In Kenya, taxation is the single largest source of government budgetary resources. Over 70 per cent of annual national budget funding comes from local taxes collected by the Kenya Revenue Authority. The Kenyan tax system features corporate and personal income tax, value added tax on goods and services, customs and excise duties, and stamp duty.

There are also a number of statutory levies and social security payments. Corporation tax is a form of income tax that is levied on companies. Resident companies are taxable at a rate of 30 per cent while non-resident companies are taxable at a rate of 37.5 per cent.

Withholding taxes are deducted at source from the following sources of income: interest, dividends, royalties, management or professional fees, commissions, pension or retirement annuity, rent, appearance or performance fees for entertaining, sporting or diverting an audience.

Taxes are collected by self-assessment and by withholding tax on payments to residents and non-residents. Employers are obliged to withhold and account for income tax on employee remuneration and benefits (the PAYE system). Penalties and interest on non-compliance and late payment of taxes are onerous, and the Kenya Revenue Authority conducts regular audits and investigations of taxpayers.