Corporate Income Tax (CIT)
Understanding tax obligations for companies in Kenya.
What is Corporate Income Tax?
Official Definition (KRA):
Corporate Income Tax is tax charged on the income of companies, partnerships, and other corporate entities. It's calculated on the profit (income minus allowable expenses) of the business.
In Simple Terms:
Companies pay tax on their profits. If your company makes KES 1 million profit, you pay tax on that profit at the corporate tax rate. Unlike individuals who pay PAYE monthly, companies typically pay CIT quarterly and file annually.
CIT Rates (2024)
Standard Rates
Special Rates
- • Listed companies: 30% (first 5 years after listing: 25%)
- • Companies in Export Processing Zones: 10%
- • Companies in Special Economic Zones: 10%
- • Agricultural companies: 15% (on agricultural income)
Taxable Income
Calculation Formula
Worked Example:
Allowable Deductions
Common Deductible Expenses
- Salaries and wages
- Rent and utilities
- Raw materials and inventory costs
- Marketing and advertising expenses
- Professional fees (legal, accounting)
- Depreciation on assets
- Interest on business loans
- Insurance premiums
Non-Deductible Expenses
- • Personal expenses of directors/owners
- • Capital expenditures (but depreciation is allowed)
- • Fines and penalties
- • Dividends paid to shareholders
- • Income tax itself
Filing Requirements
Payment Schedule
Quarterly Installments
Companies must pay CIT in quarterly installments (April, July, October, January) based on estimated annual tax. Each installment is 25% of estimated annual tax.
Annual Return
File annual CIT return within 6 months after year-end. For December year-end, file by June 30th of following year.
Penalties
- • Late payment: 5% penalty + 1% interest per month
- • Late filing: KES 20,000 or 5% of tax (whichever is higher)
- • Underpayment of installments: Interest on shortfall