Business Deductions in Kenya: What You Can Deduct and How to Track Them

KRA allows deduction of expenses that are "ordinary and necessary" for your business. "Ordinary" means expenses typical for your business type. "Necessary" means the expense helps generate business income. A clothing retailer can deduct inventory purchases (ordinary, necessary). They cannot deduct a personal vacation (not ordinary for business, not necessary to generate income). A transport business can deduct fuel and vehicle maintenance (ordinary, necessary). They cannot deduct personal groceries (not business-related).

The key test is: did this expense directly help my business earn income? If yes, it's likely deductible. If no, it's likely personal. The rule is intentionally simple so you can apply it. The catch: you must prove it with documentation. A KES 50,000 "miscellaneous expense" with no receipt is not deductible. A KES 50,000 inventory purchase with a supplier invoice is deductible. Proof is what separates allowable deductions from denied ones.

KRA publishes official guidance on deductible expenses for different business types. Use it. If you run a retail shop, there's a list of allowed deductions. If you run a salon, there's a list. Following the official list reduces audit risk to near-zero. The expenses in this guide are the most common deductions across business types-if your expense isn't on this list, check KRA's published guidance or ask your accountant.

Here are all the major deductible expense categories, how to track each, and documentation requirements.

1. 1

   Cost of Goods Sold (COGS) / Inventory

   Deductible: 100%. This is the cost of stock you sell: purchase price of goods, freight to your shop, import duties. If you buy inventory for KES 100,000 and sell it for KES 150,000, you deduct the KES 100,000 cost (and report KES 50,000 profit). Documentation: supplier invoices, purchase receipts, import documents. Tracking: use Veira or inventory system to log each purchase. Pro tip: COGS is the biggest deduction for most retailers (often 50-70% of revenue), but most traders don't claim it because they don't track purchases. Start tracking today.

2. 2

   Salaries & Wages

   Deductible: 100%. Salaries you pay employees, your own salary (if sole trader, you pay yourself and deduct as salary to reduce personal tax), PAYE contributions. Documentation: payroll records, bank statements (salary transfers), PAYE return to KRA. Tracking: log each salary payment in Veira or payroll system. Pro tip: paying yourself a fair salary as a business owner reduces tax because salary is deductible while dividends are not (for companies).

3. 3

   Rent & Lease Payments

   Deductible: 100%. Rent for business premises (shop, office, warehouse). Documentation: tenancy agreement, rental receipts or bank transfer confirmations. Tracking: log monthly rent in Veira (easy, since it's the same every month). Non-deductible: personal home rent; if you work from home, you can only deduct a percentage (workspace %), not the whole rent.

4. 4

   Utilities (Electricity, Water, Internet)

   Deductible: 100% (or percentage if home-based). Electricity, water, internet for business premises. Documentation: utility bills in the business name. Tracking: log bills in Veira. For home-based businesses: estimate the percentage of your home used for business (e.g., 20% if a room is office) and deduct only that percentage.

5. 5

   Repairs & Maintenance

   Deductible: 100%. Repairs to business property, equipment, vehicles (business-only vehicles). Maintenance costs. Documentation: invoices from repair service, receipts. Tracking: log in Veira. Important: repairs are immediately deductible; improvements (upgrades) are capitalized (depreciated over years). A KES 10,000 vehicle oil change is deductible. A KES 500,000 engine rebuild is capitalized.

6. 6

   Depreciation & Capital Allowances

   Deductible: Percentage per year (varies by asset type). KRA allows you to deduct the annual decline in value of assets: vehicles (20%), equipment (10-37%), buildings (4%), etc. Example: buy a KES 500,000 vehicle, deduct KES 100,000 annually (20% rate) for 5+ years. Documentation: asset register (list of assets, purchase date, cost, depreciation rate). Tracking: log purchases in Veira or asset tracker; automatically calculates depreciation. This is 100% legal and is how profitable businesses pay near-zero tax while reinvesting.

7. 7

   Vehicle & Transport Expenses

   Deductible: Fuel, maintenance, insurance, parking, tolls (business vehicles only). Non-deductible: personal vehicle expenses. Documentation: fuel receipts, maintenance invoices, insurance policies (business vehicles section). Tracking: keep a vehicle log or track via Veira, noting business vs. personal miles. For business vehicles (e.g., delivery truck), all expenses are deductible. For personal vehicles used partially for business, only business-use percentage is deductible.

8. 8

   Professional Services

   Deductible: 100%. Accounting, legal, consulting fees. Documentation: invoices from professionals. Tracking: log in Veira. Pro tip: hiring an accountant costs KES 20,000/year but saves KES 100,000+ in tax optimization. It's a smart investment.

9. 9

   Advertising & Marketing

   Deductible: 100%. Ads, social media marketing, brochures, signs, sponsorships (if business-related). Documentation: invoices from agencies, receipts for materials. Tracking: log in Veira. Pro tip: content creation for Instagram, Google Ads spend, and branded merchandise are all deductible.

10. 10

    Insurance

    Deductible: 100% (business policies only). Business liability, vehicle insurance (business vehicles), property insurance (shop/office). Non-deductible: personal health insurance, personal car insurance. Documentation: insurance policies, premium receipts. Tracking: log annual premiums in Veira.

11. 11

    Office Supplies & Materials

    Deductible: 100%. Stationery, ink, paper, files, folders, cleaning supplies for office. Documentation: receipts from office supply vendors. Tracking: log in Veira (usually small amounts, so group under "office supplies").

12. 12

    Software, Subscriptions & Technology

    Deductible: 100%. Accounting software (Veira, QuickBooks), email, hosting, apps, phones/plans (business use %). Documentation: subscription invoices, receipts. Tracking: log in Veira. For personal devices with business use, estimate the percentage of business use and deduct only that percentage.

13. 13

    Training & Professional Development

    Deductible: 100%. Courses, certifications, workshops for you and employees (business-related). Documentation: course receipts, certificates. Tracking: log in Veira. Pro tip: a KES 30,000 business course is deductible if it improves your business skills.

14. 14

    Interest on Business Loans

    Deductible: 100%. Interest paid on loans used for business (not personal loans). Documentation: loan agreement, payment records. Tracking: log annual interest paid in Veira. Principal repayment is not deductible (it's asset repayment), only interest is.

15. 15

    Bank & Transaction Fees

    Deductible: 100%. Bank fees, mobile money charges, payment processing fees, loan origination fees. Documentation: bank statements. Tracking: log in Veira (usually auto-tracked if using bank import).

Veira categorizes every business expense you enter (or import from your bank account) into standard deduction categories: COGS, salaries, rent, utilities, repairs, depreciation, etc. At year-end, Veira shows your total deductible expenses by category, exactly as KRA wants to see them. You know exactly what you can claim.

Veira's depreciation tracker logs equipment, vehicles, and buildings, and automatically calculates annual depreciation based on KRA rates. You never have to manually calculate depreciation-Veira does it. At year-end, Veira shows your total depreciation deduction for the year.

Veira generates a year-end tax summary (P&L statement) showing: gross revenue, total COGS, gross profit, operating expenses by category, depreciation, taxable income, and estimated tax. This summary is audit-proof because every number is backed by documented expenses. Your accountant uses this to file your return with zero fear of audit.