Ace Group – Tax Alert 1/2020


The turnover tax was re-introduced in the Finance Act 2019 effective 1st January 2020 with similar regulations previously applied.

Notable changes are;

  • Monthly submission of the TOT returns by 20th of the following month.
  • Presumptive tax is still applicable in addition to the TOT
  • Presumptive tax can be claimed as a credit against TOT payments.

Previous regulations include;

  • 3% TOT on gross turnover. No expenses deductible.
  • Gross turnover should not exceed 5 million a year.
  • TOT does not apply to Limited Companies, Employment Income, Management Income, Professional Income, Rental Income, and VAT registered individuals or businesses with over 5m turnover a year.
  • Commissioner approval is required to remain in the normal income tax regime.
  • Late submission penalty – Kshs. 5,000 for each month.


Presumptive tax remains at 15% of the single business permit.

Notable changes as a result of the Finance Act 2019;

  • PT is no longer a final tax.
  • PT can be claimed as a credit against TOT payable.

Previous regulations that are still effective;

  • Payable by individuals to whom a business permit or a trade license is issued by the County Government.
  • Payable at the time of payment for the County Government business permit or trade license.
  • Commissioner approval is required to remain in the normal income tax regime.
  • PT does not apply to Limited Companies, Employment Income, Management Income, Professional Income, Rental Income and VAT registered individuals’ or businesses with over 5m turnover a year.
  • Late submission penalty – 5% of the PT due.


  • Income earned by an individual in the Ajira Programme is exempt from tax for the first three years on set criteria.
  • The amount withdrawn from the National Housing Development Fund to purchase a house by a contributor who is a first-time homeowner is exempt from tax
  • The amount of affordable housing relief shall be 15% of the employee’s contribution but shall not exceed KES 108,000 per annum.
  • Plastics recycling plant will be entitled to a reduced corporate income tax rate of 15% for the first five years upon commencement of its operations.
  • Import Declaration Fee (IDF) to 3.5% of the customs value of goods imported for home use.
  • IDF reduced to 1.5% on the customs value of raw materials imported by manufacturers, approved imports by the CS and input for the construction of homes under the affordable housing scheme approved by CS.
  • Railway Development Levy (RDL) from 1.5% to 2% of the customs value of goods imported for home use.
  • Withholding VAT reduced to 2%.
  • Non-registered persons importing taxable services will now be required to account for reverse VAT.

Excise Duty rate changes

Excise Duty rate changes – Other items (Sin Tax)


A person is considered to be tax resident in Kenya if they:

  • have a permanent home in Kenya and were present in Kenya for any period in a particular year of income under consideration, or
  • do not have a permanent home in Kenya but were:
    • present in Kenya for 183 days or more in that year of income, or
    • Present in Kenya in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each year of income.

Individual Tax Bands and Rates

 Monthly Pay Bands-1st January 2018Annual Pay Bands-1st January 2018Rate of Tax
1     –       12,2981 – 147,58010%
12,299   – 23,885147,581- 286,62315%
23,886   – 35,472286,624 – 425,66620%
35,473   – 47,059425,667 – 564,70925%
Above 47,060Above 564,71030%
Personal Tax Relief
  • Residential rental income – 10% of gross residential rental income received payable monthly before the 20th of the following month. Annual gross residential rental income should not exceed 10 million shillings.
  • Life, health and education relief is 15% of the premium paid but cannot exceed Kshs. 60,000 p.a
  • Affordable housing tax relief – 15% of gross emoluments at a maximum of Kshs. 108,000 p.a (Starts at time of application and awaiting allocation of a house under the affordable housing scheme)
  • Mortgage interest on the owner-occupied house at a maximum amount of Kshs. 300,000 p.a is deductible
  • Gratuity and payments to a registered pension scheme are deductible to a maximum of Kshs. 240,000 p.a but cannot exceed 30% of the emoluments.
  • A homeownership savings plan – Contributions not exceeding Kshs. 96,000 p.a is deductible.
  • Bonuses and overtime paid to low-income earners is tax-free.
  • 2,000 per day allowance for traveling for an individual outside his normal place of work is tax-free.


  • Motor vehicles benefit taxed at 2% of the cost of the vehicle or the prescribed rate; whichever is higher.
  • Telephone and mobile is taxed at 30% of the cost to the employer
  • Furniture – 1% of the cost to the employer
  • Housing – higher of the market rate or actual rent paid or 15% of total employee income.
  • Employee loans are subject to Fringe Benefits Tax (FBT)


Changes in NHIF Regulations;

