br />
<br /></div>
<div style="text-align: justify;">
<span style="color: #6fa8dc; font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: large;"><b>Recommendations </b></span></div>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;"><br /></span>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; text-align: justify;">The amnesty is a welcome relief for individual landlords, some of whom have failed to comply out of ignorance or the high cost of compliance. Landlords who take advantage of the amnesty will avoid the burden of principal taxes, penalties, interest and potential prosecution for tax evasion. </span><br />
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">We recommend that individual landlords should contact their tax agents to take advantage of the amnesty.</span></div>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">To contact us:</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;"><br /></span>
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">East African Tax Consulting</span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Mobile: +254 722 332729 </span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Email: starlings@taxeac.com </span><br />
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif;">Contacts: Starlings Muchiri, Samuel Karanja</span>East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-46398913174173279002015-04-23T16:18:00.000+03:002017-02-24T21:20:55.557+03:00NHIF rates increased from April 2015The National Hospital Insurance Fund (NHIF) Board gazetted new NHIF contribution rates on 6th February 2015.<br />
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The new rates take effect on 1 April 2015 and range from KShs 150 – KShs 1700 depending on the contributor’s monthly gross income.<br />
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<iframe frameborder="0" height="288" scrolling="no" src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21113&authkey=AHbuOfciybJJ3PI&em=2" width="476"></iframe><br />
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We advise employers to amend their payroll and deduct NHIF contributions based on the new rates, beginning with the payroll for April 2015.<br />
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The deductions should be remitted to NHIF by the 9th of the subsequent month. Failure to do so attracts a penalty of five (5) times the contribution due.<br />
<br />
Contact us in case you need more information or assistance: <br />
<br />
<br />
East African Tax Consulting<br />
Branton Court, Ndemi Lane (off Ngong Road) <br />
Nairobi, Kenya<br />
+254722332729<br />
starlings@taxeac.com<br />
<br />East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-39090809213749403532015-03-18T15:59:00.000+03:002017-02-24T21:21:20.895+03:00Tax and Regulatory Compliance for Not for Profit Organisations in KenyaThese slides summarize the Tax and Regulatory compliance requirements for NPOs/ NGOs/ PBOs in Kenya as at March 2015.<br />
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<iframe frameborder="0" height="288" scrolling="no" src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21115&authkey=AKfikZ3LFSLFAg4&em=2" width="476"></iframe><br />
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<br />
<br />
Contact us: <br />
East African Tax Consulting<br />
Branton Court, Ndemi Lane (off Ngong Rd)<br />
Nairobi, Kenya<br />
+254722332729 <br />
starlings@taxeac.comEast African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-77437772604013733432015-02-03T22:55:00.000+03:002017-02-24T21:21:46.133+03:00Tax Alert! Capital Gains Tax GuidelinesThe commissioner of income tax has issued guidelines on collection and accounting for Capital Gains Tax (CGT) on land, buildings and marketable securities. <br />
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This Alert looks at some of key aspects of the guidelines and implications thereof.<br />
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<iframe frameborder="0" height="288" scrolling="no" src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21112&authkey=ADwv3v7Fskt9O_Y&em=2" width="476"></iframe><br />
<br />
East African Tax Consulting<br />
Tel: +254 722 332729 <br />
Email: starlings@taxeac.com <br />
Contacts: Starlings Muchiri, Samuel KaranjaEast African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-20173049792908470942014-12-30T21:22:00.000+03:002015-11-06T14:07:26.603+03:00Capital Gains Tax (CGT) Declaration Forms<br />
<iframe src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21116&authkey=AABNjijjl45zCsQ&em=2" width="476" height="288" frameborder="0" scrolling="no"></iframe><br />
<br />
<br />
<iframe src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21114&authkey=AHrA_BVwWkAaEA8&em=2" width="476" height="288" frameborder="0" scrolling="no"></iframe>East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-10037797670136346692014-11-21T19:58:00.002+03:002017-02-24T21:22:54.893+03:00Withholding VAT makes a comeback!The Finance Act 2014 reintroduced withholding VAT (WHVAT) with effect from 19 September 2014.<br />
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VAT is withheld on taxable supplies to government ministries, departments or agencies.<br />
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The rate of WHVAT is 6% of the taxable supplies.<br />
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WHVAT does not apply to exempt supplies, zero-rated supplies and donor aid funded projects.<br />
