Kenya Info
Joined: 23 Feb 2007
Posts: 15
Home Country: kenya
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 Posted: Tue Mar 13, 2007 9:21 am Post subject: DOING BUSINESS IN KENYA / KENYA BUSINESS GUIDE |
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DOING BUSINESS IN KENYA
STARTING A BUSINESS
STANDARDIZED COMPANY
Legal Form: Private Corporation
Minimum Capital Requirement: 0
City: Nairobi
Registration Requirements:
Procedure 1. Obtain approval for the company name from the Registrar of Companies
Time to complete: 3 days
Cost to complete: KES 100 per name reservation
Comment: The reservation lasts 30 days but can be renewed for a similar period.
Procedure 2. Stamp the Memorandum and Articles and a Statement of the Nominal Capital
Time to complete: 14 days
Cost to complete: 1% of nominal capital + KES 2,005, stamp duty on Memorandum and Articles of Association
Comment: With effect from 1st January 2005 the Kenya Revenue Authority (KRA) took over the collection of stamp duty from the Ministry of Lands and Housing. As an administrative requirement the KRA now requires the Personal Identification Numbers of the parties on whose behalf documents to be stamped with duty are submitted. Documents have to be first assessed by the stamp duty office before payment can be processed by the KRA's specified banks. The process has lengthened to about 2 weeks as the Stamp Duty office has to receive confirmation of payment from the bank after clearance of funds. Bank handling charges of Shs 100 per transaction are also payable.
Procedure 3*. Pay stamp duty at bank
Time to complete: 1 day (included in the previous procedure)
Cost to complete: KES 100 bank commission
Procedure 4. Declaration of Compliance (Form 208) is signed before a Commissioner of Oaths / notary public
Time to complete: 1 day
Cost to complete: KES 200
Comment: The Advocate incorporating is required to sign a Company Form 208 which accompanies the documents to be submitted to the Registrar of Companies. This form is a Declaration of Compliance with the requirements of the Companies Act.
Procedure 5. File deed and details with the Registrar of Companies at the Attorney General's Chambers in Nairobi
Time to complete: 21 days
Cost to complete: see comments
Comment: Submit stamped Memorandum and Articles of Association, particulars of directors and secretary (Form 201), statement of capital, notice of proposed registered office (Form 203), declaration of compliance (Form 208) and the prescribed registration fees. Registration fees are: Kshs2,200 for the first Kshs100,000 and Kshs120 for every Kshs20,000 after the first Kshs.100,000 subject to a maximum of Kshs.60,000. Filing fee for 3 forms is Kshs.600. It takes 20-25 days to get the approval.
Procedure 6. Register with the Tax Department for a PIN
Time to complete: 1 day
Cost to complete: no charge
Comment: The PIN is valid also for VAT, PAYE, and local service tax. File certificate of registration and a copy of the Memorandum and Articles of Association.
Procedure 7. Register with the VAT office
Time to complete: 1 day
Cost to complete: no charge
Comment: VAT office is in the Times Tower building.
Procedure 8. Apply for a business permit
Time to complete: 1 day
Cost to complete: see comments
Comment: The fee varies by type of business, number of employees and size of business premise. Fee is payable to Nairobi City Council, Licensing Department. The City Council will issue business permit. Cost: Kshs 5,000 (medium trader, shop or retail service from 5-20 employees and/or premises from 50-300 sqm fair location)
Procedure 9. Apply for a trading / operational license
Time to complete: 7 days
Cost to complete: no charge
Comment: The trade license is free, issued by the Ministry of Trade on production of a copy of the business permit. The requirement for obtaining a trade license from the Ministry is often overlooked because the City Council is enforcing the issue of business permits. Nevertheless, the required for trade licenses is still in the statute.
Procedure 10. Register with the National Social Security Fund (NSSF)
Time to complete: 1 day
Cost to complete: no charge
Comment: NSSF provides the employee with a lump-sum retirement benefit. Historically, the rate of return paid by the State is considerably less than that achieved by private schemes but participation is mandatory. The employer pays a standard contribution of approximately 1% of salary subject to a maximum of Shs.400 per month. One half of the contribution is deductible from the employee's salary. The precise amount of the contribution (where less than the maximum) is determined by reference to salary bands.
