2(1) In this Act, unless the context otherwise requires –

“accounting period” in relation to a person, means the period for which that person makes up the accounts of his business:

“actuary” means – testing if a change can be formatted to italic and bolded or strikeout to show a change (by Mumbi Wambugu)

(a) a Fellow of the Institute of Actuaries in England: or of the Faculty of Actuaries in Scotland: or of the Society of Actuaries in the United States of America: or of the Canadian Institute of Actuaries; or

(b) Such other person having actuarial knowledge as the Commissioner of Insurance may approve;

“agency fees” means payments made to a person for acting on behalf of any other person or group of persons, or on behalf of the Government and excludes any payments made by an agent on behalf of a principal when  such payments are recoverable;

“annuity contract” means a contract providing for the payment of an individual of a life annuity, and “registered annuity contract” means one which has been registered with the Commissioner in such manner as may be
prescribed;

“assessment” means an assessment, instalment assessment, selfassessment or additional assessment made under this Act;

“authorized tax agent” means any person who prepares or advises for remuneration, or who employs one or more persons to prepare for remuneration, any return, statement or other document with respect to a tax under this Act; and for the purposes of this Act, the preparation of a substantial portion of a return, statement or other document shall be deemedto be the preparation of the return, statement or other document;

“bank” means a bank or financial institution licensed under theBanking Act;

“bearer” means the person in possession of a bearer instrument;

“bearer instrument” includes a certificate of deposit, bond, note or anysimilar instrument payable to the bearer;

“building society” means a building society registered under the Building Societies Act

“business” includes any trade, profession or vocation, and everymanufacture, adventure and concern in the nature of trade, but does notinclude employment;

“collective investment scheme” has the meaning assigned to it in section 2 of the Capital Markets Act;

“commercial vehicle” means a road vehicle which the Commissioner is satisfied is-

(a) manufactured for the carriage of goods and so used in connection with a trade or business; or

(b) a motor omnibus within the meaning of that term in the Traffic Act;

or

(c) used for the carriage of members of the public for hire or reward;

“Commissioner” means –

(a) the Commissioner-General appointed under section 11(1) of the Kenya Revenue Authority Act; or

(b) with respect to powers or functions that have been delegated under section 11(4) of the Kenya Revenue Authority Act to another Commissioner, that other Commissioner.

“company” means a company incorporated or registered under any Law in force in Kenya or elsewhere;

“compensating tax” means the addition to tax imposed under section 7A;

“consultancy fees” means payments made to any person for acting in an advisory capacity or providing services on a consultancy basis;

“contract of service” means an agreement, whether oral or in writing, whether expressed or implied, to employ or to serve as an employee for any period of time, and includes a contract of apprenticeship or indentured learner ship under which the employer has the power of selection and dismissal of the employee, pays his wages or salary and exercises general or specific control over the work done by him; and for the purpose of this definition an officer in the public service shall be deemed to be employed under a contract of service;

“corporation rate” means the corporation rate of tax specified in paragraph 2 of Head B of the Third Schedule;

“Court” means the High Court;

“current year of income”, in relation to income charged to instalment tax, means the year of income for which the instalment tax is payable;

“debenture” includes debenture stock, a mortgage, mortgage stock, or any similar instrument acknowledging indebtedness, secured on the assets of the person issuing the debenture; and, for the purposes of paragraphs (d) and (e) of section 7(1), includes a loan or loan stock, whether secured or unsecured;

“defined benefit provision”, in respect of a registered fund, means the terms of the fund under which benefits in respect of each member of the fund are determined in any way other than that described in the definition of a “defined contribution provision”,

“defined benefit registered fund” means a registered fund that contains a defined benefit provision, whether or not it also contains a defined contribution provision;

“defined contribution provision”, in respect of a registered fund, means terms of the fund –

(a) which provide for separate account to be maintained in respect of each member, to which are credited contributions made to the fund by, or in respect of, the member and any other amounts allocated to the member,  and to which are charged payments in respect of the member; and

