February 25, 2019
From Kenya: Tax on Distribution of Dividends from Untaxed Profits
The Finance Act 2018 brought an amendment to the Income Tax Act which introduced a tax on distribution of dividends from untaxed profits at resident corporate rate (30%). This took effect on January 1, 2019. However, this amendment has brought a lot of confusion in its interpretation on what untaxed incomes relates to.
To settle this confusion, Kenya Revenue Authority (KRA) has issued a public notice to clarify on the matter.
In the public notice, KRA stated that the tax does not apply to distribution of income as dividends where the income is:
- Received by a registered collective investment scheme;
- Dividend received by a resident company from a subsidiary, whether local or foreign;
- Previously subjected to capital gain tax provisions;
- Previously subjected to final tax.