As the financial year draws to a close, Kenyan companies face one of their most important responsibilities — ensuring their tax affairs are in order and fully compliant with the Kenya Revenue Authority (KRA). Strategic tax planning before year-end not only helps avoid unnecessary penalties but also enables businesses to optimise cash flow, reduce tax exposure, and make the most of available incentives. In a constantly evolving regulatory environment shaped by initiatives like eTIMS, digital tax systems, and KRA’s enhanced compliance focus, proactive year-end preparation is no longer optional — it’s a critical part of smart financial management.
Whether your business is large or small, understanding how to legally manage timing of income, deductible expenses, and compliance documentation can significantly impact your company’s bottom line. This article outlines 10 practical, KRA-compliant tax planning moves that every Kenyan company should consider before closing the year — helping you stay compliant, efficient, and financially healthy as you head into the next fiscal cycle.
Before we dive into the detailed strategies, here’s a quick summary of three must-do actions that can make an immediate impact as you wrap up the year:
Reconcile and Review Early: Don’t wait until the last minute — review your books, instalment tax payments, and eTIMS invoices now to fix any inconsistencies.
Maximise Allowable Deductions: Claim capital allowances, clear prepayments, and ensure all deductible expenses are well-documented and KRA-compliant.
Plan Strategically for Next Year: Use insights from this year’s tax performance to forecast next year’s cash flow and plan instalment taxes in advance.
In the next section, we break down 10 powerful, KRA-compliant tax planning moves designed specifically for Kenyan companies. Each step helps you tighten financial controls, maximise legal deductions, and reduce the risk of costly penalties — all while positioning your business for a stronger start in the new financial year.
One of the first things any Kenyan company must be clear about is its accounting period, because the timelines for tax filings, payments and planning revolve around it. Under Kenyan law, companies can determine their own financial year-end (so long as it is a 12-month period) but changes must often get approval from KRA.
For most companies the year-end is December 31, meaning much of your year-end planning happens in the last quarter of the year.
Why this matters: recognising income or expenses in the right accounting period affects your taxable profit and therefore your corporate tax liability. And having accurate timing means you avoid surprises or penalty risk.
Key deadlines under KRA include:
Instalment tax payments are due on the 20th day of the 4th, 6th, 9th and 12th month of your financial year.
The balance of tax (i.e., remainder after instalments) must be paid by the last day of the 4th month after the end of your year of income. For a December 31 year-end, that means 30 April the following year.
So, as you move into the year-end closure phase you should confirm your accounting period, map the deadlines, and plan accordingly.
In Kenya, companies don’t wait until the year is over to pay all their corporate tax. They must make instalment payments during the year — this is a form of pre-payment of tax. The rule is that instalment tax is based on the higher of: (1) 110% of last year’s tax liability or (2) estimated current year profits.
These instalment payments are due on the 20th day of the 4th, 6th, 9th and 12th month of the accounting period. For companies in e.g. Jan-Dec year, that is 20 April, 20 June, 20 Sept, 20 Dec. If your company is agricultural, the instalment schedule is a little different: 75% by the 9th month, 25% by the 12th month.
Year-end planning step: before the year ends, estimate your likely full year profit and hence tax—and compare it with the instalments you have already paid. If you are likely to owe significantly more, consider accelerating deductible expenses or deferring income (where legitimately possible) so you don’t have an unexpectedly large payment at 30 April.
For Kenyan companies, claiming capital allowances (depreciation for tax) is a key planning move. The law allows companies to deduct allowance on plant & equipment, buildings etc as per the Second Schedule of the Income Tax Act (Cap 470) (Kenya).
What to do before year-end:
Update your Fixed Asset Register (FAR): list all additions during the year, any disposals/sales or retirements.
Ensure you have supporting invoices and records for any new asset purchases.
Re-calculate depreciation/capital allowance properly for the year.
For items disposed of, remove from the register and adjust gain/loss accordingly.
Optionally accelerate acquisition of deductible assets (if cash flow allows) before year-end to claim a full year allowance.
Ensure physical verification of major assets, and reconcile the register with your general ledger and financial statements.