(b) under which the only benefits in respect of a member are benefits determined solely with reference to, and provided by, the amount of the member’s account;

“defined contribution registered fund” means a registered fund under which the benefits of a member are determined by a defined contribution provision, and does not contain a defined benefit provision;

“director” means –

(a) in relation to a body corporate the affairs of which are managed by a board of directors or similar body, a member of that board or similar body;

(b) in relation to a body corporate the affairs of which are managed by a single director or similar person, that director or person;

(c) in relation to a body corporate the affairs of which are managed by members themselves, a member of the body corporate, and includes any person in accordance with whose directions and instructions those persons  are accustomed to act;

“discount” means interest measured by the difference between the amount received on the sale, final satisfaction or redemption of any debt, bond, loan, claim, obligation or evidence of indebtedness, and the price paid on purchase or original issuance of the bond or evidence of indebtedness or the sum originally loaned upon the creation of the loan, claim or other obligation;

“dividend” means any distribution (whether in cash or property, and whether made before or during a winding up) by a company to its shareholders with respect to their equity interest in the company, other than distributions made in complete liquidation of the company of capital which was originally paid directly into the company in connection with the issuance of equity interests;

“due date” means the date on or before which tax is due and payable under this Act or pursuant to a notice issued under this Act;

“employer” includes any resident person responsible for the payment of, or on account of, emoluments to an employee, and an agent, manager or other representative so responsible in Kenya on behalf of a non-resident employer;

“export processing zone enterprise” has the meaning assigned to it by the Export Processing Zones Act, 1990;

“farmer” means a person who carries on pastoral, agricultural or other similar operations;

“foreign tax”, in relation to income charged to tax in Kenya, means income tax or tax of a similar nature charged under any law in force in any place with the government of which a special arrangement has been made by the Government of Kenya and which is the subject of that arrangement;

“incapacitated person” means a minor, or a person adjudged under any law, whether in Kenya or elsewhere, to be in a state of unsoundness of mind (however described);

“individual” means a natural person;

“individual rates” means the individual rates of income tax specified in paragraph 1 of Head B of the Third Schedule;

“individual retirement fund” means a fund held in trust by a qualified institution for a resident individual for the purpose of receiving and investing funds in qualifying assets in order to provide pension benefits for such an individual or the surviving dependants of such an individual subject to the Income Tax (Retirement Benefit) Rules and “registered individual retirement fund” means an individual retirement fund where the trust deed for such a fund has been registered with the Commissioner;

“information technology” means any equipment or software for use in storing, retrieving, processing or disseminating information;

“interest” (other than interest charged on tax) means interest payable in any manner in respect of a loan, deposit, debt, claim or other right or obligation, and includes a premium or discount by way of interest and commitment or service fee paid in respect of any loan or credit or an Islamic finance return (added by Finance Act 2017 s.11)

“Islamic finance arrangement” means all financial arrangements, including transactions, instruments, products or related activities that are structured in accordance with Islamic law; (added by Finance Act 2017 s.11)

“Islamic finance return” means any amount received or paid in relation to Sukuk or an Islamic finance arrangement; (added by Finance Act 2017 s.11)

“Kenya” includes the continental shelf and any installation thereon as defined in the Continental Shelf Act;

“local committee” means a local committee established under section 82;

“loss”, in relation to gains or profits, means a loss computed in the same manner as gains or profits;

“Management Act” means the East African Income Tax Management Act;

“management or professional fee” means a payment made to a person, other than a payment made to an employee by his employer, as consideration for managerial, technical, agency, contractual, professional or consultancy
services however calculated;

“Minister” means the Cabinet Secretary for the time being responsible for matters relating to finance; (added by Finance Act 2013 s.9)

“National Social Security Fund” means the National Social Security Fund established under Section 3 of the National Social Security Fund Act;

“natural resource income” means –

(i) an amount including a premium or such other like amount paid as consideration for the right to take minerals or a living or non living resource from land or sea; or

(ii) an amount calculated in whole or in part by reference to the quantity or value of minerals or a living or non-living resource taken from land or sea.

