Corporate tax is the tax paid on the profits of the business by a corporation or registered company. In Kenya, the corporate tax rate is capped at 30 percent for resident corporations and 37.5 percent for nonresident permanent companies. There are some restrictions to deductible expenses for Nonresident companies. The tax is derived from the total business made minus Cost of Goods, General Administrative cost, selling and marketing, research and development, depreciation, and any other operational costs.
Who is Eligible to Pay Corporate tax?Limited companies (LLCs) Trusts and Co-operatives are all required to pay corporate tax. The benefits of paying corporate tax over additional personal income tax for individual employees are numerous. These returns put into consideration the health benefits and retirement plans of individual employees and deduct them for the taxable income. It is also good to note that Kenyan companies that operate branches in foreign countries are required to submit all their income from those countries so as to claim for tax relief.
What is the Criteria that qualifies a business as Tax Resident?
- If the corporation is incorporated in Kenya
- If the business affairs in terms of management and control are done in Kenya for any given year of income.
- If the cabinet secretary declares through a gazette notice that the corporations be tax resident for a particular year of income
How can a corporation be exempted from Corporate Tax
If the following criteria is met, them a corporation may get a tax relief.
The company was established solely for the purpose of relieving poverty and distress from the public. Most NGOs whose mission and goal is to do this are tax exempt.
A company is established for the advancement of religion or education. One must prove that the income earned will be spent in Kenya or the expenditure is spent on activities that better the living standards of Kenyans.