ADVOKS GLOBAL · KENYA
Income Tax Act
2. Interpretation
Edition: 2026-07-01 · In force
2. Interpretation
(1)In this Act, unless the context otherwise requires–"accounting period", in relation to a person, means the period for which that person makes up the accounts of his business;"actuary" means–(a)a Fellow of the Institute of Actuaries in England; or of the Faculty of Actuaries in Scotland; or of the Society of Actuaries in the United States of America; or of the Canadian Institute of Actuaries; or(b)such other person having actuarial knowledge as the Commissioner of Insurance may approve;"agency fees" means payments made to a person for acting on behalf of any other person or group of persons, or on behalf of the Government and excludes any payments made by an agent on behalf of a principal when such payments are recoverable;"annuity contract" means a contract providing for the payment to an individual of a life annuity, and"assessment" means an assessment, instalment assessment, self-assessment, or additional assessment made under this Act;"authorized tax agent" means any person who prepares or advises for remuneration, or who employs one or more persons to prepare for remuneration, any return, statement or other document, with respect to a tax under this Act; and for the purposes of this Act, the preparation of a substantial portion of a return, statement or other document shall be deemed to be the preparation of the return, statement or other document;"bank" means a bank or financial institution licensed under the Banking Act (Cap. 488);"bearer" means the person in possession of a bearer instrument;"bearer instrument" includes a certificate of deposit, bond, note or any similar instrument payable to the bearer;"building society" means a building society registered under the Building Societies Act (Cap. 489);"business" includes any trade, profession or vocation, and every manufacture, adventure and concern in the nature of trade, but does not include employment;"child relief" deleted by Act No. 12 of 1977, s. 5;"collective investment scheme" has the meaning assigned to it in section 2 of the Capital Markets Act (Cap. 485A);"commercial vehicle" means a road vehicle which the Commissioner is satisfied is–(a)manufactured for the carriage of goods and so used in connection with a trade or business; or(b)a motor omnibus within the meaning of that term in the Traffic Act (Cap. 403); or(c)used for the carriage of members of the public for hire or reward;"Commissioner" means–(a)the Commissioner-General appointed under section 11(1) of the Kenya Revenue Authority Act (Cap. 469); or(b)with respect to powers or functions that have been delegated under section 11(4) of the Kenya Revenue Authority Act (Cap. 469) to another Commissioner, that other Commissioner;"company" means a company incorporated or registered under any law in force in Kenya or elsewhere;"compensating tax" deleted by Act No. 9 of 2025, s. 2;"consultancy fees" means payments made to any person for acting in an advisory capacity or providing services on a consultancy basis;"contract of service" means an agreement, whether oral or in writing, whether expressed or implied, to employ or to serve as an employee for any period of time, and includes a contract of apprenticeship or indentured learnership, under which the employer has the power of selection and dismissal of the employee, pays his wages or salary and exercises general or specific control over the work done by him; and for the purpose of this definition an officer in the public service shall be deemed to be employed under a contract of service;"contractual payments" deleted by Act No. 6 of 2001, s. 42;"control", in relation to a person, means–(a)that the person, directly or indirectly, holds at least twenty per cent of the voting rights in a company;(b)a loan advanced by the person to another person constitutes at least seventy per cent of the book value of the total assets of the other person excluding a loan from a financial institution that is not associated with the person advancing the loan;(c)a guarantee by the person for any form of indebtedness of another person constitutes at least seventy per cent of the total indebtedness of the other person excluding a guarantee from a financial institution that is not associated with the guarantor;(d)the person appoints more than half of the board of directors of another person or at least one director or executive member of the governing board of that person;(e)the person is the owner of or has the exclusive rights over the know-how, patent, copyright, trade mark, licence, franchise or any other business or commercial right of a similar nature, on which another person is wholly dependent for the manufacture or processing of goods or articles or business carried on by the other person;(f)the person or a person designated by that person–(i)supplies at least ninety per cent of the supply of the purchases of another person; and(ii)upon assessment, the Commissioner deems influence in the price or other conditions relating to the supply of the purchases of another person;(g)the person purchases or designates a person–(i)to purchase at least ninety per cent of the sales of another person; and(ii)upon assessment, the