Principles.of taxation kasneb past paper
AD24 Page 1
Out of 10
ACCOUNTING TECHNICIAN DIPLOMA (ATD)
LEVEL II
PRINCIPLES OF TAXATION
TUESDAY: 21 April 2026. Afternoon Paper. Time Allowed: 3 hours.
This paper consists of fifty (50) Multiple Choice Questions. Answer ALL questions by indicating the letter
(A, B, C or D) that represents the correct answer. Each question is allocated two (2) marks.
RATES OF TAX (For employment income including wife’s employment, self-employment and professional income). Year of income
2025. Assume the following rates of tax applied throughout the year of income 2025:
Monthly taxable pay
Annual taxable pay
Rate of tax
(Sh.)
(Sh.)
% in each Sh.
1
-
24,000
1
-
288,000
10%
24,001
-
32,333
288,001
-
388,000
25%
32,334
-
500,000
388,001
-
6,000,000
30%
500,001
-
800,000
6,000,001
-
9,600,000
32.5%
Excess over
800,000
Excess over
9,600,000
35%
Personal relief Sh.2,400 per month (Sh.28,800 per annum).
Investment allowance:
Capital expenditure incurred on:
Rate of investment allowance
Residual value
(25% per year on
equal
instalments)
Prescribed benefit rates of motor vehicles
provided by employer
(i) Saloons, Hatch Backs and Estates
Monthly Annual
rates rates
(Sh.) (Sh.)
(a) Buildings:
• Hotel building
• Building used for manufacture
• Hospital buildings
• Petroleum or gas storage facilities
• Educational/hostels building
• Commercial building
50% in the first year of use
50% in the first year of use
50% in the first year of use
50% in the first year of use
10% per year on straight line basis
10% per year on straight line basis
25%
25%
25%
25%
Up to
1201 -
1501 -
1751 -
2001 -
Over -
1200 cc
1500 cc
1750 cc
2000 cc
3000 cc
3000 cc
3,600
4,200
5,800
7,200
8,600
114,400
43,200
50,400
69,600
86,400
103,200
172,800
(b) Machinery:
• Machinery used for manufacture
• Hospital equipment
• Ships or aircraft
• Motor vehicles and heavy earth
moving equipment
• Computer software, calculators,
copiers and duplicating machines
• Furniture and fittings
• Telecommunication equipment
• Film equipment by a local producer
• Machinery used to undertake
operations under prospecting rights
and exploration under mining rights
• Other machinery
50% in the first year of use
50% in the first year of use
50% in the first year of use
25% per year on straight line basis
25% per year on straight line basis
10% per year on straight line basis
10% per year on straight line basis
25% per year on straight line basis
50% in the first year of use
10% per year on straight line basis
25%
25%
25%
25%
(ii) Pick-ups, Panel Vans (unconverted
Up to - 1750 cc
Over 1750 cc
(iii) Land Rovers/Cruisers
3,600
4,200
7,200
43,200
50,400
86,400
(c) Purchase/acquisition of right to use
fibre optic cable by telecommunication
operation
10% per year on straight line basis
(d) Farm works
50% in the first year of use
25%
(e) Special Economic Zone (SEZ)
100% investment allowance
Commissioner’s prescribed benefit rates:
Services
(i) Electricity Communal or from a generator
(ii) Water (Communal or from a borehole)
Annual rates
Sh.
1,500
500
Monthly rates
Sh.
18,000
6,000
Agriculture employees: Reduced rates of benefits
(i) Water
200
2,400
(ii) Electricity
900
10,800
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AD24 Page 2
Out of 10
1. Which one of the following definitions of tax is the BEST? It is a ___________________.
A. voluntary payment made to a private organisation
B. compulsory levy imposed by government to raise revenue
C. price charged by a trader for goods and services
D. fine imposed only after conviction in court (2 marks)
2. Which one of the following statements is a purpose of taxation in Kenya?
A. To eliminate all imports permanently
B. To abolish government borrowing automatically
C. To replace accounting standards
D. To finance public expenditure and provide public goods and services (2 marks)
3. Which one of the following principles of taxation is BEST described as certainty?
A. The tax payable should be clear, definite and not arbitrary
B. Taxpayers should pay tax at the time and in the manner most convenient
C. Tax should encourage only all sector of the economy
D. Tax should be collected in cash and through bank (2 marks)
4. A tax system is progressive when the rate of tax ________________________.
A. decreases as the tax base increases
B. is constant for all taxpayers
C. increases as the tax base increases
D. depends on the quantity imported (2 marks)
5. Which one of the following statements BEST describes tax impact?
A. The person who ultimately bears the burden of the tax after shifting
B. The amount of tax withheld at source
C. The process of filing returns on iTax
D. The person on whom the tax is first imposed by law (2 marks)
6. Forward shifting of tax occurs when the ______________________.
A. tax burden is passed from the producer to the consumer through higher prices
B. producer bears the tax burden due to inelastic demand
C. tax burden is transferred by retailers to producer through lower supply prices
D. tax is shifted from one country to another country (2 marks)
7. Which one of the following statements is a statutory deduction from employment income?
A. Dividends received from a resident company
B. National Social Security Fund contributions
C. Gross rent received from residential property
D. Capital gains on sale of land (2 marks)
8. Which one of the following benefits is a non-cash benefit that may arise from employment?
A. Basic salary
B. Reimbursement of business travel supported by receipts
C. Overtime payment
D. Use of an employer’s motor vehicle for private purposes (2 marks)
AD24 Page 3
Out of 10
9. Which one of the following statements is an advantage of withholding tax?
A. It increases tax evasion
B. It eliminates the need to keep records
C. It improves collection by taxing income at source
D. It applies only to exempt income (2 marks)
10. Which one of the following statements is an obligation of a VAT registered person under the Value Added Tax Act,
2013?
A. To charge VAT on exempt supplies
B. To pay VAT for all suppliers
C. To file customs entries for local purchases
D. To keep proper VAT records and submit VAT returns as required (2 marks)
11. A zero-rated supply for Value Added Tax (VAT) purposes means that _________________________.
A. VAT is charged at 0% and input VAT relating to the supply is claimable
B. VAT is not charged and input VAT is not claimable
C. VAT is charged at 16% and input VAT is not claimable
D. VAT is charged at 16% and input VAT is claimable (2 marks)
12. Under the East African Community Customs Management Act, 2017, which one of the following documents
primarily evidences shipment of goods by sea?
A. Bill of lading
B. PIN certificate
C. Bill of payment
D. Tax compliance certificate (2 marks)
13. Which one of the following statements BEST describes restricted goods under customs control?
A. Goods that are not subject to customs control and can be imported any time
B. Goods that are exempt from all taxes
C. Goods that must always be destroyed upon entry under custom supervision
D. Goods whose importation or exportation is allowed only subject to specified conditions (2 marks)
14. Under the Tax Procedures Act (Cap. 469B), which one of the following statements is a function or power of the
Commissioner in tax administration?
A. To set taxation standards for companies
B. To make assessments and administer tax laws as provided under the law
C. To approve all county levies as and when necessary
D. To determine employment contracts and tax payable (2 marks)
15. Electronic Tax Invoice requirements in Kenya are anchored on ____________________.
A. Electronic Tax Invoice Regulations, 2020
B. Public Finance Management Act, 2012
C. The Customs and Excise Duty Act
D. Public Procurement and Asset Disposal Act, 2015 (2 marks)
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End of Document
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