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KRA has published notices in national newspapers providing directions on collection, accounting and remittance of WHVAT.<br />
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See the Tax Alert below for more information:<br />
<br />
<iframe frameborder="0" height="288" scrolling="no" src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21111&authkey=AIm6DKDQm42qwV8&em=2" width="476"></iframe> <br />
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OUR CONTACTS- <br />
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Email: starlings@taxeac.com<br />
Tel: 0722332729<br />
Website: www.taxeac.comEast African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-80487218636397792622014-10-21T12:46:00.000+03:002017-02-24T21:23:31.423+03:00Capital Gains Tax in Kenya - The 8th ScheduleAs you are well aware, the Finance Act 2014 reinstated Capital Gains Tax in Kenya by resurrecting the 8th Schedule to the Income Tax Act.<br />
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Below is the text of the 8th Schedule:<br />
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<iframe frameborder="0" height="288" scrolling="no" src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21110&authkey=AIELw6E21N5hiPg&em=2" width="476"></iframe> <br />
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Do not hesitate to talk to us if you have any queries- <b>East African Tax Consulting Mobile: +254 722 332729 Email:starlings@taxeac.com</b>East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-10691644931004948882014-09-24T16:06:00.002+03:002017-02-24T21:23:59.376+03:00The NSSF Act 2013 - What employers and employees need to know!President Uhuru Kenyatta assented to the National Social Security Fund Act, 2013 (Act No 45 of 2013) on 24 December 2013. The Act commenced on 10 January 2014.<br />
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The Act introduces a Pension Fund and a Provident Fund, provides for contributions to the fund and benefits to be paid out of the fund.<br />
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The Act introduces a progressive, wider scope and portable social security system. It also provides for the closure of the old social security system within 5 years. <br />
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Download the full Tax Alert below:<br />
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<br />
<iframe frameborder="0" height="288" scrolling="no" src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21109&authkey=AE95ZWyeHmvXfkk&em=2" width="476"></iframe><br />
<br />
<br />
<b>East African Tax Consulting</b><br />
Mobile: +254 722 332729 <br />
Email: starlings@taxeac.com <br />
Contacts: Starlings Muchiri, Samuel KaranjaEast African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-895498449724898822014-09-22T20:18:00.000+03:002017-02-24T21:24:26.806+03:00NHIF Contributions - New hurdles arise in the implementation of enhanced rates! On 11 September 2014, NHIF management and COTU officials agreed on new rates of contribution. COTU also agreed to withdraw their outstanding court case.<br />
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PUSETU however rejected the rates and threatened to move to court to stop the implementation of the agreed rates. <br />
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In the meantime, we advice employers to continue deducting contributions at the old rates and remitting the same to NHIF by 9th of the following month, pending a conclusive notice by NHIF.<br />
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See below for details: <br />
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<iframe frameborder="0" height="288" scrolling="no" src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21108&authkey=AIBNAboZNZM_oiw&em=2" width="476"></iframe><br />
<br />
<b>East African Tax Consulting</b><br />
Tel: +254 722 332729 <br />
Email: starlings@taxeac.com <br />
Contacts: Starlings Muchiri, Samuel KaranjaEast African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-37127587074128834622014-09-22T16:22:00.000+03:002015-11-06T14:13:00.396+03:00Changes brought by the Value Added Tax (Amendment) Act 2014The VAT Amendment Act was published on 15 May 2014 and commenced on 29 May 2014. See a list of the supplies that were affected by the Amendment Act below:<br />
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<iframe src="https://onedrive.live.com/embed?cid=D13C254C9C943FAF&resid=D13C254C9C943FAF%21107&authkey=AFJckCIdKqvRumM&em=2" width="476" height="288" frameborder="0" scrolling="no"></iframe>East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-16465650150281821562014-09-10T13:22:00.000+03:002014-09-10T13:22:00.517+03:00Will Ebola spoil the Party? – Effects on tax revenues from international flights.<div style="border-bottom: solid #4F81BD 1.0pt; border: none; mso-border-bottom-themecolor: accent1; mso-element: para-border-div; padding: 0in 0in 4.0pt 0in;">
<h2 style="margin-left: 0in; mso-add-space: auto; text-indent: 0in;">
<span lang="EN-GB"><span style="color: #444444; font-family: Verdana, sans-serif;">Will Ebola spoil the Party? – Effects on tax revenues from
international flights. </span></span></h2>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">The recent Ebola outbreak in West Africa has
