Tax guide for Kenyan expats

Working in Kenya places you at the heart of the African economy. When you find employment or start a business in Kenya, there are some things to keep in mind. As with any relocation, you should have a close look at your salary  or business income in regards to the tax laws in your new home.

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Lets start with the basics first, who exactly are expats? Well,an expatriate (often shortened to expat) is a person temporarily or permanently residing in a country other than that of their citizenship.

As far as tax in Kenya is concerned, you first need to determine if you are a fiscal resident. fiscal residency(also known as Tax residence , residence for tax purposes) is an important concept for all tax payers living and working abroad. It determines how you are treated with regard to taxation in a particular country. In some cases, there are different regulations and tax rates for residents and non-residents. The rule of thumb for fiscal residency is the time you spend in Kenya. If you reside in Nairobi (or any other Kenyan city) for 183 days per tax year or more, you normally count as a resident for the Kenya Revenue Authority.

Fiscal residents pay tax on all employment income, including overtime pay, bonuses, commissions, financial benefits, allowances, and some other benefits in kind. If you have employment income from foreign sources or profits on business activities across borders, you have to pay taxes on it, but only if you’re a resident. Other than that, it is just income accruing in or derived from Kenya that needs to be taxed.

If you collect any interest, dividends, royalties, or technical service fees which accrue abroad, you may or may not be subject to taxation according to Kenyan law depending on the country in which they were accrued. Kenya has treaties and agreements with some countries regarding such taxes, so the advice of a tax consultant is highly recommended.

There is no inheritance tax, gift tax, estate tax, or wealth tax. However, while Kenya suspended the capital gains tax for many years, it was  reintroduced in 2015.

If your job is your only source of income while you are living in Nairobi, taxation is quite easy. Just check if your employer files monthly PAYE tax reports for you. The company then deducts all taxes and social security contributions directly from your salary as withholding tax. If the company does not take care of this, you have to file such reports yourself, at least once during each quarter (click here to learn step by step on how to DIY) In this case (and/or if you have several sources of income in Kenya), it’s probably best to contact a tax accountant like me or just use  the hyperlinked  PAYE calculator or VAT calculator for you computations

 

At the moment, Kenya has tax relief treaties with Canada, Denmark, France, Germany, India, Norway, South Africa, Sweden, the UK, and Zambia. Other agreements are under negotiation or signed, but not yet in force. Such tax agreements do not only prevent you from possibly taxing the same income twice; in some cases, they even provide a slightly lower tax rate on selected sources of income in Kenya.

On investment basis Kenya will definitely attract you to invest.But just before we invest  or continue investing here are a few pointers i thought you should know;

  1. Currency – Kenya shillings (Weekly exchange rates by Kenya Revenue Authority)
  2. Foreign exchange control – No , but Banks must report to Central Bank of Kenya all transactions that exceed USD 10,000.
  3. Accounting principles/financial statements Accounting principles are based on IFRS and  financial statements must be prepared annually.

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In that regard as we say Karibu Kenya we mean business not only in tourism but also in the investment sector where tax compliance is a key practice.

 

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 Kenya is around the same size as Texas (US). Texas is approximately 678,052 sq km, while Kenya is approximately 580,367 sq km

 

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