Taxation for the Startups and Small Businesses in Africa

Taxation in Kenya

Tax laws are usually thought to be barely associated with the international economic world in relation to universal laws. Conversely, tax laws are established not only on economic principles but also on expediency. There exists no aspect of infinity regarding tax laws, which barely involve a constant clash of the semi-permanent state as well as immediacy. A country cannot run its financial development effectively devoid of any taxation. Consequently, the tax system cannot be operated successfully without any form of democracy. There are different necessities that any entrepreneurs require to act as per Kenyan taxation laws; these include corporate taxes, Pay as You Earn taxation, as well as Value Added Tax (VAT).

There usually exists some fundamental taxation acquiescence requirements which determine the effectiveness of any business operation, these include;

  • Maintaining entrepreneurs in accounting books.
  • Acquisition of Personal Identification Numbers-PIN by all prospective tax remunerators
  • Evaluation of taxable income following the agreed set of laws and regulations,
  • Filing of revenue progressions on income within the approved dates.
  • Allowing auditions on revenue collectors.

Below is a list of some of the taxes that apply to most of the business organizations in Kenya;

 Income tax

Income Tax refers to the direct tax that is usually imposed on various income that is derived from different business organizations, paychecks, rental fees, shares, Pensions as well as company Interests among others. In Kenya, each and every taxpayer with a chargeable income tax is required to be in possession of Personal Identification Number (PIN). Under this mode of taxation there exist different ways of collecting income taxes, they include;

Pay-As-You-Earn

Pay-As-You-Earn refers to a system of taxing employment Income Company managers in Kenya usually run it. The Taxation officials of income tax have authorized all the business managers to run this tax and remit it on a monthly basis to the KRA board. It also applies to approximately all Organizations of activity. Failures to collect this tax, punitive fines are usually imposed on the subject. The fine is not less than 30 percent of the tax duty.

 Corporate taxation

It refers to a form of income tax that is imposed on the income of business corporations such as co-operative limited companies and privately owned organizations. Under the Kenyan, Taxation Bill Local businesses are taxed at a rate of  40 % whereas foreign investors and corporations are taxed at a rate of 42.5 %.The revenue of registered collective investment Organizations  I are exempted subject Corporate taxation.

Turnover Tax

Turnover tax refers to indirect tax that is majorly imposed on private business tax remunerators whose total amount of revenue-turnover is less than KShs. 5 million. As a result, individual business taxpayers who do not meet the requirements for Value Added Tax are usually forced to pay the Turnover Tax. This tax is aimed at bringing each and every business corporation in the informal segment into taxation. These incorporate of the small scale manufacturing bodies as well as the Jua Kali industries and also the transport sector. Under Kenyan Taxation Bill the turnover tax rate is usually at 3 percent for each taxation made.

Value Added Tax

It refers to a consumption tax that is imposed on the sale of goods and services. The income tax is collected by entrepreneurs and submits it to Keya Revenue Authority. All entrepreneurs are having a sales turnover of over Kshs. 5 million per annum are required VAT. After which they are, the obliged to collect and submit VAT on their payable goods and services.

The Excise Duty

It is usually applied under the excise duty Act 2015 of laws of Kenya. The tax is imposed on a variety of products such as alcoholic drinks, petroleum products, Automobile accessories, cell phone airtime and also financial bank charges, the first plan of the act provides rates of excise duty while the second plan on provides exemptions from excusable goods and services.

Reference: http://www.kra.go.ke/notices/pdf/excise%20duty%20act%202015.pdf.

Let us know how your business is getting affected by bad accounting & invoicing practice. Please share your experience in the comments section below. We are working with leading chartered accountants (CA) and certified public accountants (CPA). We will happy to help you with accounting consulting.

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