drawn comparisons to the bubonic plague (Black Death) that ravaged Europe in
the 14<sup>th</sup> century. Statistically though, the fatalities are nowhere
near those of the Black Death.</span></span></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAMCxItt9HFx1OFe0IiaSUF4BoZtliT-OGC_qIngod8i-9hrzVVCkZov0CKey3d0D3oif149MDE_C3Nzjgyhor9rcKExmM_kwXjK7JAcCa0mJy60Mb4Vp9Ilclf3-otHm0oP8ytiMGCY4/s1600/Black-Death-Nicolas-Poussin.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAMCxItt9HFx1OFe0IiaSUF4BoZtliT-OGC_qIngod8i-9hrzVVCkZov0CKey3d0D3oif149MDE_C3Nzjgyhor9rcKExmM_kwXjK7JAcCa0mJy60Mb4Vp9Ilclf3-otHm0oP8ytiMGCY4/s1600/Black-Death-Nicolas-Poussin.jpg" height="292" title="The Black Death by Nicholas Poussin" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="color: red;">The Black Death by Nicholas Poussin</span><br /><i><span style="font-family: Times, Times New Roman, serif;">The ‘Black Death’ killed 30% of Europe’s population whereas Ebola has killed 1400 people</span></i></td></tr>
</tbody></table>
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<span style="text-indent: 0in;"><span style="font-family: Trebuchet MS, sans-serif;">The
thought of an Ebola Pandemic is scary because of the potential effects on the
modern globalized economy.</span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Kenya
banned flights from Guinea, Sierra Leone and Liberia from entering into the
country. Many other airlines also stopped flying to the affected countries. <o:p></o:p></span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Let
us have a look at the effect of the ban on flights from affected West African
countries on tax revenue collections.</span></span></div>
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<span style="color: #8064a2; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<h3 style="margin-left: 0in; text-indent: 0in;">
<span style="color: #8064a2; font-family: Arial, Helvetica, sans-serif;"><b>The tax
Practice</b></span></h3>
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<span style="text-indent: 0in;"><span style="font-family: Trebuchet MS, sans-serif;"><br /></span></span></div>
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<span style="text-indent: 0in;"><span style="font-family: Trebuchet MS, sans-serif;">There are two broad bilateral approaches to
taxation of shipping lines and airlines in international traffic.</span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">In the first approach, profits from the operation
of ships and aircraft in international traffic are taxable only in the
Contracting State in which the place of effective management of the enterprise
is situated. This is the approach favoured by the OECD.</span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">The second approach is recommended by the UN
Model Tax Treaty to allow countries with undeveloped shipping industries to
have a piece of the tax revenue pie. Profits from the operation of aircraft in
international traffic are taxable only in the Contracting State in which the
place of effective management of the enterprise is situated. However, the
profits relating to the operation of ships in international traffic may be taxed
at a reduced rate of tax in the second state if the operations in that second
state are more than casual. </span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Liberia with over 3,500 ships has the second
largest shipping registry after Panama. Liberia has shipping treaties with USA
and New Zealand. The country also has double tax treaties with Germany and
Sweden.</span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Sierra Leone has double tax treaties with
Norway, South Africa and UK while Guinea has a double tax treaty with France. </span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Most countries unilaterally tax ships and
aircraft in international traffic. In the case of Kenya, the unilateral rate of
tax is 2.5% of the gross revenue from cargo, mail and passenger traffic sourced
in Kenya</span><span style="font-family: Arial, Helvetica, sans-serif;">.</span></span></div>
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<span style="color: #8064a2; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<h3 style="margin-left: 0in; text-indent: 0in;">
<span style="color: #8064a2; font-family: Arial, Helvetica, sans-serif;">The tax revenue
losers</span></h3>
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<span style="font-family: 'Trebuchet MS', sans-serif; text-indent: 0in;">In view of the above tax practices in
international shipping and air transport, countries affected by Ebola as well
as countries that have banned flights into/from the affected regions will
suffer direct revenue loss.</span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Closer home, Kenya Airways (KQ) derives
around 25% of its revenues from West Africa. Out of the 44 weekly flights to West Africa
before the ban, 7 were to the affected countries. KQ made losses in the last two years (KShs 3B
last year and KShs 7.8B in the preceding year) for reasons not related to the
Ebola outbreak. </span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">The outbreak is likely to delay KQ’s return
to profitability and tax contribution to the exchequer especially if the ban is
extended over a long time or to other West African destinations. </span></span></div>
