What You Need to Know About Kenya Corporate Tax

Resident companies in Kenya pay corporate tax at 30%, while non-residents face a steeper 37.5% on Kenya-sourced income. If your business qualifies for Turnover Tax (annual income between KES 1 million and KES 25 million), you pay just 1.5% of gross turnover instead, which replaces income tax and VAT entirely. Here is how the standard corporate tax works, from quarterly instalment payments to filing your ITR-R on iTax.

1. What is Corporate Tax?

Corporate tax in Kenya is the income tax charged on the profits of companies doing business in the country. The standard rate is 30% for resident companies. Non-resident companies without a permanent establishment are taxed at 37.5% on Kenya-sourced income. The Kenya Revenue Authority (KRA) administers corporate tax through the iTax platform.

2. Who does it apply to?

This usually applies to:

Companies incorporated in Kenya (resident companies)
Branches of foreign companies operating in Kenya
Non-resident companies earning income from Kenyan sources
Companies in special economic zones (may qualify for reduced rates)

3. Why does it matter?

Understanding corporate tax helps you:

Stay compliant with tax laws
Avoid penalties and late fees
Keep proper records
File and pay correctly
Plan your cash flow better

4. How does it work?

Here's the basic process:

Register your company for income tax on KRA's iTax portal
Keep accurate books of account throughout the financial year
Calculate taxable income (total revenue minus allowable deductions and capital allowances)
Pay instalment tax in four quarterly payments during the year
File your annual income tax return (ITR-R) by the 6th month after your year-end
Pay any balance of tax due with the return
KRA issues an assessment based on your filed return

5. What forms are involved?

ITR-R - Annual corporate income tax return filed on iTax
Instalment Tax Schedule - Quarterly instalment tax payments
Capital Allowance Schedule - Claiming wear and tear on business assets
Tax Computation - Detailed calculation of taxable profit

6. What information do you need?

Before handling corporate tax, make sure you have:

Your company's KRA PIN
iTax login credentials
Audited or certified financial statements
Schedule of capital allowances
Details of all income (trading, investment, foreign)
Withholding tax certificates received
Records of advance tax and instalment tax payments
Transfer pricing documentation (for group companies)

7. Important deadlines

Filing frequency: Annual ITR-R return
Payment deadline: Instalment tax due by the 20th of the 4th, 6th, 9th, and 12th months of the accounting period
Year-end requirements: File ITR-R within 6 months of the end of the accounting period. For December year-end companies, the deadline is 30 June.

8. Common mistakes to avoid

Missing instalment tax payments, which attract a 10% penalty on the shortfall
Not claiming all available capital allowances (investment deduction, wear and tear)
Underestimating instalment tax (must be at least 110% of the prior year's tax)
Failing to maintain transfer pricing documentation for related-party transactions
Not applying for available tax incentives (special economic zones, EPZ status)
Overlooking withholding tax credits when computing the final tax liability
Missing the 6-month deadline for filing the annual return

9. Simple example

Your company earns KES 10,000,000 in revenue and has KES 7,000,000 in allowable expenses.

Taxable income: KES 10,000,000 - KES 7,000,000 = KES 3,000,000
Corporate tax at 30%: KES 3,000,000 x 30% = KES 900,000

Instalment tax payments (4 equal instalments):

4th month: KES 900,000 / 4 = KES 225,000
6th month: KES 225,000
9th month: KES 225,000
12th month: KES 225,000

Any balance or overpayment is settled when filing the ITR-R.

10. FAQ

Q: What is the corporate tax rate in Kenya? A: 30% for resident companies. Non-resident companies pay 37.5% on Kenya-sourced income.

Q: What is Turnover Tax? A: Turnover Tax applies to resident businesses with annual income between KES 1 million and KES 25 million. The rate is 1.5% of gross turnover, and it replaces income tax, VAT, and other taxes for qualifying businesses.

Q: How is instalment tax calculated? A: Instalment tax is estimated based on the current year's expected tax or 110% of the prior year's tax, whichever is lower. It is paid in four equal quarterly instalments.

Q: Can I carry forward losses? A: Yes. Tax losses can be carried forward indefinitely to offset against future taxable profits in Kenya.

Q: What is the penalty for late filing? A: A penalty of 5% of the tax due or KES 20,000, whichever is higher, applies for late filing. Interest is charged at 1% per month on unpaid tax.

11. Final takeaway

Kenya's corporate tax rate is 30% for resident companies, and paying your quarterly instalment tax on time while filing your ITR-R within 6 months of year-end keeps your business compliant with the KRA.

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What you need to know about Kenya corporate tax: Pay 30% on taxable profits, make four quarterly instalment payments, and file your ITR-R on iTax within 6 months of your financial year-end.

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