Commissioner deems influences in the price or any other conditions of the sales of another person;(h)the person has any other relationship, dealing or practice with another person which the Commissioner may deem to constitute control;"corporation rate" means the corporation rate of tax specified in paragraph 2 of Head B of the Third Schedule;"Court" means the High Court;"current year of income", in relation to income charged to instalment tax, means the year of income for which the instalment tax is payable;"debenture" includes any debenture stock, mortgage, mortgage stock, or any similar instrument acknowledging indebtedness, secured on the assets of the person issuing the debenture;"deemed interest" means an amount of interest equal to the average ninety-one day Treasury Bill rate, deemed to be payable by a resident person in respect of any outstanding loan provided or secured by the non-resident, where such loan is provided free of interest;"defined benefit provision", in respect of a registered fund, means the terms of the fund under which benefits in respect of each member of the fund are determined in any way other than that described in the definition of a "defined contribution provision";"defined benefit registered fund" means a registered fund that contains a defined benefit provision, whether or not it also contains a defined contribution provision;"defined contribution provision", in respect of a registered fund, means terms of the fund–(a)which provide for a separate account to be maintained in respect of each member, to which are credited contributions made to the fund by, or in respect of, the member and any other amounts allocated to the member, and to which are charged payments in respect of the member; and(b)under which the only benefits in respect of a member are benefits determined solely with reference to, and provided by, the amount of the member’s account;"defined contribution registered fund" means a registered fund under which the benefits of a member are determined by a defined contribution provision, and does not contain a defined benefit provision;"demurrage charges" deleted by Act No. 23 of 2019, s. 2;“digital content monetisation” means offering for payment entertainment, social, literal, artistic, educational or any other material electronically through any medium or channel, in any of the following forms–(a)advertisement on websites, social media platforms or similar networks by partnering with brands including endorsements from sellers of such brands;(b)sponsorship where a brand owner pays a content creator for content creation and promotion;(c)affiliate marketing where the content creator earns a commission whenever the audience of the content creator clicks on the product displayed;(d)subscription services where the audience pays a periodic fee to access the content and support the content creator;(e)offering for use a logo, brand or catchphrase associated with the content creator merchandise sales eBooks, course or software;(f)membership programmes for exclusive content including early access;(g)licensing the content including photographs, music or other businesses or individuals for use in the user’s own projects; or(h)a content creator earns a commission or fees from crowd funding;"director" means–(a)in relation to a body corporate the affairs of which are managed by a board of directors or similar body, a member of that board or similar body;(b)in relation to a body corporate the affairs of which are managed by a single director or similar person, that director or person;(c)in relation to a body corporate the affairs of which are managed by the members themselves, a member of the body corporate,and includes any person in accordance with whose directions and instructions such persons are accustomed to act;"discount" means interest measured by the difference between the amount received on the sale, final satisfaction or redemption of any debt, bond, loan, claim, obligation or other evidence of indebtedness, and the price paid on purchase or original issuance of the bond or evidence of indebtedness or the sum originally loaned upon the creation of the loan, claim or other obligation;"dividend" means any distribution (whether in cash or property, and whether made before or during a winding up) by a company to its shareholders with respect to their equity interest in the company, other than distributions made in complete liquidation of the company of capital which was originally paid directly into the company in connection with the issuance of equity interests;“donation” means a benefit in money in any form, promissory note or a benefit in kind conferred on a person without any consideration and includes grants;"due date" means the date on or before which any tax is due and payable under this Act or pursuant to any notice issued under this Act;"employer" includes any resident person responsible for the payment of, or on account of, any emoluments to any employee, and any agent, manager or other representative so responsible in Kenya on behalf of any non-resident employer;"export processing zone enterprise" has the meaning assigned to it by the Export Processing Zones Act (Cap. 517);“fair market value” means the comparable market price available in an