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<span lang="EN-GB"><span style="font-family: Arial, Helvetica, sans-serif;"> <table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8lJGQhozCnuDlCESVtRVhV8tnTO57LO5__eDqcJ-KaXUXWEMJBuHuHr-GyfapnpELeqI4ngdh4Y6B2xLZrZoMB4S1dH3hqxUQY-wdox-bkK065wR1mDorHzfRMqoszFs1A6fx2QLLPh8/s1600/KQ+Revenues.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8lJGQhozCnuDlCESVtRVhV8tnTO57LO5__eDqcJ-KaXUXWEMJBuHuHr-GyfapnpELeqI4ngdh4Y6B2xLZrZoMB4S1dH3hqxUQY-wdox-bkK065wR1mDorHzfRMqoszFs1A6fx2QLLPh8/s1600/KQ+Revenues.png" height="276" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="text-indent: 0in;"><i><span style="font-family: Times, Times New Roman, serif;">At a recent press conference Titus Naikuni the outgoing KQ CEO mentioned that revenues from West Africa are not more than 25% </span></i></span></td></tr>
</tbody></table>
</span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Kenya Airports Authority (KAA) collects US $
40 for every passenger who lands at Jomo Kenyatta International Airport
(JKIA). Further, KAA collects airplane
landing fees. KAA will lose on revenues that would have been paid by the
passengers and airplanes from the banned routes. </span></span></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Korean Airlines of South Korea suspended
operations from Kenya stating that as a regional hub, Kenya has a high risk of
exposure to Ebola. Again, this ripple effect leads to loss of revenue for KAA.</span></span></div>
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<span style="color: #8064a2; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<h3 style="margin-left: 0in; text-indent: 0in;">
<span style="color: #8064a2; font-family: Arial, Helvetica, sans-serif;"><b>The silver
lining</b></span></h3>
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<span style="font-family: Arial, Helvetica, sans-serif; text-indent: 0in;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; text-indent: 0in;">I</span><span style="font-family: Trebuchet MS, sans-serif; text-indent: 0in;">s there a silver lining to this dark cloud?</span></div>
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<br /></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">The outbreak possibly gives the smaller
regional aviation players a chance to grow their market share on the routes
that have been shunned by the major airlines. </span></span></div>
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<br /></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">Charter flights (“the taxis of the sky”) are
also likely to gain more prominence in the transportation of key personnel and
cargo to the affected areas.</span></span></div>
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<br /></div>
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<span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">The Ebola outbreak will lead to tax revenue
losses for the affected countries as well as the international transportation
industry in general. The losses will be substantial if the outbreak becomes a
pandemic or takes a long time to fizzle out. Hopefully national authorities and
the international community will contain the outbreak before much damage is
done. </span></span></div>
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<br /></div>
<br />
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<b><span lang="EN-GB"><span style="font-family: Trebuchet MS, sans-serif;">East
African Tax Consulting</span><o:p></o:p></span></b></div>
East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-88041786246262253912014-03-08T13:15:00.003+03:002014-03-08T13:47:23.677+03:00iTAX rolled out - How to file returns and make payments<div class="MsoNormal">
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<span style="font-family: Verdana, sans-serif;">Kenya Revenue Authority (KRA) has rolled out
the iTAX online tax return filing and payment system for domestic taxes. With effect from 1<sup>st</sup> March 2014
all taxpayers are required to file their returns through iTAX. KRA will not accept manual returns. In addition, taxpayers using the Integrated
Tax Management System (ITMS) are expected to upgrade to iTAX.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: large;">Getting
started...</span></h3>
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</div>
<ul>
<li><span style="font-family: Verdana, sans-serif;">Access the
ipage through the web portal <a href="http://www.kra.go.ke/">Click here</a> </span></li>
<li><span style="font-family: Verdana, sans-serif;">Log in to
iTAX using existing ITMS credentials</span></li>
<li><span style="font-family: Verdana, sans-serif;">Update the
profile data in iTAX</span></li>
<li><span style="font-family: Verdana, sans-serif;">Obtain the
updated tax certificate</span></li>
</ul>
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<span class="Heading2Char"><span style="font-family: Verdana, sans-serif; font-size: large;">How to file returns... </span></span></h3>
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<span style="font-family: Verdana, sans-serif; font-size: large;">How to pay taxes...</span></h3>
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East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-33237852718945987082013-12-22T23:27:00.000+03:002014-03-08T13:33:17.718+03:00Resurrection of Capital Gains Tax (CGT) in Kenya<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<h4>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Government's position</span></h4>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In June 2013, Henry Rotich, cabinet secretary for Kenya’s National Treasury,
