Everything You Need to Know About Corporate Income Tax in Kenya

Corporate Income Tax (CIT) is an integral part of the financial responsibilities of a business in Kenya, but it doesn’t have to be overwhelming.

In simple terms, CIT is a tax that businesses in Kenya pay on the profits they make. Businesses are responsible for paying this tax, which is calculated based on how much profit your business generates within a given year along with other factors that we’ll discuss below.

A few key facts regarding Corporate Income Tax in Kenya:

• In the most recent (2024/25) tax year, CIT accounted for 11.8% (Ksh 304 billion) of KRA’s total collections making it a significant source of government funding.
• Despite over 1.6 million SMEs operating in Kenya it is estimated that up to 75% of them don’t file or pay corporation tax, a massive loophole that KRA aims to plug with the introduction of eTIMS.
• The sectors that contribute most to CIT collections include ICT, manufacturing, financial, real estate, wholesales and retail.

Whether you’re just starting or are looking to brush up on your tax knowledge, this guide breaks down everything you need to know about CIT in simple, clear terms.

From how it’s calculated to key deductions and filing deadlines, we’ll walk you through the essential details that ensure your business stays compliant and avoids unnecessary penalties.

Who Needs to Pay Corporate Income Tax?

If you’re running a business in Kenya, whether it’s a small startup or a large corporation, there’s a good chance you’ll need to pay Corporate Income Tax.

Resident companies, which are companies registered in Kenya or controlled and managed from Kenya, are required to pay CIT. Non-resident companies (those whose management is based outside Kenya) might also be subject to CIT, but typically, only on income they earn from activities within Kenya.

Generally, if your business is earning an income and you’re registered with the Companies Registry and Kenya Revenue Authority (KRA), you’re required to file tax returns and pay your share of CIT. It’s not just limited to large companies — small businesses, consultants, and even sole proprietors who operate through a registered company can also be liable.

There are exceptions, though, such as businesses that don’t earn taxable income or fall under specific tax-exempt categories. But even then, it’s always a good idea to check with a tax advisor or accountant to confirm your status.

How Is Corporate Income Tax Calculated?

The key factor in calculating your corporate tax is your business’s taxable income, which is essentially your net profit after deducting all business-related expenses. So, if your business is earning revenue from sales or services, you can subtract your operational costs (like rent, salaries, utilities, and materials) to arrive at your taxable income.

Here’s an oversimplified example:

	Ksh	Notes
Revenue	5,000,000	The total amount of money your business earns. This could be from sales, services, interest, or any other business activity
Allowable Expenses	(4,000,000)	These include employee wages, rent, advertising costs, and other necessary expenses.
Taxable Profit	1,000,000	This is the amount that CIT is charged on. CIT rate for most businesses is 30%
Corporate Income Tax(30% of Taxable Profit)	300,000	The amount to be remitted to KRA

Understanding how your taxable income is calculated is crucial. The lower your taxable income, the less CIT you will pay. And to reduce your taxable income, you need to ensure you’re correctly claiming all allowable business expenses.

Please Note: As of January 2026, all Allowable Expenses must be supported by valid eTIMS invoices.

Types of Corporate Income Tax Rates in Kenya

The standard corporate income tax rate for resident companies is 30%. However, the rate can differ depending on the nature of the business or the size of the company.

For instance:

• Small and medium-sized enterprises (SMEs): If your business falls under the SME category, you may qualify for special tax relief. Some businesses might also benefit from a lower tax rate of 25% depending on annual turnover, industry, or other factors. Talk to your tax accountant to ensure you claim every tax relief available to you.
• Manufacturing and agricultural businesses: The government often offers tax incentives to these sectors to encourage growth and job creation. For example, certain industries can benefit from reduced tax rates or other forms of tax relief.
• Non-resident companies: If your business is managed from outside Kenya but you earn income here, you could still be subject to CIT based on certain factors. Check with KRA or your tax consultant to confirm how this applies to your business.

Here’s a table summarizing corporate income tax rates for various categories of businesses in Kenya:

Business Category	Tax Rate	Additional Information
Resident Companies	30%	Applies to all companies registered and managed in Kenya.
Small and Medium Enterprises (SMEs)	25% (for qualifying SMEs)	For SMEs with an annual turnover of up to KSh 50 million.
Non-Resident Companies	37.5%	Applies to companies that are not based in Kenya but earn income within Kenya.
Manufacturing Companies	15%	Reduced tax rate for businesses involved in manufacturing.
Agricultural Businesses	15%	Reduced rate for businesses in the agriculture sector.
Export-Oriented Businesses	10% (on income from exports)	Applies to businesses focused on exporting goods and services.