open and unrestricted market between independent parties acting at arm's length and under no compulsion to transact, which is expressed in terms of money or money’s worth;"family relief" deleted by Act No. 8 of 1996, s. 27;"financial derivative” means a financial instrument the value of which is linked to the value of another instrument underlying the transaction which is to be settled at a future date;"foreign tax", in relation to income charged to tax in Kenya, means any income tax or any tax of a similar nature charged under any law in force in any place with the Government of which a special arrangement has been made by the Government of Kenya and which is the subject of that arrangement;“immovable property” includes–(a)land, whether covered by water or not, any estate, rights, interest or easement in or over any land and things attached to the earth or permanently fastened to anything attached to the earth, and includes a debt secured by mortgage or charge on immovable property; or(b)a mining right, an interest in a petroleum agreement, mining information or petroleum information;"incapacitated person" means a minor, and any person adjudged under any law, whether in Kenya or elsewhere, to be in a state of unsoundness of mind (however described);"individual" means a natural person;"individual rates" means the individual rates of income tax specified in paragraph 1 of Head B of the Third Schedule;"individual retirement fund" means a fund held in trust by a qualified institution for a resident individual for the purpose of receiving and investing funds in qualifying assets in order to provide pension benefits for such an individual or the surviving dependants of such an individual;"infrastructure bond" means a bond issued by the Government for the financing of a strategic public infrastructure facility including a road, hospital, port, sporting facility, water and sewerage system, a communication network or energy project;"information technology" means any equipment or software for use in storing, retrieving, processing or dissemination information;"insurance relief" deleted by Act No. 8 of 1996, s. 27;"interstate tax" means any income tax or any tax of a similar nature changed under any law in force in Kenya;"interest" (other than interest charged on tax) means interest payable in any manner in respect of a loan, deposit, debt, claim or other right or obligation, and includes any premium or discount by way of interest and any commitment or service fee paid in respect of any loan or credit or an Islamic finance return;"investee company" has the meaning assigned to it under the Capital Markets Act (Cap. 485A) and the regulations made thereunder;"Islamic finance arrangement" means all financial arrangements, including transactions, instruments, products or related activities that are structured in accordance with Islamic law;"Islamic finance return" means any amount received or paid in relation to Sukuk or an Islamic finance arrangement;"Kenya" includes the continental shelf and any installation thereon as defined in the Continental Shelf Act (Cap. 312);"local committee" means a local committee established under section 82 of this Act;"loss", in relation to gains or profits, means a loss computed in the same manner as gains or profits;"Management Act" means the East African Income Tax Management Act (E.A. Cap. 24);"management or professional fee" means any payment made to any person, other than a payment made to an employee by his employer, as consideration for any managerial, technical, agency, contractual, professional or consultancy services however calculated and includes interchange fees and merchant service fees arising from transactions that use a card as a means of payment;"married relief" deleted by Act No. 12 of 1977, s. 5;"National Social Security Fund" means the National Social Security Fund established under section 3 of the National Social Security Fund Act (Cap. 258);"natural resource income" means–(i)an amount including a premium or such other like amount paid as consideration for the right to take minerals or a living or nonliving resource from land or sea; or(ii)an amount calculated in whole or in part by reference to the quantity or value of minerals or a living or non-living resource taken from land or sea;"non-resident rate" means a non-resident tax rate specified in paragraph 3 of Head B of the Third Schedule;"notice of objection" means a valid notice of objection to an assessment given under section 84(1);"number of full-year members", in respect of a registered fund, means the sum of the periods of service in the year under the fund of all members of the fund, where the periods are expressed as fractions of a year;"oil company", deleted by Act No. 16 of 2014, s. 2;"officer" means the Commissioner and any other member of staff of the Kenya Revenue Authority appointed under section 13 of the Kenya Revenue Authority Act (Cap. 469);"original issue discount" means the difference between the amount received on the final satisfaction or redemption of any debt, bond, loan, claim, obligation or other evidence of indebtedness, and the price paid on original issuance of the bond or evidence of indebtedness or the sum originally loaned upon creation of the