“non-resident rate” means an non-resident tax rate specified in paragraph 3 of Head B of the Third Schedule;

“notice of objection” means a valid notice of objection to an  assessment given under section 84(1);

“number of full-year members”, in respect of a registered fund, means the sum of the periods of service in the year under the fund of all members of the fund, where the periods are expressed as fractions of a year;

“officer” means the Commissioner and any other member of staff of the Kenya Revenue Authority appointed under section 13 of the Kenya Revenue Authority Act.

“original issue discount” means the difference between the amount received on the final satisfaction or redemption of any debt, bond, loan, claim, obligation or other evidence of indebtedness, and the price paid on original issuance of the bond or evidence of indebtedness, and the price paid on original issuance of the bond or evidence of indebtedness or the sum originally loaned upon creation of the obligation, loan, claim or other obligation;

“oil company” means a petroleum company within the meaning of the Ninth Schedule; (added by Finance Act 2013 s.9)(deleted by Finance Act 2014 s.2)

“paid” includes distributed, credited, dealt with or deemed to have been paid in the interest or on behalf of a person;

“pension fund” means a fund for payment of pensions or other similar benefits to employees on retirement, or to the dependants of employees on the death of those employees and “registered pension fund” means one which has been registered with the Commissioner in such manner as may be prescribed;

“pensionable income” means-

(a) in relation to a member of a registered pension or provident fund or of an individual eligible to contribute to a registered individual retirement fund, the employment income specified in section 3(2)(a)(ii) subjected to  eduction of tax under section 37;

(b) in the case of an individual eligible to contribute to a registered individual retirement fund, the gains or profits from business subject to tax under section 3(2)(a)(i) earned as the sole proprietor or as a partner of the business;

Provided that where a loss from business is realized, the loss shall be deemed to be zero;

“permanent establishment” in relation to a person means a fixed place of business and includes a place of management, a branch, an office, a factory, a workshop, and a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, a building site, or a construction or installation project which has existed for six months or more where that person wholly or partly carries on business:
Provided that –

(a) the permanent establishment of the person shall be deemed to include the permanent establishment of the person’s dependent agent;

(b) in paragraph (a), the expression “dependent agent” means an agent of the person who acts on the person’s behalf and who has, and habitually exercises, authority to conclude contracts in the name of that person;

“permanent or semi-permanent crops” means those crops which the Minister may, by notice in the Gazette, declare to be permanent or semipermanent crops for the purposes of this Act;

“personal relief” means –

(a) the personal relief provided for under part V; and

(b) the relief mentioned in section 30.

“preceding year assessment”, in relation to instalment tax, means the tax assessed for the preceding year of income as of the date the instalment tax is due without regard to subsequent additions to, amendments of, or subtractions from the assessment; and in the event that as of the date the instalment tax is due no assessment for the preceding year of tax has, as yet, been made, means the amount of tax estimated by the person as assessable for the preceding year of income;

“premises” means land, any improvement thereon, and any building or, where part of a building is occupied as a separate dwelling-house, that part;

“provident fund” includes a fund or scheme for the payment of lump sums and other similar benefits, to employees when they leave employment or to the dependants of employees on the death of those employees but does not include a national provident fund or national social security fund established by the Government and “registered provident fund” means one which has been registered with the Commissioner in such manner as may be
prescribed;

“provisional return of income” (Deleted by No. 16 of 2014 s.2)

“public pension scheme” means a pension scheme that pays pensions or lump sums out of the Consolidated Fund;

“qualifying assets”, in respect of a registered individual retirement fund, means time deposits, treasury bills, treasury bonds, securities traded on any securities exchange approved under the Capital Markets Act and such
other categories of assets as may be prescribed in the investment guidelines issued under the Retirement Benefits Act, 1997;

“qualifying dividend” means that part of the aggregate dividend that is chargeable to tax under section 3(2)(b) and which has not been otherwise exempted under any other provision of this Act, but shall not include a dividend paid by a designated co-operative society subject to tax under section 19A(2) or 19A(3);

“qualifying institution” means a bank licensed under the Banking Act, or an insurer registered under the Insurance Act, or such other financial institution as may be approved under the Retirement Benefits Act, 1997;

“qualifying dividend rate of tax” means the resident withholding tax rate in respect of a qualifying dividend specified in paragraph 5 of the Third Schedule.

