Let me try assist... Wazuans correct where I lie too much.

Company A supposed to pay 30% corporate tax before dividends. Further, company A should submit 5% withholding tax for any dividends paid to their shareholders holding less than 12.5% of shares.

Company B will receive dividend income and has to show this in its Profit & Loss. Company B needs to pay 30% corporate tax - dividend income excluded in calculating taxable income.
In distributing dividends, 5% withholding tax withheld for shareholders with less than 12.5%


Since all investors are Kenyan residents, they'll be required to file their self-assessment returns. If your 5% was withheld, requisite form attached with return to offset your obligations.

If no amount was withheld, dividend income shown on self-assessment return and netted off from allowable expenses to determine what 'balance of tax' you owe.

well, i don't know whether i am wrong (that's why i sought for your opinions) but this is my take.

Company B: dividend expense (100M) is paid out of profit after tax.
since it's paying corporates owning over 12.5% then NO w/tax.

Company A: Dividend income (67.5M) is qualifying dividend thus not taxable.
Upon re-distributing the received dividend to its shareholders (natural persons), regardless of their holdings it will withhold tax at 5% which will be final to those individuals.
BUT, i understand there is a provision in the income tax for SUBSTITUTE TAX (and i am advised that it will apply on this case)..

Kindly assist where possible..

@muganda

I too have never heard of it but a certain consultant mentioned something of the sort..

I've called KRA and they seems not sure..

Some lawyer wins a 3.4 Billion legal fees from the GOK; and is promptly slapped with a 2.8 Billion shilling tax bill. How is that possible. I thought Ceaser takes upto a maximum of about 30%. And how does one run up such a bill or is the GOK always this generous. Any learned friend around how much is the highest that can be billed by the hour?