The Kenya Revenue Authority has issued a clarification on section 7A of the finance Act 2018 regarding the taxation of untaxed profits distributed as dividends.
Through a public notice, the agency issued some of the exemptions for companies which will not be subjected to taxation of untaxed profits which was usually distributed as dividends to resident shareholders.
The corporate tax was introduced under the Finance Act 2008, seeking to eliminate distribution made from untaxed gains.
It eliminated compensating tax and replaced it with taxation of untaxed profits at the rate of 30 per cent.
KRA has clarified that the amendement does not apply to distribution of income as dividends where the income is received by a registered collective scheme.
The corporate tax does not also apply to companies where the dividend is received by a resident company from a subsidiary , whether local or foreign.
“The new section 7A of the income Tax Act Cap 470 does not aply to distribution of income as diividends where the incomes has been subjected to capital gain tax provisions and been subjected to final tax,” KRA noted.