“qualifying interest” means the aggregate interest, discount or original issue discount receivable by a resident individual in any year of income from –

(i) a bank or financial institution licensed under the Banking Act, or

(ii) a Building Society registered under the Building Societies Act which in the case of housing bonds has been approved by the Minister for the purposes of this Act, or

(iii) the Central Bank of Kenya:

Provided that –

(a) interest earned on an account held jointly by a husband and wife shall be deemed to be qualifying interest; and

(b) in the case of housing bonds, the aggregate amount of interest shall not exceed three hundred thousand shillings;

“qualifying interest rate of tax” means the resident withholding tax rate in respect of interest specified in paragraph 5 of the Third Schedule;

“real estate investment trust” shall have the meaning assigned to it in the Capital Markets Act; (added by Finance Act 2011 s.9)

“registered fund” means a registered pension fund or a registered provident fund;

“registered home ownership savings plan” means a savings plan established by an approved institution and registered with the Commissioner for receiving and holding funds in trust for depositors for the purpose of enabling individual depositors to purchase a permanent house;

“registered trust scheme” means a trust scheme for the provision of retirement annuities which has been registered with the Commissioner in such manner as may be prescribed;

“registered unit trust” means a unit trust registered by the Commissioner in such a manner as may be prescribed;

“registered venture capital company” means a venture capital company registered by the Commissioner in such manner as may be prescribed;

“resident”, when applied in relation –

(a) to an individual means –

(i) 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

(ii) 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 –

(i) that the body is a company incorporated under a law of Kenya; or

(ii) that the management and control of the affairs of the body was exercised in Kenya in a particular year of income under consideration; or

(iii) that the body has been declared by the Minister by notice in the Gazette to be resident in Kenya for any year of income;

“resident withholding rate” means a rate of resident withholding tax specified in paragraph 5 of Head B of the Third Schedule;

“Retirement Benefits Authority” means the Authority by that name established under the Retirement Benefits Act, 1997;

“return of income” means a return of income furnished by a person consequent upon a notice served by the Commissioner under section 52, including a return of income together with a self-assessment of tax furnished to the Commissioner in accordance with the provisions of section 52B, together with the documents required to be furnished therewith;

“retirement annuity” means a retirement annuity payable under a registered annuity contract;

“royalty” means a payment made as a consideration for the use of or the right to use –

(a) the copyright of a literary, artistic or scientific work; or

(b) a cinematograph film, including film or tape for radio or television broadcasting; or

(c) a patent, trade mark, design or model, plan, formula or process; or

(d) any industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific equipment or experience, and gains derived from the sale or exchange of any right or property giving rise to that royalty;

“securities exchange” has the meaning assigned to it in section 2 of the Capital Markets Authority Act;

“specified arrangement” means an arrangement for relief from double taxation having effect under section 41 or an agreement for the exchange of tax information under Section 41A (added by Finance Act 2013 s.9) or an agreement for the exchange of tax information under Section 41A;

‘Sukuk’ has the meaning assigned to it in the Public Finance Management Act, 2012 (added Finance Act 2017 s.11)

“specified mineral” (Deleted by No. 16 of 2014 s.2)

“tax” means the income tax charged under this Act;

“tax computerized system” means any software or hardware for use in storing, retrieving, processing or disseminating information relating to tax.