By doing this, you maximise the amount you can deduct or claim, which lowers taxable profit and therefore your tax liability.
Companies that hold inventory or have prepayments and accruals need to close their books diligently before year-end. This aligns with accounting standards (IFRS for SMEs) and ensures your tax return reflects the correct economic position.
Conduct a physical stock count of inventory, raw materials, work-in-progress and finished goods.
Adjust for obsolete stock, damaged stock, or slow-moving inventory.
Review and record prepayments (e.g., insurance paid in advance, rent paid for next period) and accrue for expenses incurred but not yet invoiced.
Make sure all costs attributable to the current year are recorded, and revenue belonging to this year is captured.
Clean up and reconcile debtors (receivables) and creditors (payables) so your movable part of working capital is accurate.
Accurate working capital numbers help prevent surprises and ensure your taxable profit (and tax) is correctly calculated.
In Kenya’s evolving tax environment, the role of the eTIMS (Electronic Tax Invoice Management System) is becoming increasingly important. From 1 September 2023 all businesses must issue electronic tax invoices via eTIMS, and from 1 January 2024 any business expense without a valid eTIMS invoice will not be deductible (unless specific exceptions apply).
What you should check:
Confirm all your major expenses (rent, utilities, purchase of goods, professional fees) have invoices issued via eTIMS where applicable.
Ensure you are registered in eTIMS and your suppliers are also compliant.
Ensure your accounting system can integrate or at least upload invoices to eTIMS.
Keep your expense ledger and invoice records aligned – missing invoices may lead to tax-deduction disallowances.
Review and clear any un-documented expenses by year-end (either obtain proper invoices, or defer/postpone the expense to next period if no invoice).
Confirm that you have captured all possible deductible expenses before closing the year, e.g., employee training, maintenance, lease payments etc.
Proper documentation ensures you legitimately reduce taxable profit and avoid KRA queries or disallowances of deductions.
Before year-end it’s important to reconcile your ledger with your tax records and make sure you are in a position to claim any credits. Some key items:
Receivables (Debtors): Review aged-receivables, follow up overdue amounts, consider writing off irrecoverable debts (which may allow a deduction if criteria are met).
Payables (Creditors): Make sure you include invoices or accruals for goods/services received before year-end—even if not yet invoiced—to match expense to correct year.
Withholding Tax (WHT) Certificates: When a client withholds tax on your income, they issue a WHT certificate. You can claim that as a credit in your annual tax return. If certificates are missing, you may lose the credit.
By reconciling these items now you avoid last-minute surprises, strengthen your audit trail, and ensure your tax return (and tax payable) is solid.
There are various tax incentives and reliefs under Kenyan tax law that companies can benefit from—but you need to be aware of them and ensure you have the documentation. Some examples:
Reduced corporate tax rates or reliefs for certain sectors (e.g., manufacturing, export processing zones).
Claiming capital allowances, loss carry-forward, or tax credits where applicable.
Ensuring you are registered and meet any requirements to benefit from incentives (for example, being in an export-processing zone).
Timing your qualifying expenditure before year-end to unlock relief in the current year.
As year-end approaches, review whether your company is eligible for any such incentives and whether you can take action this year to claim them (e.g., accelerate qualifying expenditure, apply for zone status, etc.). Leveraging these can reduce your effective tax rate or tax liability.
Sometimes it may make sense for your company to change its accounting year-end to align with business cycles or tax planning. In Kenya, companies can apply to the Commissioner of KRA to change their year-end. Under recent proposals, if KRA delays for six months in approving the change, the change may be automatically approved—but you still need to apply and justify the change.
Timing strategies before year-end:
Accelerate expenses (purchase of equipment, repairs, professional fees) into the current year if it will reduce taxable profit this year, and nothing prevents that.
Defer income if legitimately possible into next year (provided this meets accounting and tax rules) so you shift some tax liability to next year (assuming profits may be lower or you expect lower tax rate).
Review whether closing the year earlier or later better aligns with business seasonality (e.g., busy period ends in March vs December). Changing year-end might help smooth tax burdens.
