Taxation as a business cost

The management of taxes for any taxpayer is nowadays an extremely delicate and crucial aspect of the business, especially taking into account the efficiency and effectiveness that the Kenya Revenue Authority carries its mandate of ensuring that taxpayers comply with the laid down regulations as far as taxes are concerned.

However, one area which each taxpayer almost forgets is the fact that the tax statutes also provide quite some decent incentives which, if taken advantage of, could lead to significant tax savings.

The taking advantage of incentives is obviously one of the areas that you should be concerned with since it contributes significantly to the amount of the tax expense, which admittedly must be managed effectively to ensure that only the correct taxes are paid or reclaimed back as the case may be.

The tax statutes provide various tax incentives to the different industries ostensibly with a view to encouraging or enhancing the particular industry for the enhancement of the country’s resources or abilities to compete effectively not only in the region but also in the international arena.

For example, the tourism industry is crucial in the generation of the much required foreign exchange.

Therefore, the tax statutes allow for the construction of a hotel, presumably for the use in accommodating tourists, without any taxes being levied.

Indeed, the tax laws also allow the waiver of any applicable taxes on the importation or local purchase of equipment to be installed in the hotel.

In the education sector, the tax laws also allow the non payment of taxes that would otherwise be applicable on the construction of a private university.

The education sector is obviously extremely critical to our country, especially taking into account the fact that most of the secondary school graduands are not able to obtain space in the available public universities.

Similarly, like hotel owners, the tax statutes allow the recovery of such remaining balance of the construction of the educational institution within two years from the tax profits of the company, thus ensuring that the owners recoup their initial investment in the shortest time possible.

The housing sector is also an issue of concern in the country.

However, did you know that on the construction of more than twenty five houses, the tax statutes allow such construction to be undertaken without taxation, subject obviously to some specific conditions?

The housing industry is one of the fast growing industries, with the main objective being to make housing affordable to every Kenyan, especially the middle and lower income earners, who I believe would appreciate any reduction on the purchase price of the houses through the removal of taxes on the construction costs.

A review of the available incentives actually shows that each taxpayer is entitled to some deduction, and the big question is whether whatever you are doing can lead to some tax savings through these available incentives.

Whether you are an employee, an employer, an investor, a capital provider or insurer, there is an incentive available to you, which you most probably are not aware about, and for which you are losing money.

A candid discussion with a tax consultant aware about these incentives could lead to huge savings that you will not mind making your returns next time they are due, because most probably you will be seeking a refund of tax.

kthuo@vivafricaltd.com