Key Tax Deductions and Allowances

In Kenya, there are various deductions and allowances available to reduce your taxable income. These are important because the more deductions you can claim, the less tax you’ll end up paying. Here are some common deductions:

• Operating Expenses: Anything that you spend on running your business, such as office rent, utilities, supplies, and even marketing expenses, can be deducted. These reduce your overall taxable income.
• Employee Salaries and Wages: If you have employees, their salaries, benefits, and other compensation packages are tax-deductible.
• Capital Allowances: If you’ve purchased equipment, machinery, or other assets that are used in your business, you can claim a capital allowance. This is like a depreciation deduction, which allows you to reduce the value of your assets over time, making your business’s taxable income lower.
• Bad Debts: If you’ve tried to collect money from customers but couldn’t, these debts may also be deductible.
  

For businesses in specific sectors, such as agriculture or manufacturing, there are additional deductions available, like tax incentives for purchasing machinery or tax breaks for certain exports.

KEY TAKEAWAY: You need to keep good records of all your expenses, as they’ll directly impact the amount of tax your business owes. Working with a tax advisor can help ensure you’re claiming everything you’re entitled to.

Filing Corporate Income Tax Returns

Once you understand how much tax you owe, the next step is ensuring you file your returns on time. Corporate Income Tax in Kenya is filed annually, but businesses must also make quarterly advance payments based on estimated income.

Here’s what you need to know about the filing process:

Documents and Records You’ll Need

To file your Corporate Income Tax return, you’ll need to provide accurate records of your business’s income, expenses, and deductions. This includes:

1. Financial statements (income statement, balance sheet).
2. Detailed records of all expenses and capital allowances.
3. Information about your business’s assets, liabilities, and equity.
4. Any tax credits or incentives you’re claiming.

How to File

Filing your CIT return is done through the KRA iTax portal. This is the platform where you’ll submit your tax returns and make any necessary payments. Every business with a valid KRA PIN has access to an iTax account where they can do the filing.

For this purpose, KRA provides a return form that simplifies the process of filing CIT. Once complete, you upload all required financial documents and tax computations. 

Deadlines

It’s crucial to note that filing and payment deadlines differ.

Filing Deadline:

Your annual CIT return is due six months after the end of your company’s financial year. So, if your financial year ends on December 31st, you’ll need to file by June 30th of the following year.

Payment Deadline:

1. Payment of corporate income tax due should be done within 4 months of the year-end.
2. For quarterly (advance) payments, these are due by the 20th of the 4th, 6th, 9th, and 12th months of your financial year. These are based on your estimated income and help spread your tax payments throughout the year.

Missing these deadlines can result in penalties and interest charges, so it’s important to stay on top of your filing schedule. Even if your business hasn’t made a profit, it’s still necessary to file your return on time to avoid penalties.

What Happens If You Don’t Pay Corporate Income Tax?

Failure to pay Corporate Income Tax on time can lead to serious consequences for your business, from penalties to legal actions. Here’s what you need to know:

Penalties and Interest

If you miss a filing deadline or underreport your taxable income, KRA will charge you penalties and interest. The penalty for late filing can be as high as 5% of the tax due for each month it’s overdue, while interest can be as much as 1% per month. These charges add up quickly, making it even harder to get back on track financially.

Audits and Investigations

KRA conducts tax audits to ensure businesses are reporting accurately. If you fail to file your returns or there are discrepancies in your reports, KRA can audit your business. An audit often involves a thorough review of your financial records, and if KRA finds issues, it can lead to additional penalties and adjustments to your tax liabilities.

KRA investigations are usually an uncomfortable ordeal that invariably disrupts most businesses’ operations.

Legal Consequences

If your business continues to neglect its tax obligations, KRA can take legal action. This could involve seizing assets or even liquidating your business to recover the tax owed. The threat of such actions makes it critical to file your returns on time and keep up with payments.

Reputational Damage

Non-compliance doesn’t just affect your finances — it can damage your reputation as well. Clients, partners, and suppliers are less likely to work with businesses that have tax issues, especially if they risk facing penalties themselves due to non-compliant invoicing or contracts.

To avoid these problems, it’s essential to pay your taxes on time and keep good records. Regular consultations with youraccountant or tax advisor can help ensure that your business stays on the right side of the law.

Commonly Asked Questions (FAQs)

As you work to understand Corporate Income Tax, you may have some specific questions about how it applies to your business. Here are some common ones:

Stay Ahead of Corporate Tax Obligations

Navigating corporate income tax can be complex, but staying informed and compliant is essential for your business’s success.

To ensure that you’re maximizing your deductions, meeting deadlines, and avoiding costly penalties, it’s crucial to have the right guidance.

Alphacap offers expert tax consulting services to help you manage your corporate tax obligations efficiently and effectively. Whether you’re looking for advice on tax planning, filing returns, or staying compliant with changing regulations, Alphacap is here to support your business every step of the way.

Reach out today to make sure your tax strategy is aligned with your business goals and to keep your operations running smoothly.

Stay proactive, stay informed, and make Corporate Income Tax part of your regular business planning. It’ll save you time, money, and potential headaches down the road.