obligation, loan, claim or other obligation;"paid" includes distributed, credited, dealt with or deemed to have been paid in the interest or on behalf of a person and "pay", "payment" and "payable" have corresponding meanings;"pension fund" means any fund for the payment of pensions or other similar benefits to employees on retirement, or to the dependants of employees on the death of such employees;"pensionable income" means–(a)in relation to a member of a registered pension or provident fund or of an individual eligible to contribute to a registered individual retirement fund, the employment income specified in section 3(2)(a)(ii) subjected to deduction of tax under section 37;(b)in the case of an individual eligible to contribute to a registered individual retirement fund, the gains or profits from business subject to tax under section 3(2)(a)(i) earned as the sole proprietor or as a partner of the business:Provided that where a loss from business is realized the loss shall be deemed to be zero;"permanent establishment" includes–(a)a fixed place of business through which business is wholly or partly carried on and includes a place of management, a branch, an office, a factory, a workshop, a mine, an oil or gas well, a quarry or any other place of extraction or exploitation of natural resources, a warehouse in relation to a person whose business is providing storage facilities to others, a farm, plantation or other place where agricultural, forestry plantation or related activities are carried on and a sales outlet;(b)a building site, construction, assembly or installation project or any supervisory activity connected to the site or project, but only if it continues for a period of more than one hundred and eighty-three days:Provided that for the purpose of determining whether the period specified in this paragraph has been exceeded–(i)where a person carries on activities at a place that constitutes a building site or construction or installation project and these activities are carried on during one or more periods of time that, in the aggregate, exceed thirty days but do not exceed one hundred and eighty-three days; and(ii)connected activities are carried on at the same building site or construction or installation project during different periods of time, each exceeding thirty days, by one or more enterprises closely related to the first-mentioned enterprise, the different periods of time shall be added to the aggregate period of time during which the first-mentioned enterprise has carried on activities at that building site or construction or installation project;(c)the provision of services, including consultancy services, by a person through employees or other personnel engaged for that purpose, but only where the services or connected business in Kenya, continue for a period of, or periods exceeding in the aggregate, ninety-one days in any twelve-month period commencing or ending in the year of income concerned;(d)an installation or structure used in the exploration for natural resources:Provided that the exploration continues for a period of not less than ninety-one days;(e)a dependent agent of a person who acts on their behalf in respect of any activities which that person undertakes in Kenya including habitually concluding contracts, or playing the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the person,but excludes the following activities where the activities are of a preparatory or auxiliary character–(i)the use of facilities solely for the purpose of storage, or display of goods or merchandise belonging to the enterprise;(ii)the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, or display;(iii)the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;(iv)the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;(v)the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity; and(vi)the maintenance of a fixed place of business solely for any combination of activities mentioned in paragraphs (i) to (v);"permanent home" means a place where an individual resides or which is available to that individual for residential purposes in Kenya, or where in the opinion of the Commissioner the individual’s personal or economic interests are closest;"permanent or semi-permanent crops" means such crops which the Cabinet Secretary may, by notice in the Gazette, declare to be permanent or semi-permanent crops for the purposes of this Act;"personal relief" means–(a)the personal relief provided for under Part V; and(b)the relief mentioned in section 30;"preceding year assessment", in relation to instalment tax, means the tax assessed for the preceding year of income as of the date the instalment tax is due without regard to subsequent additions to, amendments of, or subtractions from the assessment and in the event that as of the date the instalment tax is due no assessment for the preceding year of tax has, as yet, been made, means the amount of tax estimated by the person as assessable for the preceding year of income;"premises" means land, any improvement thereon, and any building or, where part of a building is occupied as a separate dwelling-house, that part;"provident fund" includes any fund or scheme for the payment of lump sums and other similar benefits, to employees when