Procedure 11. Register with the National Hospital Insurance Fund (NHIF)
Time to complete: 1 day
Cost to complete: no charge
Comment: The employee contributes a fixed sum to the NHIF, which must be deducted by the employer from the employees' salary. The maximum contribution is Shs.320 per month. The contributions are used to offset the costs of medical treatment but they only cover a fraction of actual costs. Hence, most companies put in place medical insurance cover for employees.
Procedure 12. Register for PAYE
Time to complete: 1 day
Cost to complete: no charge
Procedure 13. Make a company seal after a certificate of incorporation has been issued
Time to complete: 2 days
Cost to complete: KES 2500
Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*).
FORMS OF BUSINESS ORGANISATION
The principal forms of business enterprises in Kenya are:
· Limited Company - private or public
· Branch of a foreign company
· Partnership
· Sole Proprietorship
· Joint Venture
· Co-operative Society
Limited Companies
The provisions concerning limited companies are contained in the Kenyan Companies Act of 1962 which is modelled closely on the UK Companies Act 1948 (with amendments).
Limited companies may be public or private. A private company is prohibited from inviting the general public to subscribe for its shares, it cannot have more than 50 members, and its shares are not freely transferable between members. A public company as its name suggests, may offer its shares to the general public. There is no maximum number of members and its shares are freely transferable. Such a company is the equivalent of a corporation in many other countries.
Partnerships
The law relating to partnerships is largely contained in the Partnership Act 1962. A partnership is restricted to a maximum of 20 persons, each of whom is jointly and separately liable for all debts incurred. If these numbers are exceeded the partnership must be registered under the Companies Act. A partnership may be formed by any kind of agreement. This need not be formal but is usually in writing. If the partnership does not trade under the names of the partners, these names must be registered under the Registration of the Business Names Act 1962. Partnership agreements do not have to be filed in any public registry nor do partnership financial statements have to be published. Partnerships are not required by law to appoint auditors although many larger partnerships do so in practice.
The death, resignation or retirement of any individual partner dissolves a partnership unless, as is usual, the partnership agreement provides otherwise.
A limited partnership may be formed. The same maximum number of partners applies but at least one partner must be a general partner who is liable for all the debts of the firm without a limit. A limited partner cannot take part in the management. Limited partnerships are governed by the Limited Partnership Act 1962 and under the Act, are subject to registration with the Registrar of Companies.
Branches of Foreign Companies
A company incorporated outside Kenya may carry on business in Kenya through a branch. In order to establish a branch the following documents and details must be submitted to the Registrar of Companies:
· a certified copy of the company's own Memorandum and Articles of Association or equivalent constitution documents
· a list containing the names, addresses, nationalities and occupation of its directors and company secretary
· a statement of existing mortgages and charges created by the company in Kenya, if any
· the names and addresses of one or more Kenyan residents who are authorised to accept legal notices on the company's behalf
· the address of the company's registered or principal office
Financial statements of a branch must be delivered to the Registrar of Companies. Under the Companies Act, there is no requirement for those financial statements to be audited but, in practice, an audit is usually performed since the tax authorities are reluctant to accept unaudited branch accounts for tax purposes.
Joint Ventures
Joint ventures with Government-owned agencies are encouraged. These may be conducted as a partnership or sometimes as limited companies in which all the parties are shareholders.
TAXATION
The resident corporate income tax rate tax in 2002 was 30%, reduced from 32.5% in 1998, and the rate for branches of foreign companies was 37.5%, down from 40%. The withholding tax on dividends payable to residents was 5%, down from 7.5%. On dividend income and interest income (except on bearer instruments) that is payable to non-residents, the withholding tax rates were 10% and 15%, respectively. These rates may be reduced or eliminated by the terms double tax treaties, which Kenya has with the United Kingdom, Germany, Denmark, Norway, and Sweden, Canada, India and Zambia. In 2002 the capital gains tax had been suspended but there was a compensating tax on companies which paid dividends out of untaxed profits. Various tax incentives are offered to companies which develop and/or operate in export processing zones (EPZs).
Income tax rates on individuals are graduated, rising to a top marginal rate of 30%, down from 35% in 1996. There is also a hospital insurance tax.
Since 1990, a value-added tax (VAT) has been applied to most goods and services. The standard rate was reduced from 16% to 15% as of June 1999, and the reduced rate 13% eliminated except for restaurants and hotel accommodations. Some domestic supplies of power are exempt from VAT. There are also local authority service taxes, and a hospital insurance tax. |
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