Income tax of business

It is divided into three:
      -Capital gains tax
      -Estate/Inheritance tax
      -Payroll tax

Income tax on business

Income Tax Act deals with tax of businesses and individuals.
Section 2 defines business as any trade, profession or vocation and every manufacture and venture or concern in the nature of trade but excluding any form of employment.

Income tax is then charged on all the income of the business whether resident or non-resident which has accrued in or derived in Kenya or is deemed so.

A corporation or other association of persons will be regarded as being resident if either the company is incorporated in Kenya or its affairs are managed or controlled in Kenya by the Minister through a notice in the gazette.

Income to be taxed is that to be received or accrued through business profit, services rendered, and income from agricultural activities, royalties, pensions or annuities.

Foreign sourced income is not taxable unless the company carries on business partly in Kenya and partly outside in which case all profits of the company should be liable to tax subject to any double taxation treaty, which may allow any taxes so paid to be deducted.

Income tax of individuals
Taxed on resident individuals on Kenyan sourced income, and on any foreign sourced income for employment or services rendered. however if Kenyan individual party carries on business in Kenya and abroad then it will be liable to tax, income tax will be charged on income from employment services rendered, rental income, interest pensions annuities, royalties and income from agricultural produce.

Capital gain tax
This is charged on capital gains realized on disposal of capital assets where gains are calculated between difference of  purchase and sale price discounted by inflation as measured by consumer price index for the period in which asset was held.

It was abolished on 14 June 1985 although it remains to be charged on gains realized on transfer of property in Kenyan model on or before 14th June 1985. It is still chargeable under the 8th schedule.

Death or estate duties.
It is charged upon transmission of property from a deceased owner to his heirs as a form of transfer of wealth. It helps the state to share in appreciation of assets from the time those assets were acquired to the time of transfer.

In 1982, MP for Karachuonyo moved a motion and an Act known as Estate Duty Abolition Act, which abolished estate duty on transfer of property from the deceased person who died. In Kenya, it is still charged on deaths that occurred by this date from time of granting of letters of administration.

Land charges
Stamp duties on any inter vivo transfers of land and the coming into effect of a registered doctrine. Local authorities also have land rates for property read in their localities, others in local authorities paid on transfers

Payroll Taxes
Collected by an employer PAYE on behalf of employee. Payment for insurance, retirement, pension, medical and other schemes handled by the employer on behalf of the employee.


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