SYS 3
County government revenue: rates, licences, fees and charges
1Scope and legal basis
Article 209(3) of the Constitution lets a county government impose property rates, entertainment taxes and any other tax it is authorised to impose by an Act of Parliament, and Article 209(4) lets both national and county governments charge fees for the services they provide. Article 209(5) limits the power: county taxation and charges may not prejudice national economic policies, economic activities across county boundaries, or the national mobility of goods, services, capital or labour. Counties raise their own-source revenue under an annual County Finance Act passed by the county assembly, within the framework of the Public Finance Management Act 2012, the County Governments Act 2012, the National Rating Act 2024 (which replaced the Rating Act and the Valuation for Rating Act), the Urban Areas and Cities Act, and the County Governments (Revenue Raising Process) Act 2023, which requires a county to consult the National Treasury and the Commission on Revenue Allocation before imposing a new tax, fee or charge.
Own-source revenue is a small share of most counties' budgets (Nairobi, Mombasa, Kiambu and Nakuru raise the most); the balance is the equitable share of national revenue under the annual Division of Revenue Act and County Allocation of Revenue Act, together with conditional grants and donor funds. The KRA collects no county taxes, though it may be contracted to; counties collect their own revenue through their revenue departments and automated systems.
2Key definitions
3Charge, computation and rates
Property rates
- The county prepares a valuation roll (Nairobi's 2019 roll replaced a 1980 roll) listing each rateable property and its value; owners may object to the valuation court or the Rating Tribunal. The rate is a percentage of the unimproved site value (Nairobi charges a percentage of the 2019 site values with minimum amounts), or a flat rate per parcel for agricultural land, set in the County Finance Act.
- Rates are payable annually, typically with an early-payment discount in the first quarter and interest or penalties for arrears; a county may register a charge against the title, refuse consents and clearance certificates, and sue for arrears. Rates clearance certificates are required for a land transfer and for a lease consent.
- Public land used for public purposes, places of worship and some charitable properties are exempt under the Act; national government land occupied for its own purposes attracts a contribution in lieu of rates.
- For income tax, property rates paid on business or rental premises are an allowable expense against business income and against commercial rental income; they are not allowable against residential rental income taxed on gross under the 7.5% regime.
Business permits, cess and other charges
| Revenue stream | How it is charged | Points to note |
|---|---|---|
| Single business permit | Fixed annual fee by category in the County Finance Act (Nairobi's ranges from a few thousand shillings for a kiosk to hundreds of thousands for a large firm), renewed by 31 March | Deductible for income tax as a business expense; trading without one is an offence under county law; some counties issue a unified business permit covering fire, health and advertising |
| Cess on produce and minerals | Per bag, per litre, per tonne or per lorry at the point of exit or at the processor | Constitutionally suspect where it operates as a barrier to inter-county trade; the courts have struck down county 'transit' charges on goods merely passing through |
| Parking | Daily, monthly or annual fees by zone, collected through mobile money and county apps | A fee for a service under Article 209(4), not a tax |
| Outdoor advertising | Annual fee per sign by size and location | Often the second-largest own-source stream in urban counties |
| Health and sanitation, market and slaughterhouse fees | Per visit, per stall, per animal | Fees for services; cost-recovery based |
| Liquor licences | Annual licence by class of outlet under the county alcoholic drinks control Act | Regulatory licence; separate from the national excise duty on the drink itself |
The revenue-raising process and budget cycle
Under the Public Finance Management Act a county's budget cycle runs from the County Integrated Development Plan and the annual County Fiscal Strategy Paper (by 28 February) to the budget estimates (by 30 April), the Appropriation Act and the County Finance Act (by 30 June, or within 90 days of the Appropriation Act), which sets the taxes, fees and charges for the year. The County Governments (Revenue Raising Process) Act 2023 requires public participation, a regulatory impact statement, and consultation with the National Treasury and the Commission on Revenue Allocation for any new or varied tax, fee or charge; the Senate has an oversight role through the County Allocation of Revenue Act. County revenue is paid into the County Revenue Fund, and the Controller of Budget approves withdrawals; the Auditor-General audits county accounts, and the Office of the Controller of Budget reports own-source revenue against target each quarter.
4Compliance: returns, payment and penalties
County revenue is not self-assessed in the national sense; it is demanded and paid on the county's automated revenue system (Nairobi Pay, the Laikipia, Kiambu and Mombasa systems) or through mobile money, and the receipt or permit is the evidence of compliance. Property rates and business permits fall due annually with penalties for late payment set in the County Finance Act (commonly a percentage surcharge and interest, plus refusal of clearances and enforcement by distress or closure of premises). Disputes over valuation go to the Rating Tribunal and over other charges to the county's dispute mechanism and the courts; a challenge to the legality of a county charge (a cess held to be a barrier to trade, a fee imposed without public participation, or a tax outside Article 209(3)) is brought by judicial review or constitutional petition in the High Court. For national tax, county payments are business expenses where they relate to income-earning activity, and county governments themselves are exempt from income tax on their own revenue.
5Examinable focus
What KASNEB tests
Public Finance and Taxation asks for the sources of county revenue (own-source under Article 209(3) and (4), the equitable share under Article 203, conditional grants, borrowing with national guarantee, donor funds), the constitutional limits on county taxation (Article 209(5)) with cess as the example, and how property rates and single business permits work. A short part may ask for the county budget timetable or the role of the Commission on Revenue Allocation, the Controller of Budget and the Senate. Distinguish a tax from a fee for a service, and note which county payments are deductible for income tax.