KENYA Law and Practice Contributed by: Anne Kinyanjui and Loice Erambo, DLA Piper Africa, Kenya (IKM)
Notably, the Government Proceedings Act pro - hibits the exercising of liens over government property. 7.7 Requirements Before Use or Inhabitation For a project to be inhabited, a certificate of practical completion must be issued by a quali - fied architect, and a certificate of occupation must be issued by the relevant county govern - ment. The sale of non-residential premises is subject to VAT under the VAT Act. This position was recently confirmed in the case of National Bank of Kenya Limited v Commissioner of Domestic Taxes (Income Tax Appeal Nos. E155 & 533 of 2020) where the High Court held that Kenya Rev - enue Authority (KRA) was justified in charging VAT on the sale of commercial property since commercial land and buildings are not expressly listed as exempt supplies in the VAT Act. This was a departure from the earlier finding in David Mwangi Ndegwa v KRA [2018] eKLR, where the High Court held that VAT is not payable on the sale or purchase of both residential and non-res - idential premises. The appeal against the finding 8. Tax 8.1 VAT and Sales Tax in the latter case is still pending. 8.2 Mitigation of Tax Liability Large real estate investors mitigate tax liability by: • applying for the development to be declared a special economic zone (SEZ) under the SEZ Act, which has many tax benefits, including reduced corporate taxes and exemption from the payment of CGT on transfers of property
within the SEZ, stamp duty and excise duty. Further, royalties, interest, management fees, professional fees, training fees, consultancy fees, agency or contractual fees paid by an SEZ developer, operator or enterprise to a non-resident person are exempt from tax for the first 10 years of the establishment of the SEZ developer, operator or enterprise; • where possible, acquiring the shares of the landowner instead of purchasing land directly to reduce the stamp duty amount payable by them. However, the seller may be required to pay CGT in such instances (see 2.10 Taxes Applicable to a Transaction ); • investing in special programmes like the AHS, which benefits from various tax incentives; or • taking advantage of any existing statutory tax exemptions. 8.3 Municipal Taxes The landlord or owner is obliged to pay land rates to the relevant county government if the business premises are within an urban area. Ten - ants may contribute towards land rates by way of the payment of service charges. The Valuation for Rating Act exempts some properties in urban areas from the requirement to pay land rates, including churches, burial grounds and charitable institutions. 8.4 Income Tax Withholding for Foreign Investors Withholding Tax (WHT) Foreigners are subject to WHT, which is levied at different rates depending on the category of income earned. The rate also depends on whether the foreigner is a resident or a non-res - ident. WHT is 30% on rental income earned by a non-resident, 15% on dividend and interest income earned by a non-resident, and 20% on professional fees earned by a non-resident.
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