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Tax Exemption in Kenya

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Tax Exemption in Kenya
Who should apply for Tax Exemption?
Application and duration for the Tax Exemption Status
Which Organizations should apply for the exemption?
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What is Tax Exemption?


Under the Income Tax Act, every person and individual has to file annual tax returns irrespective of whether any income was earned or paid to the person or individual. Businesses are taxed on profit earned i.e Every person should declare the income earned during the year and deduct expenses incurred to generate that revenue the surplus or profit remaining is taxable at 30% for resident companies, 37% for non resident companies and at graduated rates for individuals.

The surplus or profit is what we call exempt profit if the company or individual is tax exempt. However, this should not be confused with exempt income such as income for sale of fixed assets, interest from post office bank etc.


Who should apply for Tax Exemption?


The income of an institution, body of persons, or irrevocable trust, of a public character established solely for the purposes of the relief of the poverty or distress of the public, or for the advancement of religion or education.

The organization applying for exemption must satisfy the following requirements;

 

 


 

 

(a) established in Kenya or

(b) whose regional headquarters is situated in Kenya,

The Commissioner is satisfied that the income is to be expended either in Kenya or in circumstances in which the expenditure of that income is for purposes which result in the benefit of the residents of Kenya.

Provided that any such income which consists of gains or profits from a business shall not be exempt from tax unless those gains or profits are applied solely to those purposes and either -

(i) the business is carried on in the course of the actual execution of those purposes; or

(ii) the work in connection with the business is mainly carried on by beneficiaries under those purposes; or

(iii) the gains or profits consist of rents (including premiums or similar consideration in the nature of rent) received from the leasing or letting of land and chattels leased or let therewith.

 

 


 

 

Application and duration for the Tax Exemption Status

Provided that an exemption granted will be valid for a period of five years but may be revoked by the Commissioner for any just cause and where an applicant has complied with all the requirements of the Income Tax Act, be issued within sixty days of the lodging of the application.

 

 

Which Organizations should apply for the exemption?

If an institution is public in character and satisfies the above requirements, the you should apply for Tax Exemption. You will be exempted from paying tax but not filing annual tax returns.

The following organizations should consider applying for Tax Exemption;

 

 


 

 

  1. Educational institutions
  2. Churches and other religious institutions
  3. Not for profit organizations/ public benefit organizations
  4. Research institutions
  5. Organizations which operate under a foreign organization that is tax exempt in that country

This is just a sample but a more detailed review of your organization can reveal if you can benefit from the provisions of the law. Talk to us today to for application of a Tax Exemption Certificate.

 

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