informed the Budget and Appropriations Committee of the National Assembly that the
government had initiated a review of the capital gains tax under the Income Tax
Act as part of a plan to reintroduce the CGT, which had been suspended more than
25 years earlier.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The cabinet secretary recently disclosed that the government has
firmly committed to the international financial institutions to reintroduce
CGT, at least on real estate. </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">CGT suspended in 1985</span></h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">While the charging section for the CGT (section 3(2)(f) of the ITA)
is still in force, the operation of the eighth schedule to the ITA, under which
capital gains are computed, was suspended in 1985 to spur investment in the
capital markets and the real estate sector.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The easiest way to reintroduce the CGT would be to lift the
suspension on the eighth schedule to the ITA. Alternatively, the government
might introduce new regulations that are in line with current policy but
incorporate recent trends in taxation.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Following is an outline of the provisions of the suspended legislation.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Rates of CGT</span></h3>
</div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">CGT is levied at the rate of 10 percent of net gains. However,
capital gains from marketable securities held by individuals and listed on the
securities exchange are taxed at 7.5 percent.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Subsection 3(2)(f) (capital gains) of the ITA is a fallback provision.
Income is taxed under subsection 3(2)(f) only if it is not taxable under any
other provision of the ITA. </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">For example, if a taxpayer is engaged in the trade
of buying and selling property, the resulting gains are taxed as business
profits under subsection 3(2)(a). Depreciable capital machinery subject to
balancing charges or deductions is not subject to CGT.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Who pays CGT?</span></h3>
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large;">Corporate and non-corporate persons (individuals and partnerships)
both are subject to CGT, as are membership clubs and trade associations. </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
scope for CGT is wider for corporate organizations than individuals, however.
For corporate entities, the CGT applies to real property, movable property,
goods, money, and rights to property, whether the property is part of the
business assets or is held for investment purposes. </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Individuals pay the tax
only on gains from real property and marketable securities.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">If property is held by trustees, nominees, or liquidators, they have
the obligation to account for tax on any gains arising from the transfer of the
property.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Subject matter</span></h3>
</div>
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<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large;">Land is defined widely to include buildings, standing timber, trees,
crops, and land covered by water.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Capital gains are taxed at source. Marketable securities issued by
the government, a municipal authority, or government authority are deemed to be
situated in the country in which the authority is situated. </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Other marketable
securities are deemed to be situated in the country where they are registered
or where the principal register is located.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The taxable value for CGT purposes is the transfer value less the
adjusted cost. The gain or loss is deemed to be realized at the time of the
transfer even if the consideration is paid in installments.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The adjusted cost includes acquisition and construction costs, the
cost of enhancing or preserving the value of the property, incidental costs,
and the cost of defending title to the property. Incidental costs include legal
fees; stamp duty; mortgage costs; and sales, advertising, and valuation costs.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Bad debts incurred in connection with the transfer of property can
be deducted against trading income. </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">CGT trigger </span></h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">A transfer occurs when a property is sold, exchanged, lost,
abandoned, surrendered, or given as a gift, whether for consideration or not. There
is no transfer if property is used to secure a debt, a company issues its own
shares/debentures, or property is transmitted to heirs or is vested by a
trustee to the beneficiary.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The tax authority may adjust the transfer price if it is not at arm’s
length, if no consideration was paid, or if the consideration cannot be valued.
