Taxation of Sacco's - The Doctrine of Mutuality

id : 113 Tax Policy   
posted by : Admin
 DOQ : 2023-07-03 18:50:32

It is an established principle that what is not “income” under the income tax law cannot be taxed, and where there is no sale of “goods” or providing and rendering of services between two persons, natural or juridical, there cannot be any indirect taxes (General Sales Tax or Value Added Tax).

The doctrine of MUTUALITY

Trading with self

explicitly provides that for tax purposes a person cannot make a profit out of himself or trade with himself.

activities covered

By extension, this applies where persons carry on any activity, trade or profession in such a way that they and those with whom they deal with are the same persons, the said transaction will not give rise to taxable profits and even for indirect taxes no chargeability will arise.

entities covered

The principle is, thus the basis for exempting certain incorporated and unincorporated bodies, typically mutual insurance companies, societies and clubs.

The doctrine of mutuality

Taxes on income are taxes on moneys or profits generated by a person in their transactions with others. No assessee can generate real income out of himself, which can be taxed. The doctrine of mutuality postulates that when transactions are carried out between people in mutual association with each other, i.e. where they contribute to a common fund for the betterment of the contributors and generate returns therefrom, such returns are not taxable. The exemption granted to a mutual concern is premised on the assumption that the concern is being run for the mutual benefit of the contributors and the contributions made by the members ought to be directed in that direction. The contributions to the mutual concern are held in trust for the benefit of the contributors, and required to be spent accordingly.

You may also like...


tbnv It is an established principle that what is not “income” under the income tax law cannot be


tbnv Knowing the difference is important in getting the right VAT treatment The difference betwee


tbnv Legal notice no 52 of 2002 (LN 52), Income Tax Leasing Rules (2002) gives the guidance on how L



tbnv In January 2016, the International Accounting Standards Board (‘IASB’) issued IFRS 16 repla
tbnv This claim is contained in a court case questioning the government’s double taxation agreemen



The Kenya Revenue Authority has turned its guns on hundreds of Container Freight Stations (CFSs) on
        2024-04-29 21:06:14
-5) OR 834=(SELECT 834 FROM PG_SLEEP(15))--
        2024-04-29 21:06:29

my Views
(0) @2014-2024 All rights reserved
Powered by :