Corporate Tax

KRA supplies accounting tips for corporate tax charges

Times Tower building in Nairobi. [Standard, File]

The Kenya Revenue Authority (KRA) has published guidelines detailing the applicable corporate tax rates for the 2020-2021 income years.

The lower rate of 25 percent was introduced in April 2020 as a tax break to counter the negative impact of COVID 19 on corporate and employment income.

Domestic companies with accounting periods ending on or before March 30, 2020 were advised to apply the 30 percent rate.

“Taxpayers whose accounting period ends after January 1, 2021 will determine the income for the accounting period and split it between the two periods and calculate the applicable tax rates,” KRA domestic tax commissioner Rispah Simiyu said in a statement.

“The process of improving the iTax system is already under way to accommodate this interpretation,” she added.

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She advised taxpayers to prepare their accounts, file tax returns through the current iTax system and pay the correct amount of tax in the meantime.

“Any erroneous penalties or interest that may arise in the meantime will be corrected when the system is fully deployed,” Simiyu said.

KRA Domestic Taxation Commissioner Rispah Simiyu.

The corporate tax rates apply as follows:

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1. 30 percent of the income of an individual whose accounting period ended on or before March 30, 2020.

2. 25 percent of the income of an individual whose accounting period ended between April 1, 2020 and December 31, 2020.

3. For persons whose accounting period ends after January 1, 2021, the corporation tax rate applies as follows: 25 percent for income earned in the period before January 1, 2021. 30 percent for income earned on or after January 1, 2021.

In December 2020, corporate income tax recorded a benefit rate of 93.5 percent versus the target. Performance was negatively impacted by a 25.3 percent decline in bank installment transfers, reflecting the impact of COVID on business development.

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