In the Kenyan tax system a partnership is not a separate taxable entity but a flow through arrangement. This means the partnership itself does not pay corporate tax. Instead its profits or losses are distributed to the individual partners according to their agreed sharing ratio and each partner is then responsible for paying tax on their portion as part of their individual business income.
Despite not paying corporate tax every partnership must file an annual Partnership Return to declare its financial activities and how income was distributed.
Key Requirements for Partnerships A partnership must have a KRA PIN registered under the partnership name. While the entity does not pay income tax it is still required to register for other obligations such as PAYE if it has employees and VAT if its annual taxable turnover exceeds five million shillings.
Step by Step Guide to Filing the Partnership Return IT2P
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Log In to iTax Access the KRA iTax portal using the PIN and password assigned to the partnership.
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Access the Returns Menu From the top menu select Returns and click on File Return. Choose Income Tax Partnership as the tax obligation.
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Download the IT2P Excel Form Select the appropriate return period and download the Excel Income Tax Partnership Return form. Open the file and enable macros to ensure the automated fields work correctly.
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Capture Partner Details and Profits In the Basic Information section enter the PINs of all partners and their respective profit sharing ratios as per the partnership deed. Navigate to the Profit and Loss sheet to enter the gross income and deductible business expenses.
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Validation and Submission Once the data is entered go to the tax computation sheet. The system will distribute the net profit or loss to the partners based on the ratios provided earlier. Click Validate to generate a zipped XML file. Upload this file to the iTax portal and download the acknowledgment receipt.
Filing Obligations for Individual Partners The process does not end with the partnership filing. Every partner must then log in to their personal iTax profile and file their individual resident return. They must declare their share of the partnership income in the business income section. Because partnerships often involve withholding tax on certain payments partners should ensure they claim any applicable tax credits on their personal returns to avoid overpayment.
Get Expert Help Today Managing partnership taxes requires careful coordination between the entity and the individual partners to ensure all ledgers are balanced and compliant. FaidiHR offers specialized tools and professional support to streamline this process.
Contact FaidiHR for Professional Tax Support Call 254 702 339 699 Email sales@faidihr.com