Be cautious: the timing strategies must still respect the law (you cannot artificially defer income or accelerate expenses simply for tax avoidance). But legitimate timing decisions are part of good tax planning.
No tax-planning exercise is complete without ensuring compliance is fully covered. For Kenyan companies, failure to meet deadlines or meet KRA requirements can lead to significant penalties. For instance:
Late filing of the corporate tax return may attract a penalty (for example, a minimum of 5% of tax due or KSh 20,000, whichever is higher) and interest on unpaid amounts.
Missing instalment tax payments or paying less than required may trigger interest and penalties.
Expenses without compliant invoices (eTIMS) may be disallowed, increasing taxable profit and thus tax liability.
Poor record-keeping may trigger audits or increased scrutiny by KRA.
Pre-year-end checklist:
Ensure all instalment payments for the year are paid and reconciled.
Confirm that your accounting books tie to your tax return — fixed assets, inventory, receivables/payables, etc.
Verify all required invoices and documentation (eTIMS compliant) are present.
Prepare for audit or review: ensure your financial statements will be audited (if applicable) and reflect the true position.
File any outstanding returns, WHT certificates and reconcile your tax accounts via iTax.
By doing this you reduce your risk of KRA penalties and ensure your tax planning stands on solid compliance ground.
Year-end should not just be about closing the books for this year—it’s also the launching pad for planning the next tax year. Some forward-looking moves:
Prepare a tax budget: estimate tax liabilities for next year given expected profit, new assets, incentives, etc.
Align your cash-flow planning: ensure you have funds for instalment tax payments, and the balance tax by year-end of the next year.
Enhance your internal controls and accounting systems: integrate eTIMS, streamline invoice capture, ensure you’ll be ready for tax filings and possibly audits.
Map out performance vs previous year: if you expect higher profit, plan to possibly accelerate deductions; if lower, plan accordingly.
Engage with your tax advisor/accountant early in the new year to ensure tax planning is built into your business strategy, not just as a year-end afterthought.
By turning year-end into a strategic moment, you embed tax planning into your business rhythm and gain more control over your tax outcomes.
For resident companies, the standard corporate income tax rate is 30% of taxable profit. For non-resident companies with a permanent establishment in Kenya, the tax rate may vary.
A company must file its annual self-assessment tax return within six months after the end of its accounting/income year. For a December 31 year-end, that means by 30 June the next year.
Yes. A company can apply to change its accounting year-end, subject to approval by KRA. Recent proposals suggest that if KRA does not respond within six months the change may be automatically approved. Changing year-end may support tax planning, but must be properly done and justified.
If you miss your instalment tax payments by the due dates (20th of the 4th, 6th, 9th and 12th months), you risk interest and penalties when reconciling at year-end. It also affects your cash-flow planning.
From 1 January 2024, businesses in Kenya risk deduction disallowance for expenses that don’t have valid electronic tax invoices under the eTIMS system, unless a specific exception applies. So it’s critical to ensure your invoices are compliant and captured.
There are a number of incentives such as tax reliefs for export processing zone enterprises, capital allowances for qualifying assets, and sector-specific reduced rates. For example, an EPZ enterprise may be exempt from corporation tax for a certain period. Ensure you meet the eligibility requirements and have the documentation to claim them.
As your company nears its year-end, making use of the above 10 tax-planning moves will help you optimise your tax position, improve cash-flow management, and stay fully compliant with KRA. Good tax planning isn’t about avoidance—it’s about smart structuring, timely actions, and proper documentation so your business is in the best shape as you close the year and start the next one.
Partner with Spondoo Kenya — the experts in corporate accounting, KRA compliance, and strategic tax planning for Kenyan businesses.
Whether you need help reconciling your instalment tax, preparing eTIMS-ready invoices, or structuring your year-end close, Spondoo’s experienced advisors are ready to help you stay compliant and maximise your tax efficiency.
👉 Contact Spondoo Kenya today for personalised year-end tax planning and accounting support:
📩 Email: supportteam@spondoo.ke
🌐 Website: www.spondoo.ke