“telecommunication operator” means a person licensed as such under the Kenya Information and Communications Act, 1998; (added by Finance Act 2009 s.16)

“total income” means, in relation to a person, the aggregate amount of his income, other than income exempt from tax under Part III, chargeable to tax under Part II, as ascertained under Part IV;

“trade association” means a body of persons which is an association of persons separately engaged in any business with the main object of safeguarding or promoting the business interests of those persons;

“training fee” means a payment made in respect of a business or user training services designed to improve the work practices and efficiency of an organization, and includes any payment in respect of incidental costs associated with provision of such services. (added Finance Act 2009 s.16)

“Tribunal” means the tribunal established under section 83;

“unit holder”, in relation to a unit trust, means the owner of an interest in the moneys, investments and other property which are for the time being subject to the trusts governing the unit trust, that interest being expressed in
the number of units of which he is the owner;

“unit trust” has the meaning assigned to it in section 2 of the Capital Markets Act;

“venture company” (venture capital enterprise substituted for venture company – added by Finance Act 2008 s.23) means a company incorporated in Kenya in which a venture capital has invested and which at the time of first investment by the venture company has assets with a market value or annual turnover of less
than five hundred million Kenya shillings.

“whole time service director” means a director of a company who is required to devote substantially the whole of his time to the service of that company in a managerial or technical capacity and is not the beneficial owner
of, or able, either directly or through the medium of other companies or by any other means, to control more than five per cent of the share capital or voting power of that company;

“wife’s employment income” means gains or profits from employment arising from a contract of service which is chargeable to tax under section 3(2)(a)(ii) and pensions, lump sums and withdrawals from a registered fund, public pension scheme or registered individual retirement fund which are chargeable to tax under section 3(2)(c), of a woman living with her husband, excepting income derived by her as a trustee or manager of a settlement created by her husband the income of which is deemed under section 25 or 26 to be the income of the settler or income derived by her as an employee of –

(a) a partnership in which her husband is a partner;

(b) her husband; or

(c) a company, the voting power of which is held to the extent of twelve and one-half per cent or more at any time during the year of income by her or by her husband or by both jointly, either directly or through nominees;

“wife’s employment income rate” means the wife’s employment income rate specified in paragraph 1A of Head B of the Third Schedule;

wife’s professional income” means the gains or profits of a married woman living with her husband derived from the exercise by her (but not as a partner of a partnership in which her husband is a partner) of one of the professions specified in the Fifth Schedule being also a person who has the qualifications specified in that Schedule relevant to that profession;

“wife’s professional income rate” means the wife’s professional income rate specified in paragraph 1A of Head B of the Third Schedule;

“wife’s self-employment income” means gains or profits arising from a business of a married woman living with her husband which are chargeable to tax under section 3(2)(a)(i) and any income chargeable under section 3(2)(a)(iii) or section 3(2)(b),  but does not include any income derived from the provision of goods or services by her to a business, partnership or a company owned by or the voting power of which is held to the extent of twelve and one half percent, or more at any one time during the year of income by her or her husband either directly or through nominee;

“wife’s self-employment income rate” means the wife’s self-employment income rate specified in paragraph 1A of Head B of the Third Schedule;

“winnings” has the meaning assigned to it in the Betting, Lotteries and Gaming Act. (deleted by Finance Act 2012 s.13 then added back by Finance Act 2013 s.9)

“year of income” means the period of twelve months commencing on 1st January in any year and ending on 31st December in that year.

(2) In relation to any year of income in respect of which an order relating to Tax or personal reliefs has been made under the Provisional Collection of Taxes and Duties Act reference in this Act to rates of tax and personal reliefs shall, so long as the order remains in force, be construed as references to the rates or reliefs specified in that order, and if, after the order has ceased to have effect, the rates of tax and of personal reliefs in relation to that year of income as specified in this Act as amended are different from those referred to in the order, and assessments have already been made having regard to those rates in the order, then all necessary adjustments shall be made to the assessments to give effect to the rates of tax and of personal reliefs for that year of income as specified in this Act as amended for that year of income.