In those cases, the market value is deemed to be the transfer price.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Transfers involving the exchange of properties necessitated by
corporate restructuring and reorganizations are exempt from CGT subject to
government approval.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<h3>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Implications</span></h3>
</div>
<div style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
reintroduction of the CGT will undoubtedly cause investors to look for tax
planning alternatives, including the recently introduced real estate investment
trust regime and succession planning.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Verdana, sans-serif; font-size: large;"><br /></span>
<br />
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<span style="font-family: Verdana, sans-serif;">by <span style="font-size: large;">Starlings Muchiri</span></span></div>
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East African Tax Consultinghttp://www.blogger.com/profile/08427124248475764306noreply@blogger.com0tag:blogger.com,1999:blog-9020098927388816555.post-47818311274695887322013-12-18T09:59:00.002+03:002013-12-18T11:47:54.594+03:00Kenya at 50 years – evolution of the tax system<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Kenya
celebrated 50 years of independence from British colonial rule on 12 December
2013.</span><br />
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">We
look at the history of tax developments in the five decades from independence
and highlight the areas for further reform.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The independence 60s</span></b></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">At
independence, Kenya adopted the <span class="A10"><span style="line-height: 115%;">colonial
legislation, international treaties and agreements that the British Crown had
undertaken on behalf of the colony. The tax system comprised of </span></span>income tax and consumption taxes. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Income
tax was administered by the East African Tax Department under the East African
High Commission which was formed in 1948.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
East African Income Tax (Management) Act 1952 combined three ordinances
governing income tax in the East African countries and laid the basis for
administration of income tax. Separate Income Tax Acts for the three East
African countries were subsequently enacted in
1953. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Prior
to the introduction of income tax, Africans were subjected to hut and poll tax
from 1901 while non-natives resident in Kenya were subjected to graduated
personal taxation from 1933.</span><br />
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">At
independence, the Customs tariff ordinance, 1958 was in force. The colonial
government had started charging customs tariff at the port of Mombasa under an
agreement between Sultan Mazrui and the British in 1824. The tariff was
slightly modified in 1922 to charge Duty at 30% on spirits, tobacco &
perfumes, 10% duty on industrial commodities and 20% on other products. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Excise
Duty was collected under the Excise duty Agreements Ordinance. Duty was first introduced
on beer in 1923 and on sugar, tea, cigarettes and tobacco in 1931. <o:p></o:p></span></div>
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<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b></div>
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<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The mixed fortune 70s<o:p></o:p></span></b></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
the decade after independence, the Kenyan economy boomed due in part to the
green revolution and generous aid and grants from donors. </span><br />
<span style="background-color: white;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The country was
however affected by the oil shocks of 1973 and 1979. The government responded
with tax changes to reduce the resulting fiscal deficits.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
response to the first oil shock, Kenya replaced the existing consumption taxes
with a sales tax in the 1972/3.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The rate of corporate taxes was
increased in 1973/4 from 40% to 45% for local companies and from 47.5% to 52 %
for foreign companies.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The government introduced Capital
Gains Tax on property and marketable securities in 1975 to increase tax
revenue.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
addition to the oil shocks, the East African Community (EAC) collapsed in 1977,
requiring public money to form corporations and buy out others. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
government responded to the collapse of the EAC and the 1979 oil shock by
increasing sales taxes from 10 to 15 per cent and excise duties from 50% to
59%. Personal Income Tax was however decreased from 36% to 29% per cent in
