The Kenya Revenue Authority (KRA) was established by an Act of Parliament, Chapter 469 of the laws of Kenya , which became effective on 1st July 1995 . The Authority is charged with the responsibility of collecting revenue on behalf of the Government of Kenya.
A Board of Directors, consisting of both public and private sector experts, makes policy decisions to be implemented by KRA Management. The Chairman of the Board is appointed by the President of the Republic of Kenya .The Chief Executive of the Authority is the Commissioner General who is appointed by the Minister for Finance.
PURPOSE OF KRA
Assessment, Collection, Administration and Enforcement of laws relating to revenue.
The Authority is a Government agency that runs its operations in the same was as a private enterprise. In order to offer better single-window services to taxpayers, KRA is divided into five Regions as follows:
- Rift Valley Region
- Western Region
- Southern Region
- Northern Region
- Central Region
In terms of revenue collection and other support functions, the Authority is divided into the following Departments:
- Customs Services Department
- Domestic Taxes Department i). Domestic Revenue ii). Large Taxpayers Office
- Road Transport Department
- Support Services Department
- Investigations & Enforcement Department
Each Department is headed by a Commissioner.
In addition to the four divisions the Authority had seven service Departments that enhance its operational efficiency. These are as follows:
- Human Resources Department
- Finance Department
- Board Corporate Services & Administration Department
- Internal Audit Department
- Information & Communication Technology Department
- Research & Corporate Planning Department
- Marketing & Communication
Role of KRA in the economy
- To administer and to enforce written laws or specified provisions of written laws pertaining to assessment, collection and accounting for all revenues in accordance with these laws.
- Advise on matters pertaining to the administration or and the collection of revenue under written laws.
- Enhance efficiency and effectiveness of tax administration by eliminating Bureaucracy, Procurement, Promotion, Training and Discipline.
- Eliminate tax evasion by simplifying and streamlining procedures and improving tax payer service and education thereby increasing the rate of compliance.
- Promote professionalism and eradicate corruption amongst K.R.A. employee by paying adequate salaries that enables the institution to attract and retain competent professionals of integrity and sound ethical morals.
- Restore Economic Independence and Sovereign pride of Kenya by eventually eliminating the perennial budget deficits by creating organizational structures that maximize revenue collection.
- Ensure protection of local Industries and facilitate economic growth through effective administration of tax laws relating to trade.
- Ensure effective allocation of scarce resources in the economy by effectively enforcing tax policies thereby sending the desired incentives and shift signals throughout the country.
- Facilitate distribution of income in socially acceptable ways by effectively enforcing tax laws affecting income in various ways.
- Facilitate economic stability and moderate cyclic fluctuations in the economy by providing effective tax administration as an implementation instrument of the fiscal and stabilization policies.
- Be a ‘watchdog’ for the Government agencies ( such as Ministries of Health, Finance, etc ) by controlling exit and entry points to the country to ensure that prohibited and illegal goods do not pass through Kenyan borders.
Exempt incomes First schedule of the ITA- ( the list is not exhaustive)
- The income, other than income from investments, of an amateur sporting association, that is to say, an association –
a. whose sole or main object is to foster and control any outdoor sport; and
b. whose members consist only of amateurs or affiliated associations the members of which consist only of amateurs; and
c. whose memorandum of association or by-laws have provisions defining an amateur or a professional and providing that no person may be or continue to be a member of that association if that person is not an amateur.
- The income of a local authority
- Interest on tax reserve certificates which may be issued by authority of the Government.
- The income of an institution, body of persons, or irrevocable trust, of a public character established solely for the purposes of the relief of the poverty or distress of the public, or for the advancement of religion or education:-
- The income of a registered pension scheme.
- Pensions or gratuities granted in respect of wounds or disabilities caused in war and suffered by the recipients of those pensions or gratuities.
- Interest on a savings account held with the Kenya Post Office Savings Bank.
- Interest earned on contributions paid into the Deposit Protection Fund established under the Banking Act.
- The income of a registered individual retirement fund.
- The income of a registered home ownership savings plan.
- Income of the National Social Security Fund provided that the fund complies with such conditions as may be prescribed.
- Dividends received by a registered venture capital company.
- Gains arising from trade in shares of a venture company earned by a registered venture capital company within the first ten years from the date of first investment.
- Interest income accruing from all listed bonds, notes or other similar securities used to raise funds for infrastructure and other social services, provided that such bonds, notes or securities shall have a maturity of at least three years.
- Monthly or lump sum pension granted to a person who is sixty five year of age or more
- If resident companies receive dividend from companies where they control more than 12.5% of the voting power of the dividend paying company, the dividend is exempted from income tax, Sec. 7 (2).
“resident”, when applied in relation –
(a) to an individual means –
- That he has a permanent home in Kenya and was present in Kenya for any period in a particular year of income under consideration; or
- 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 –
- That the body is a company incorporated under a law of Kenya; or
- That the management and control of the affairs of the body was exercised in Kenya in a particular year of income under consideration; or
- That the body has been declared by the Minister by notice in the Gazette to be resident in Kenya for any year of income;
Only resident individuals are eligible to claim personal relief
Non resident companies are taxed at a higher rate (37.5%) and are taxed on gross incomes
Year Of Income
“year of income” means the period of twelve months commencing on 1st January in any year and ending on 31st December in that year. For body corporate the year of income need not coincide with the calendar year but may be taken as an 12 month cycle