Wazua
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Rank: New-farer Joined: 12/2/2009 Posts: 82 Location: kenya
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Dear members, - i would like to know legal ways which a business man/woman in Kenya can use to minimize their tax exposure. For instance is it better to pay dividends than bonuses given that the latter attract tax at 30 percent and dividends only 5 percent? Opportunity may knock once, but temptation bangs on the front door forever..
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Rank: Elder Joined: 9/15/2006 Posts: 3,905
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Hmmn, let me attempt and @mukiha can assist where I mislead. Bonuses are added to your Gross Pay so will be taxed to a maximum of 30%. Dividends are paid after tax meaning your organization has already paid turnover tax [if this is your chosen meal] or corporate tax at 30%.
Actually no big difference, considering that 5% withholding tax on dividends only applies if you only hold less than 12.5% of the company.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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You got to differentiate between personal and corporate taxation. If the business man is a director in his own company, bonus is a company expense but an income to him. Company will deduct the expense from its income b4 taxing. The business man will however pay personal tax at 30%. For dividends the company cannot deduct as an expense, which means the income is already taxed on company at 30%. the dividend receiver is further taxed at 5%but the director does not pay further tax. If the company is a one man show, then its better to pay the bonus Life is short. Live passionately.
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Rank: Veteran Joined: 10/6/2007 Posts: 1,177 Location: Nairobi - Kenya
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@ mzazii pls clarify if the natural persons are strictly employees or employees cum owners of the firms... then tax moguls will advise accordingly... When you hear what I say, you will not understand. When you see what I do, you will not comprehend
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Rank: New-farer Joined: 12/2/2009 Posts: 82 Location: kenya
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@ kamaa and others thanks. My focus is on a director who is also owner/shareholder. Opportunity may knock once, but temptation bangs on the front door forever..
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Rank: Elder Joined: 3/2/2009 Posts: 26,328 Location: Masada
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sparkly wrote:You got to differentiate between personal and corporate taxation. If the business man is a director in his own company, bonus is a company expense but an income to him. Company will deduct the expense from its income b4 taxing. The business man will however pay personal tax at 30%. For dividends the company cannot deduct as an expense, which means the income is already taxed on company at 30%. the dividend receiver is further taxed at 5%but the director does not pay further tax. If the company is a one man show, then its better to pay the bonus Can someone confirm if the with holding tax on dividend is still 5%? I underheard that the Jubilee gaament has increased it to 15% in order to collect some money which was missed with the suspension of the capital gain tax. Anyone?  Portfolio: Sold
You know you've made it when you get a parking space for your yatcht.
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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can an individual tax payer claim FX losses(realized or unrealized) as an allowable deduction for tax purposes? If Obiero did it, Who Am I?
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Rank: Veteran Joined: 11/13/2015 Posts: 1,589
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Swenani wrote:can an individual tax payer claim FX losses(realized or unrealized) as an allowable deduction for tax purposes? Quote:The Income Tax Act
Section 4A reads
(1) A foreign exchange gain or loss realized on or after 1st January, 1989 in a business carried onin Kenya shall be taken into account as a trading receipt or deductible expenses in computing the gains and profits of that business for the year of income in which that gain or loss was realized You can only claim the realized losses
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Rank: Member Joined: 10/29/2007 Posts: 76
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I have been informed that KRA is writing to all County Planning offices requesting for all plans approved from last year including the name of client, title deed number, approval date, architect name, etc. Further, they are visiting building sites asking whether witholding tax was paid for architect's fees, structural engineer.. etc Is it true? If it is true, then it might be a sign that our Government has serious revenue shortfalls.
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Rank: User Joined: 1/20/2014 Posts: 3,528
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mwania wrote:I have been informed that KRA is writing to all County Planning offices requesting for all plans approved from last year including the name of client, title deed number, approval date, architect name, etc. Further, they are visiting building sites asking whether witholding tax was paid for architect's fees, structural engineer.. etc Is it true? If it is true, then it might be a sign that our Government has serious revenue shortfalls. No need to fear if you have been doing things correctly. Mr. Tax just wants his dues to build Kenya for a better tomorrow. Formal education will make you a living. Self-education will make you a fortune - Jim Rohn.
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Rank: Member Joined: 10/29/2007 Posts: 76
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Othelo, I know and that is what should be the case, but I can bet that the motivation is also to line somebody's pockets... and I know this.. they will audit you and when they find that you have a tax liability of Kshs. 600,000, they will ask you to give them Kshs. 500,000 and then pay Kshs. 100,000 to KRA. If you do not play ball, the extortionists will blackmail you to hell.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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mwania wrote:Othelo, I know and that is what should be the case, but I can bet that the motivation is also to line somebody's pockets... and I know this.. they will audit you and when they find that you have a tax liability of Kshs. 600,000, they will ask you to give them Kshs. 500,000 and then pay Kshs. 100,000 to KRA. If you do not play ball, the extortionists will blackmail you to hell. Why don't you just withhold the tax? It's not your tax anyway and does not increase your cost. it's the tax of the contractor/ architect. Withholding and paying is a very simple process, I can give you my email if you want assistance. Life is short. Live passionately.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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Impunity wrote:sparkly wrote:You got to differentiate between personal and corporate taxation. If the business man is a director in his own company, bonus is a company expense but an income to him. Company will deduct the expense from its income b4 taxing. The business man will however pay personal tax at 30%. For dividends the company cannot deduct as an expense, which means the income is already taxed on company at 30%. the dividend receiver is further taxed at 5%but the director does not pay further tax. If the company is a one man show, then its better to pay the bonus Can someone confirm if the with holding tax on dividend is still 5%? I underheard that the Jubilee gaament has increased it to 15% in order to collect some money which was missed with the suspension of the capital gain tax. Not true. still 5℅. 10℅ for non East Africans Anyone? Life is short. Live passionately.
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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mwania wrote:I have been informed that KRA is writing to all County Planning offices requesting for all plans approved from last year including the name of client, title deed number, approval date, architect name, etc. Further, they are visiting building sites asking whether witholding tax was paid for architect's fees, structural engineer.. etc Is it true? If it is true, then it might be a sign that our Government has serious revenue shortfalls. No our gaarment is not having revenue shortfalls, they are only tightning tax loopholes If Obiero did it, Who Am I?
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Rank: Member Joined: 9/9/2015 Posts: 233
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That timing raises eyebrows "Buy when there's blood in the streets, even if the blood is your own."
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