  • Limit cover to a maximum of one spouse and five children
  • New members will have to wait for 90 days before accessing services or benefits in addition to making a one year upfront payment within the 90 days waiting period.
  • Late payment of contributions will attract a fine of 50% of the monthly contribution and a requirement to pay one year in advance. Benefits and services will be restricted for a period of 30 days.
  • Defaulting for more than 12 months will require re-registration and benefits and services can only be accessed after 90 days of resuming payments. A one year upfront payment will be required.
  • Access to specialized services shall be restricted to 6 months waiting period following card maturity for new members.
  • Access to maternity benefit will be restricted to 6 months waiting period following card maturity for both principal members and spouse declared.
  • Any dependent declared after registration shall be subject to the 6 months waiting for the period for specialized and maternity services.
  • For inpatient and medical outpatient, additional dependents will be eligible for the benefit apply after 30 days waiting period. The same applied for a change of spouse.
  • Government-funded programs like free maternity, health insurance subsidy, elderly persons with severe disabilities and Inua Jamii have been exempted from these changes

Published by Mohamed Ebrahim, MBA, CeMap, MLIBF, MCSI

Mohamed Ebrahim Mohamed is an author of books related to Islamic Finance, Financial Reporting, Accountancy, and related topics. Mohamed, is currently based in Birmingham, West Midlands, England, United Kingdom and is a Co-founder, CEO and Director of a Start-up Everest Fin Edu Tech Limited. He utilises his training and experience of over 25 years to find funding solutions for individuals, businesses and property buyers, investors and developers especially for the SME'S. Mohamed, is a Senior Partner with Ace Associates LLP - Certified Public Accountants & CEO of Ace Financial Advisory Limited, he is a CPA Kenya and holds an MBA from The University of Manchester (UK) and B.A (Hons) from Manchester Metropolitan University, He has worked for over 25 years with firms in Kenya -Ernst & Young – Assurance Advisory Business Service & Tax Service lines, PKF Kenya Audit Senior, and Devani –Devani & Co. United Arab Emirates -Group Financial Controller - Credo Investments FZE. Canada – Mc Tavish & Co. CPA’s. A member Institute of Directors (Kenya) and Non-Executive Directors Association (UK). He served on the ICPAK Coast Branch, Executive Council as Secretary and CPD Convener (2013-15) and from May 2016 to May 2018. Vice-Chair May 2018 to June 2020. He was commended by ICPAK in June 2015 for his services to the Accounting profession by ICPAK. Furthermore, Mohamed Ebrahim was awarded a Fellowship of the Institute of Certified Public Accountants of Kenya on.11th December 2020. Educational & Professional details. Mohamed speaks English, Gujerati, Hindi, Urdu, Swahili. Born in an Indian immigrant family from Gujerat India, settled on the Swahili Coast of East Africa for four (4) generations, Bachelor of Arts (Hons) – Sustainable Performance Management Manchester Metropolitan University Master of Business Administration The University of Manchester – Manchester Business School Certified Islamic Finance Executive (CIFE) Advanced. Certified Islamic Finance Executive in Islamic Accounting Ethica Institute of Islamic Finance, Dubai, UAE. ACMA, CGMA, Member, Chartered Institute of Management Accountants and Association of International Certified Professional Accountants, registered as a CIMA Member in Practice. CPA, Practicing member Institute of Certified Public Accountants of Kenya FCFIP, Fellow Member -International Institute of Certified Forensic Investigation Professionals FCT, Fellow Member, Fellow Chartered Treasurer FFA – Fellow of the Institute of Financial Accountants MCIArb - Chartered Institute of Arbitrators, Full Member. MCSI: Member, Chartered Institute of Securities & Investments Institute of Internal Auditors - Member Currently, a Doctoral Student at the Edinburgh Business School, completed the Coursework stage, working on the doctoral thesis Interim Award - Post Graduate Certificate in Business Research methods Short Courses and MOOC’s • The World Bank Group's MOOC on Financing for Development. • Financial Markets an online non-credit course authorized by Yale University, facilitator being Professor Robert Shiller – 2013 recipient of Nobel Prize in Economic sciences • Principles of Valuation: Time Value of Money authorized by University of Michigan • Islamic Financial & Capital Markets -101 - & Structure and Trading of Sukuk102 – by Islamic Research and Training Institute • Islamic Finance & Banking 101 & 102 – Islamic Modes of Finance - by Islamic Research and Training Institute • University Teaching MOOC on Coursera by Hong Kong University. • Oxford Brookes University Business School – Online mentoring Course • ICPAK - Training of Trainers PRESENTATIONS AND PUBLICATIONS Professional Conference paper IICFIP 2014 Global Conference “Creating a Business Culture based on ethics” MBA Dissertation Risk Management in Islamic Financial Institutions Publications in Professional Journals The Accountant – Journal of the Institute of Certified Public Accountants of Kenya • Tax Reforms 1 – Time for a Flat Tax system in Kenya – February- March 2012 issue • Tax Reforms 2 – Specific Tax Simplification Reforms – April –May 2012 Issue • Risk Management in Islamic Financial Institutions – December-January 2013 issue Africa Islamic Finance Report (Volume 1 no, 2)- April- June 2016 • A case for Islamic Sharia Compliant Real Estate Investment Trust (Islamic REITS) in Kenya Others Islamic Home Financing

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