Every business operating in Kenya has to navigate a specific set of tax obligations administered by the Kenya Revenue Authority. Understanding which taxes apply to your business, at what rate, and by when they must be paid is essential for staying compliant and avoiding the penalties that come with missed deadlines.
Here is a clear breakdown of every major business tax in Kenya, what it applies to, and how to stay on top of it.
Corporate Income Tax
Resident companies pay Corporate Income Tax at 30 percent on net profits, while non-resident companies operating branches in Kenya pay 37.5 percent. The tax is calculated on profit after deducting legitimate business expenses like rent, salaries, and utilities.
Companies pay this tax in four equal instalments, due by the 20th day of the 4th, 6th, 9th, and 12th months of their financial year. Annual returns must be filed through the iTax Portal within six months after the financial year closes.
Turnover Tax for Small Businesses
Turnover Tax applies specifically to SMEs with annual gross turnover between KES 1 million and KES 25 million, charged at 1.5 percent of gross sales rather than net profit. This simplified structure makes compliance easier for smaller businesses that may not have sophisticated accounting systems.
Turnover Tax is filed and paid monthly through iTax, with payment due by the 20th of the following month.
Value Added Tax
The standard VAT rate in Kenya is 16 percent on most taxable goods and services. Reduced rates apply in specific cases, including 8 percent on petroleum oils and 0 percent on zero-rated supplies such as certain exports and essential goods.
VAT registration becomes mandatory once your business turnover reaches or exceeds KES 5 million within a 12-month period. Registered businesses must file and remit VAT monthly and issue eTIMS compliant electronic invoices for every transaction, a requirement KRA has been enforcing more strictly in recent years to close revenue leakage.
Pay As You Earn
If your business has employees, you become a tax agent responsible for deducting PAYE from salaries every month based on Kenya’s progressive tax bands. This is one of the most straightforward tax obligations to administer since payroll software typically calculates the correct deduction automatically.
Deducted PAYE must be remitted to KRA by the 9th day of the following month, one of the tightest deadlines in Kenya’s tax calendar.
Withholding Tax
Withholding Tax is deducted at source when your business makes certain payments to individuals or other businesses. Management and professional fees attract 5 percent, contractual fees attract 3 percent, and rent payments carry their own specific rate depending on the arrangement.
Amounts withheld must be remitted to KRA by the 20th day of the following month.
Monthly Rental Income Tax
Landlords and businesses earning rental income between KES 288,000 and KES 15 million annually pay a reduced rate of 7.5 percent on gross rental revenue. This simplified rate removes the need for complex expense deductions that apply under standard corporate tax calculations.
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Monthly Rental Income tax is remitted by the 20th of the following month through iTax.
County Government Levies
Beyond national taxes administered by KRA, businesses must also budget for county-level fees. Local governments like Nairobi City County require businesses to hold a Single Business Permit and, depending on the nature of operations, a Fire Safety Certificate.
Fees for these permits vary based on business type, location, and employee count, and must be renewed annually to keep your business legally compliant at the county level.
Staying Compliant Across Multiple Tax Obligations
Most Kenyan businesses juggle several of these tax types simultaneously. A mid-sized company with employees, rental income, and VAT-registered sales could easily be managing five separate filing deadlines each month.
Working with a qualified tax accountant or using accounting software integrated with iTax can help ensure nothing slips through the cracks, since KRA’s penalties for late filing and payment accumulate quickly and can significantly increase your overall tax burden if deadlines are consistently missed.