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Kenya’s corporate tax policy favourabe - report

The 2019 report provides fresh insights into the global tax and economic activities of nearly 4,000 multinational enterprises

In Summary
  • The report by the OECD dubbed Corporate Tax Statistics singles out Kenya as one of the global jurisdictions with a generous accelerated depreciation corporate tax policy alongside Italy, Papua New Guinea and Cote D’Ivoire.
Acting National Treasury CS Ukur Yattani with KRA Commissioner General Githii Mburu at Treasury Buildings
Acting National Treasury CS Ukur Yattani with KRA Commissioner General Githii Mburu at Treasury Buildings
Image: COURTESY

Kenya is one of the leading countries fostering tax reforms for economic growth, a recent global report on corporate taxation shows.

The OECD report titled Corporate Tax Statistics singles out Kenya as one of the global jurisdictions with a generous accelerated depreciation corporate tax policy alongside Italy, Papua New Guinea and Cote D’Ivoire.

The 2019 report provides fresh insights into the global tax and economic activities of nearly 4,000 multinational enterprises (MNE) groups headquartered in 26 jurisdictions and operating across more than 100 jurisdictions worldwide.

 

Of the 74 jurisdictions covered in the 2019 analysis, 57 provide accelerated depreciation, meaning that investments in these jurisdictions are subject to Effective Average Tax Rate (EATRs) below their statutory tax rates.

“Among those jurisdictions, the average reduction of the statutory tax rate was 1.7 percentage points; in 2019, the largest reductions were observed in Italy (4.9 percentage points), Kenya (3.8 percentage points), Papua New Guinea (3.7 percentage points) and Cote d’Ivoire (3.4 percentage points),” says the the report.

Kenya Revenue Authority (KRA) Commissioner General Githii Mburu acknowledged that Kenya had managed to make headway on the corporate tax front.

“The Corporate Tax Statistics report provides a welcome dashboard on the global status and will allow us to enhance our ongoing benchmarking against global standards such as the BEPS Action plan,” Mburu said.

He added that the government through the National Treasury among other agencies have been providing much-needed support to ensure adherence to multilateral treaties and conventions required on this front.

Kenya’s tax policy allowing for the expensing of intangible assets is also noted as an innovative development.

In many jurisdictions, investments in intangibles are subject to very different effective tax rates (ETRs) due to significant variation in tax treatment across jurisdictions. In particular, intangibles are non-depreciable in Botswana, Chile and Costa Rica, leading to strongly decelerated fiscal depreciation.

 
 

Argentina, Australia, Brazil, South Africa, Montserrat and Spain provide moderately decelerated depreciation of intangibles.

On the other hand, Papua New Guinea, Kenya and Denmark allow acquired intangible assets to be expensed immediately.

At the same time, Italy provides enhanced deductions for the acquisition of highly digitalised intangible assets.