If you run a business in Kenya, whether it is a registered company or a partnership, there are several types of taxes you will deal with. The Kenya Revenue Authority explains these clearly, but here is a much simpler breakdown so anyone can understand how it works, who it affects, and why it matters.
Who this information concerns
People who own or are starting a limited company
People running a partnership
Business owners who employ workers
People selling goods, offering services, importing items, or renting out property
Any business owner who wants to stay compliant and avoid penalties
This applies to small businesses, side hustles, startups, and established companies.
Main Taxes You Should Understand
1. Income Tax
This includes all the tax charged on money your business earns.
a. Corporation Tax
If you operate a limited company, it pays tax on profit. Resident companies pay 30 percent. Foreign companies operating in Kenya pay 37.5 percent.
This tax is filed through the iTax portal using form IT2C, within six months after the end of your accounting year.
If your expected annual tax is above 40000 shillings, you must pay in installments during the year. This is called Installment Tax.
b. PAYE
If your business has employees, you must deduct Pay As You Earn from their salaries each month and submit it to KRA by the ninth day of the following month.
c. Withholding Tax
If you pay people for services such as consultancy, professional work, interest, dividends, or royalties, you may need to deduct tax before paying them. You then send that tax to KRA.
d. Advance Tax
If you operate a public service vehicle or commercial vehicle, you must pay this tax before inspection or licensing.
e. Installment Tax
This applies to companies that expect to pay more than 40000 shillings in tax per year.
2. Rental Income Tax
If you earn money from renting out property, this tax applies.
Residential property is taxed at 10 percent of gross rent. You cannot deduct expenses. This is a final tax.
Commercial property is taxed as part of normal business income and is included in your annual income tax return.
3. Value Added Tax VAT
If your business supplies taxable goods or services, or imports them, VAT applies.
The standard VAT rate is 16 percent.
You must register for VAT if your business earns more than 5 million shillings per year.
You file VAT using the VAT3 form by the twentieth day of the following month.
4. Excise Duty
This tax applies to specific goods and services such as alcohol, soft drinks, bottled water, cosmetics, mobile services, and money transfers.
Imported excisable goods are taxed on their cost including insurance and freight.
Local producers pay based on the factory selling price.
You file and pay through iTax.
5. Capital Gains Tax CGT
If you sell property or land and make a profit, you pay 5 percent tax on the gain.
This tax is final and does not need to be declared again in your annual return.
Marketable securities currently attract zero percent CGT.
6. Agency Revenue
These are taxes KRA collects on behalf of other government bodies.
Stamp Duty is paid during transfers of land, buildings, stocks, or shares.
Betting and Gaming Tax applies to businesses in the betting industry on their revenue and winnings paid out.
7. Turnover Tax TOT
This is for small businesses earning between one million and twenty five million shillings per year.
TOT is 1 percent of gross monthly sales.
This is a final tax.
You file and pay TOT by the twentieth day of the following month.
Businesses that hit the five million shilling mark and supply VAT taxable goods or services must register for VAT even while on TOT.
Why This Matters
Understanding taxes helps you avoid penalties, stay compliant, and run your business smoothly.
It also helps with planning, budgeting, and making informed financial decisions.
For small businesses, TOT can be easier than standard taxation.
If you earn rent, sell property, or deal in taxable goods and services, you need to know which taxes apply.
Summary
Companies pay corporation tax on profits.
Partnerships do not. Instead, each partner pays income tax on their share of the profit.
If you have employees, you must handle PAYE.
Your business may also deal with VAT, Excise Duty, Withholding Tax, TOT, Rental Tax, CGT, and Stamp Duty depending on what you do.
Need Help With Compliance
If you want help registering for the right taxes, filing, staying compliant, or managing payroll and HR processes, contact FaidiHR
Call 254 702 339 699
Email sales@faidihr.com