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Advance collection of capital gains tax in Kenya declared unconstitutional.

By the Africa Legal Consulting Team

www.africalegalconsult.com

“The subject is not taxable by inference or by analogy but only by plain words of a statute applicable to the facts and circumstances of the case. As I understand the principle of fiscal legislation it is this, if the person sought comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax cannot, bring the subject within the letter of the law, the subject is free however apparently within the spirit of the law the case ought otherwise appears to be. “The subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax upon him.”

Nyamu JA, Keroche Industries Limited V Kenya Revenue Authority & 5 Others [2007] e KLR, quoting with approval Russell v Scott [1948] 2 ALL ER 5 and Partington v Attorney General [1869] 4HL 100


By the Africa Legal Consulting Team

www.africalegalconsult.com

Last week on 09/02/2016, the 9th Circuit Court of Appeals of the United States determined an appeal of the orders given by U.S. District Judge James Robart which suspended Presidents Trump’s travel ban. The ban barred citizens of seven Muslim-majority countries -- Iraq, Syria, Iran, Libya, Somalia, Sudan and Yemen -- from entering the US for 90 days, all refugees for 120 days and indefinitely halts refugees from Syria. Below is commentary on the judgment, highlighting the main legal issues raised by the appeal.


By the Africa Legal Consulting Team

www.africalegalconsult.com

Land in Kenya has been an emotive issue since time immemorial. During the colonial period, alienation of land was the major grievance put forward and formed the basis for the independence movement in Kenya. Land grievances scaled up after independence since most Kenyans were not able to repossess their alienated lands. The allocation of land after independence was largely shaped by political power and this led to some communities being allocated more land than others. Other Kenyans were left as squatters in their own land with no single parcel land to their name leading to future tribal clashes over land.


By the Africa Legal Consulting Team

www.africalegalconsult.com

There are various types of non-profit organizations which can be established in Kenya. These include: companies limited by guarantee, charitable trusts and Non-governmental organizations.  The Public Benefits Organizations Act which was enacted in 2013 commenced on 9th September 2016.  It repealed the Non-Governmental Organizations Coordination Act and established an elaborate legal framework that consolidates the law regulating not-for profit organizations.  This article shall compare and contrast three main forms of public benefit organizations.


By the Africa Legal Consulting Team

www.africalegalconsult.com

On 23rd December 2016, parliament enacted the Bribery Act which commenced on 13th January 2017. The preamble of the Act highlights its objective as “an Act of parliament to provide for the prevention, investigation and punishment of bribery.”   The Act has extended the fight against corruption into the private sector as it imposes stringent anti-bribery laws to be observed by the companies and partnerships.


The Tax law changes in Kenya effective from January, 2017
By the Africa Legal Consulting Team
www.africalegalconsult.com


The Kenyan Finance Act, assented to on 13th September 2016 amended various sections of several acts relating to finance such as the Income Tax Act, Tax Procedures Act, Banking Act and The Kenya Deposit Insurance Act among others. The primary purpose of the act was to amend the law on taxes and duties in Kenya. Unlike majority of other acts of parliament, different sections of this act commenced on different dates. This article shall discuss the legislative changes effective from 1st January 2017 relating to tax laws.


The implications of the Finance Act, 2016 on the Banking Sector in Kenya
By the Africa Legal Consulting Team
www.africalegalconsult.com


The Finance Act, 2016 made a few changes to the banking legal regime through amendments to the Banking Act and the Kenya Deposit Insurance Act. The amendments are aimed at curbing some of the factors which have contributed to the collapse of banks in the recent past. The collapse of banks has been attributed to various factors such as imprudent lending strategies, poor management and deficiencies in the legal framework. Many SACCOs have also collapsed leading to loss of savings by the shareholders. The following amendments to the Banking Act became effective on 1st January 2017.


The 2014 Finance Act has re-introduced the capital gains tax. Capital gains shall be subject to tax at the rate of five per cent effective from 1st January 2015.

Capital gains enjoy low tax rates compared to ordinary income in most jurisdictions. In Kenya, resident ordinary business income is taxed at the rate of 30 per cent while capital gains will be taxed at the rate of five per cent.


Multinational enterprises (MNEs) setting up in Kenya have the option of incorporating a subsidiary or registering a branch. Subsidiaries in Kenya, just like other incorporated companies, pay corporate taxes at the rate of 30 per cent. Foreign branches pay corporate taxes at the rate of 37.5 per cent.

Despite the high corporate tax rate, some MNEs prefer to operate as branches. This may be driven by a host of reasons ranging from global structural strategy, the need to reduce the effective tax rate and local legal considerations.

For instance, some tax jurisdictions allow the tax deduction of branch start-up losses. Therefore, the head office may adopt a global strategy of shifting branch start-up losses to such a jurisdiction.


Are Kenyans in diaspora liable to taxes in Kenya? There is no straight answer to this question. It is important to examine the surrounding factual circumstances of every case.

Tax liability in Kenya is based on the character of the income and the residence of the taxpayer. Income accrued in or derived from Kenya is taxable in Kenya notwithstanding the residence of the taxpayer. This legal provision is based on the source-based principle which posits that the jurisdiction to tax is premised on the fact that a State creates economic opportunities that allows a person to derive income from that State.


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