response to increasing tax competition in East Africa.<o:p></o:p></span></div>
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<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b></div>
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<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The reformative 80s<o:p></o:p></span></b></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
the early 1980s the Kenya economy was still reeling from the economic shocks of
the 1970s. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Capital
Gains Tax was suspended in 1985 to encourage foreign direct investment and
development of the stock exchange.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
the second half of the decade, the country embarked on tax reform, which was
part of the Structural Adjustment Programmes
in economic restructuring agreement between the Government of Kenya and
the international financial institutions. The government adopted the Tax
Modernization Programme (TMP) in 1986 and the Budget Rationalization Programme
in 1987.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
the 1980s the personal tax rates were still high. For instance, the top marginal
rate of taxation in 1986 and 1989 was 65% and 45%, respectively. <o:p></o:p></span><br />
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Excise
Duty was specific and charged on domestically produced goods. <o:p></o:p></span></div>
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<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The dramatic 90s<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Early
1990s was politically turbulent, characterised by the clamour for multi-party
democracy in Kenya. <o:p></o:p></span><br />
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
Berlin wall had fallen on 9 November 1989, signalling the demise of communism
and end of the cold war. This marked the end of unconditional aid and grants
from donors. In fact bilateral and multilateral donors suspended aid in 1991 to
pressure the government to meet its commitments. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Despite
the political intrigue, a number of administrative reforms were instituted in
the 1990s. <o:p></o:p></span><br />
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">VAT
was introduced in 1990 to replace sales tax. VAT had a wider scope and included
tax on services. On introduction of VAT, there were 9 rates of ranging from 0%
to 150%, with a standard rate of 18%. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">At
the end of the decade, the VAT rates had been reduced to 4, ranging from 0% to
15%, with a standard rate of 15%. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
EPZs Act was enacted in 1990. The Act gave generous incentives to export
oriented manufacturers. Among the incentives available to EPZs were Exemptions
from VAT, WHT, Stamp Duties, Import Duties and a 10 year corporation tax
holiday followed by CIT at a reduced rate of 25%.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
EPZs Act also provided for manufacture under bond. Manufacturers under bond were
exempted from Duty and VAT on imported plant, equipment and raw materials. They
were also entitled to 100% investment allowance on PPE. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
1991/2 Excise was changed from specific to <i>ad
valorem</i>. The scope of excise was expanded to included imports, effectively
turning Excise from a tax on domestic production to a tax on consumption.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
1993, the economy was liberalised. Import licencing requirements and foreign
exchange controls were abolished and export compensation was suspended. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
government tried, without much success to reform taxation of the agricultural
and informal sectors. Presumptive tax was introduced in 1990, abolished in
1993, reintroduced in 1995 and abolished again in 2000.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">A
semi-autonomous Kenya Revenue Authority was incorporated in 1995. KRA amalgamated 5 departments in Ministry of
Finance namely: Customs Duty, Excise Duty, Sales Tax, Income Tax and Corporate
Tax. Two years later KRA established a special station for large taxpayers
(LTO). <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><b>The transition 00s</b><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
first decade of the 21<sup>st</sup> century was a transition period. President
Moi handed over power to President Kibaki’s NARC team in 2003, after 24 years
in power. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
NARC administration put more emphasis in financing the budget through
internally collected tax revenues. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
NARC administration accelerated the Tax Modernisation Programme, introducing
new tax administration measures, including use of IT. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
NARC government started with a “gift” of a tax amnesty in 2004. Taxpayers were
allowed to declare and pay past taxes without suffering penalties and interest.