they leave employment or to the dependants of employees on the death of those employees but does not include any national provident fund or national social security fund established by the Government;"provisional return of income" deleted by Act No. 16 of 2014, s. 2;“public entity” means a ministry, state department, state corporation, county department or agency of the national or county Government;"public pension scheme" means a pension scheme that pays pension or lump sums out of the Consolidated Fund;"qualified institution" means a bank licensed under the Banking Act (Cap. 488), or an insurer registered under the Insurance Act (Cap. 487), or such other financial institution as may be approved under the Retirement Benefits Act (Cap. 197);"qualifying assets", in respect of a registered individual retirement fund, means time deposits, treasury bills, treasury bonds, securities traded on any securities exchange approved under the Capital Markets Act (Cap. 485A) and such other categories of assets as may be prescribed in the investment guidelines issued under the Retirement Benefits Act (Cap. 197);"qualifying dividend" means that part of the aggregate dividend that is chargeable to tax under section 3(2)(b) and which has not been otherwise exempted under any other provision of this Act, but shall not include a dividend paid by a designated cooperative society subject to tax under section 19A(2) or 19A(3);"qualifying dividend rate of tax" means the resident withholding tax rate in respect of a qualifying dividend specified in the Third Schedule;"qualifying interest" means the aggregate interest, discount or original issue discount receivable by a resident individual in any year of income:Provided that–(a)interest earned on an account held jointly by a husband and wife shall be deemed to be qualifying interest; and(b)in the case of housing bonds, the aggregate amount of interest shall not exceed three hundred thousand shillings;"qualifying interest rate of tax" means the resident withholding tax rate in respect of interest specified in paragraph 5 of the Third Schedule;"real estate investment trust" shall have the meaning assigned to it in the Capital Markets Act (Cap. 485A);"registered annuity contract" means one which has been registered with the Commissioner in such manner as may be prescribed;"registered fund" means a registered pension fund or a registered provident fund;"registered home ownership savings plan" means a savings plan established by an approved institution and registered with the Commissioner for receiving and holding funds in trust for depositors for the purpose of enabling individual depositors to purchase a permanent house;“registered individual retirement fund” means an individual retirement fund where the trust deed for such a fund has been registered with the Retirement Benefits Authority;“registered pension fund” means a pension fund which has been registered with the Retirement Benefits Authority;“registered provident fund” means a provident fund which has been registered with the Retirement Benefits Authority;"registered trust scheme" means a trust scheme for the provision of retirement annuities which has been registered with the Commissioner in such manner as may be prescribed;"registered unit trust" means a unit trust registered by the Commissioner in such manner as may be prescribed;"registered venture capital company" means a venture capital company registered by the Commissioner in such manner as may be prescribed;“related person” means, in the case of two persons, either of the persons who participates directly or indirectly in the management, control or capital of the business of the other person, and in the case of more than the two persons—(a)any other person who participates directly or indirectly in the management, control or capital of the business of the two persons; or(b)an individual who—(i)participates directly or indirectly in the management, control or capital of the business of the two persons;(ii)is associated with the two persons by marriage, consanguinity or affinity; and(iii)the two persons participate in the management, control or capital of the business of the individual;"resident", when applied in relation–(a)to an individual, means–(i)that he has a permanent home in Kenya and was present in Kenya for any period in any particular year of income under consideration; or(ii)that he has no permanent home in Kenya but–(A)was present in Kenya for a period or periods amounting in the aggregate to 183 days or more in that year of income; or(B)was 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;(b)to a body of persons, means–(i)that the body is a company incorporated under a law of Kenya; or(ii)that the management and control of the affairs of the body was exercised in Kenya in a particular year of income under consideration; or(iii)that the body has been declared by the Cabinet Secretary, by notice in the Gazette, to be resident in Kenya for any year of income;"resident withholding rate" means a rate of resident withholding tax specified in paragraph 5 of Head B of the Third Schedule;"retirement annuity" means a retirement annuity payable under a registered annuity contract;"Retirement Benefits Authority" means the Authority