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.