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
government then introduced Electronic Tax Registers (ETR) in 2005 to enhance
VAT Compliance. This move was met with countrywide opposition by traders before
gradual acceptance. The SIMBA 2005 system for Customs declaration was also
introduced in 2005. <o:p></o:p></span><br />
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
government gazetted Transfer Pricing regulations in 2006 to prescribe the
methods of determining transfer prices between resident companies and related
non-resident entities. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
reforms at KRA were largely successful. KRA was awarded the ISO 9001:2001
certification in 2007 and the ISO 9001:2008 certification in 2011. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">To
keep up with developments in the IT sector, the government introduced
provisions for taxation of non-resident providers of bandwidth, satellite and
radio communications. The government also prescribed new capital allowances on fibre
optic cable and computer software.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Once
again in 2006 the government sought to bring the informal sector into the tax
net through Turnover Tax (ToT) and Advance Tax. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
government reverted to specific rates of Excise Duty in 2003/4. A hybrid system
was adopted for cigarettes. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Regional
integration proceeded fast in the decade. The EAC Treaty came into force in
2000. The Customs Union was launched in 2004 and the Common Market in 2010.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">VAT
standard rate was reduced from 18% at the turn of the decade to 16%. The 16%
rate prevailed till the end of the decade. A special rate of 12% was charged on
electricity and HFO.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Personal
Income Tax brackets were reduced to 5 in number.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The new dawn 10s<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
adoption of a new constitution in 2010 was a watershed in public finance management.
The 2010 constitution laid down an elaborate framework for public finance management
as well as entrenched the right to fair administrative process as a fundamental
right. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Section
47 of the constitution entitles a taxpayer to an expeditious, efficient,
lawful, reasonable and procedural fair administrative process. Taxpayers have
a right to be given written reasons for actions that may affect their tax
liabilities adversely. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
constitution devolved some powers of taxation from the national government to the
county governments. The national government was granted a monopoly in imposing income
tax, value-added tax, customs duties and other duties on import and export
goods and excise tax. The county governments may impose property rates, entertainment
taxes and any other tax that may be authorized to impose by Parliament.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
new constitution abolished tax exemptions for public officers. The Income Tax
Act, Customs and Excise Act and VAT Acts were amended to remove tax exemptions
for the president and other public officers. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">A
new broad based VAT Act was enacted in 2013 to improve VAT administration and
improve VAT tax yields.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
the present decade, the government has identified new sources of tax revenue including
excise on mobile money transfer and tax on transfer of rights to oil prospecting
blocks. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">KRA
has continued with Tax Modernisation measures. The Medium Taxpayers Office (MTO)
station, modelled along the lines of the LTO was introduced in 2010 to manage
taxpayers making a turnover of KES 350-750 Million. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">KRA
is rolling out an integrated system of the registration, filing of returns and
payment of tax (iTax). <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
government introduced the legal framework to enable KRA to co-operate with
other revenue authorities and exchange information on tax revenue matters in
2012. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">On
tax dispute resolution, the government has introduced a single tribunal to replace
the multiple tribunals for income tax and VAT.
<o:p></o:p></span></div>
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<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b></div>
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<b><span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The future <o:p></o:p></span></b></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">In
the 50 years since independence, Kenya has made progressive steps to reform public
finance management and the tax system. There
have been notable improvements in the policy framework and tax administration
processes.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Going
forward, KRA should continue improving tax administration processes and aim at adopting
international best practices. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
county governments have been granted taxing powers by the constitution. Most of
the counties lack the capacity and expertise to administer tax systems. The
national government should assist the county governments to develop capacity to
administer taxes at the county level.<o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The
government has largely failed at bringing the informal sector to taxation. Large
taxpayers and people in formal employment account for most of the tax collections.
The country should explore economically
efficient means of bringing the gray market to taxation. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Substantive
taxation of land and wealth has been elusive since the colonial government
tried to tax land by enacting the 1908 Crown Land Bill. There is a huge potential
for tax revenue collection from property. The government should explore ways
and means of taxing the sector.</span><br />
<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"> <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Finally
research suggests that tax incentive schemes introduced in the 1990s through
the EPZs Act may be harming rather than helping tax collections. The government
should reassess the incentives and if possible enact the Special Economic Zones
Bill as soon as is practically possible. <o:p></o:p></span></div>
<span style="background-color: white;"><br /></span>
<br />
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<span style="font-family: Verdana, sans-serif;">by <span style="font-size: large;">Starlings Muchiri</span></span></div>
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