by that name established under the Retirement Benefits Act (Cap. 197);"return of income" means a return of income furnished by a person consequent upon a notice served by the Commissioner under section 52 of this Act including a return of income together with a self-assessment of tax furnished to the Commissioner in accordance with the provisions of section 52B, together with any documents required to be furnished therewith;“royalty” means a payment made as a consideration for the use or the right to use—(a)any copyright of a literary, artistic or scientific work;(b)any software, proprietary or off-the-shelf, whether in the form of licence, development, training, maintenance or support fees;(c)any cinematograph film including a film or tape for radio or television broadcasting;(d)any patent, trademark, design or model, plan, formula or process;(e)any industrial, commercial or scientific equipment;(f)information concerning industrial, commercial or scientific equipment or experience, and any gains derived from the sale or exchange of any right or property giving rise to that royalty; or(g)a proprietary digital payment card network or platform, including access, participation or usage rights in such system through a card, whether the consideration is periodic or transaction-based and whether or not the payment is described as a service fee, transaction fee, network fee, assessment fee, processing fee or similar charge;"securities exchange" has the meaning assigned to it in section 2 of the Capital Markets Authority Act (Cap. 485A);"single relief" deleted by Act No. 8 of 1996, s. 27;"special arrangement" means an arrangement for relief from double taxation having effect under section 41 of this Act or an agreement for the exchange of tax information under section 41A;"special single relief" deleted by Act No. 8 of 1991, s. 52;"specified mineral" deleted by Act No. 16 of 2014, s. 2;"Sukuk" has the meaning assigned to it in the Public Finance Management Act (Cap. 412A);"tax" means the income tax charged under this Act;"tax computerized system" means any software or hardware for use in storing, retrieving, processing or disseminating information relating to tax;"telecommunication operator" means any person licensed as such under the Kenya Information and Communications Act, (Cap. 411A);"total income" means, in relation to a person, the aggregate amount of his income, other than income exempt from tax under Part III, chargeable to tax under Part II, as ascertained under Part IV;"trade association" means a body of persons which is an association of persons separately engaged in any business with the main object of safeguarding or promoting the business interests of those persons;"training fee" means a payment made in respect of a business or user training services designed to improve the work practices and efficiency of an organization, and includes any payment in respect of incidental costs associated with the provision of such services;Provided that training fee shall not include fees paid for educational services provided by–(a)a pre-primary, primary, or secondary school;(b)a technical college or university;(c)an institution established for the promotion of adult education, vocational training or technical education;"Tribunal" deleted by Act No. 9 of 2025, s. 2;"unit holder", in relation to a unit trust, means the owner of an interest in the moneys, investments and other property which are for the time being subject to the trusts governing the unit trust, such interest being expressed in the number of units of which he is the owner;"unit trust" has the meaning assigned to it in section 2 of the Capital Markets Act (Cap. 485A);"venture company" deleted by Act No. 9 of 2025, s. 2;"whole time service director" means a director of a company who is required to devote substantially the whole of his time to the service of such company in a managerial or technical capacity and is not the beneficial owner of, or able, either directly or through the medium of other companies or by any other means, to control more than five per cent of the share capital or voting power of such company;"wife’s employment income" deleted by Act No. 12 of 2024, s. 2(e);"wife’s professional income" deleted by Act No. 12 of 2024, s. 2(g);"wife’s professional income rate" deleted by Act No. 12 of 2024, s. 2(h);"wife’s self-employment income" deleted by Act No. 12 of 2024, s. 2(i);"wife’s self-employment income rate" deleted by Act No. 12 of 2024, s. 2(j);"winnings" means a pay-out from a lottery or prize competition by a person licensed under the Gambling Control Act, (No. 14 of 2025);“withdrawals” means any amount of money, cash equivalent, or money's worth paid or disbursed to the account of a player, by a person licensed under the Gambling Control Act, (No. 14 of 2025);"year of income" means the period of twelve months commencing on 1st January in any year and ending on 31st December in that year.(1A)Where under the provisions of this Act, any accounts, books of accounts or other records are required to be kept, such accounts, books or other records may be kept in written form or on micro-film, magnetic tape or any other form of mechanical or electronic data retrieval mechanism.Case law referring to this provision