Corporate tax regulations for SACCOs in Kenya
Corporate tax obligations for Savings and Credit Cooperative Societies (SACCOs) in Kenya are governed by Section 19A of the Income Tax Act. While some SACCOs are exempt from tax, others must comply with specific taxation rules.
SACCOs Exempted from Tax
- Exemption Under the Co-operative Societies Act
- SACCOs exempted from all provisions of the Co-operative Societies Act are not liable to pay corporate tax.
- Commissioner’s Discretion
- SACCOs deemed by the commissioner as bodies corporate conducting business for their own profit, based on factors such as business operations and member numbers, are also exempt.
SACCOs Liable to Pay Tax
- A) Designated Primary Society
- Membership is limited to individual members.
- Chargeable income is calculated as the total income for the year after deducting bonuses and dividends declared and distributed to members.
- B) Designated Cooperative Society (Other than a Designated Primary Society)
- Similar to the primary society, their chargeable income is the total income for the year minus the aggregate bonuses and dividends declared and distributed to members.
- C) Designated Primary Society Operating as a SACCO:
- The total taxable income includes
- 50% of Gross Interest Income from Non-Members
- Only half of the interest income earned from non-members is subject to tax.
- Gross Income from Property Use (Rent)
- Full rental income from property use is taxable.
- Other Taxable Income
- Any other income as specified under the Income Tax Act is included.
- 50% of Gross Interest Income from Non-Members
- This total income is subject to a corporate tax rate of 25%.
- Interest Income from Members
- Exempt from tax; thus, related expenses are not deductible.
- Other Interest Income
- Taxed at 25% of 50% of the income.
- Additional Incomes
- Rents, dividends, capital gains, and commissions (e.g., from money transfer services, insurance agency, and housing schemes to members) are taxed according to specified sources of income under the Income Tax Act.