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CPA Public Finance and Taxation – April 2026 Past Paper & Answers

Unit: Public Finance and Taxation

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Questions

Download CPA Public Finance and Taxation April 2026 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

Access the full paper online, download the PDF, or study offline. Each question includes step-by-step solutions to help you understand key concepts in Public Finance and Taxation.

Other Public Finance and Taxation Past Papers

1a
Introduction to Public Financial Management
​​Outline FOUR fiscal responsibility principles applicable in management of public finances as provided under Regulation 26 of the Public Finance Management Regulations, 2015.
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1b
Introduction to Public Financial Management
​​In a Public Finance Seminar, one of the facilitators noted that “there are certain types of information that must be included in the Budget Policy Statement (BPS) as per Section 25(4) of the Public Finance Management Act, 2012”.

With reference to the above statement, identify FOUR types of information that should be included in the BPS.

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1c
Introduction to Public Financial Management
​​Analyse TWO circumstances under which money may be withdrawn from the Consolidated Fund as provided under Article 206(2) of the Constitution of Kenya.
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1d
Relationship between National and County Governments on budget and economic matters
​​Explain FOUR factors, other than the needs of the National Government, that are considered while determining the equitable share of revenue as provided under Article 203 of the Constitution of Kenya.
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2a
Public Private Partnerships Arrangements
​​Describe FOUR functions of the Directorate of Public Private Partnerships as provided under Section 19 of the Public Private Partnerships Act.
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2b
Administration of Income Tax and Tax Procedures
​​With reference to the Tax Procedures Act, analyse THREE circumstances under which the Commissioner is prohibited from issuing a notice to an agent to collect tax from a person owing money to a taxpayer.
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2c
Administration of Value Added Tax (VAT)
​ ​​Beta Ventures Ltd., is a company registered for Value Added Tax (VAT) purposes. The following transactions were recorded for the month of February 2026: 

  1. Local sales of standard-rated goods to registered customers: Sh.18,000,000. 
  2. Exported goods to South Sudan: Sh.3,200,000. 
  3. Sold standard-rated goods worth Sh.1,200,000 to a diplomatic mission in Kenya (exemption provided). 
  4. Purchased raw materials locally for Sh.9,280,000. Suppliers for materials worth Sh.2,320,000 were not registered on e-TIMS. 
  5. Imported a processing machine at import cost of Sh.6,000,000. Import duty was 20% of the import cost. 
  6. An invoice of Sh.580,000 issued to a customer in February 2023 was proved to be a bad debt as the customer was declared bankrupt on 15 February 2026. 
  7. A government agency withheld VAT on purchases made during the month of February amounting to Sh.400,000. 
  8. Legal fees paid: Sh.232,000. 15% of the legal services related to a zero-rated supply project. 
  9. Received a credit note of Sh. 348,000 from a supplier for goods returned on 20 February 2026. 
  10. Paid Sh.600,000 for internet and television broadcasting services provided by a non-resident company for consumption in Kenya, 
  11. Purchased locally consumed teas for staff refreshments at a cost of Sh.58,000. 
  12. Supplied standard-rated goods valued at Sh.3,000,000 to a licensed Export Processing Zone (EPZ) enterprise. 

 Note: All transactions are inclusive of VAT at the rate of 16% where applicable, unless otherwise stated. 

 Required: 
 Compute the VAT payable by or refundable to Beta Ventures Ltd. for the month of February 2026.
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3a
Public Debt Management
​​Examine FOUR objectives of public debt management by the National Government as provided in the Public Finance Management Regulations, 2015.
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3b
Public Private Partnerships Arrangements
​​Citing TWO reasons, justify why a contracting authority might prefer a Public Private Partnership (PPP) arrangement over traditional public procurement for a large-scale project.
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3c
Taxation of Income
​ ​ ​ ​ ​​Vincent Warecha is a senior research scientist at Smart Multinational Ltd. He provided the following information relating to his income for the year 2025:

1.Basic salary: Sh.450,000 per month (monthly PAYE deducted: Sh.135,000).
2.He was provided with a fully furnished house where employer pays monthly rent of Sh.100,000. Furniture cost: Sh.600,000. Vincent Warecha contributes Sh.15,000 per month towards rent.
3.He was assigned a 3500cc saloon car by the employer on 1 July 2025 (Purchased in year 2023 for Sh.3,600,000).
4.Annual medical insurance premium paid by employer Sh.140,000 to approved scheme. The scheme only covers all senior management staff.
5.Monthly entertainment allowance: Sh.30,000. He spent 60% of this on entertaining official business clients.
6.He received performance bonus on 1 October 2025 of Sh.240,000.
7.His monthly pension contribution to a registered pension scheme was Sh.25,000; while employer contribution to the scheme was Sh.30,000 per month.
8.Employer deducted Sh.6,750 per month for the affordable housing levy (AHL) and Sh.12,375 per month for Social Health Insurance Fund (SHIF).
9.Other income includes:
  • Gross dividend from Special Economic Zone (SEZ) Sh.120,000
  • Net Post Office Savings interest Sh.45,000
  • Royalties for a scientific book Sh.380,000
10.Company gave him Sh.100,000 for laboratory utensils used exclusively for official research.
11.He exercised an option to buy 3,000 shares at Sh.80 each while the market value was Sh.150 each
12.Outstanding staff loan provided by the employer of Sh.5,000,000 at 3% interest while the Prescribed interest rate was 10%
13.He paid Sh.20,000 per month to a post-retirement medical fund.
14.He paid Sh.8,000 per month towards his life insurance premium.

Required: 
(i) Compute the total taxable income for Vincent Warecha for the year 2025. 

(ii) Determine the net tax payable (if any) from the income computed in (c) (i) above.  
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4a
Procurement in public entities
​​With reference to the Public Procurement and Asset Disposal Act, 2015, explain the term “citizen contractor”.
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4b
Procurement in public entities
​​Outline FOUR responsibilities of an Inspection and Acceptance Committee as provided under Section 48 of the Public Procurement and Asset Disposal Act, 2015.
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4c
Investment Allowances/deductions
​ ​​Lamek Manufacturing Ltd. is a licensed enterprise in a Special Economic Zone (SEZ). It commenced operations on 1 January 2025 after incurring the following expenditure:

AssetCost (Sh.)
Land15,000,000
Factory building (Note 1)52,000,000
Processing machinery (New)12,400,000
Packaging machine (Second-hand)1,400,000
Delivery van3,200,000
Staff canteen4,500,000
Computers and peripheral hardware1,200,000
Borehole2,600,000
Laboratory implements and utensils (Note 2)250,000
Directors' saloon car (2800cc)4,200,000
Water treatment plant3,800,000

Additional information:
1.Factory building includes a showroom (Sh.2,400,000) and retail shop (Sh.1,800,000).
2.Laboratory implements were employed in the production of gains, but do not constitute machinery or plant.
3.Trading profit: Sh.24,600,000 before deducting:
  • Depreciation Sh.3,200,000
  • General bad debt provision Sh.650,000
  • Legal fees (land) Sh.400,000
  • Political donation Sh.1,000,000
  • Interest on non-resident loan Sh.1,500,000 (Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) was Sh.4,000,000).
4.Profit included: Gross resident dividend Sh.500,000; realised foreign exchange gain Sh.280,000.
5.Directors' car was purchased on 1 July 2025.
6.Construction of a sports facility on public grounds had cost Sh.4,500,000 and was expensed.
7.Sold the delivery van for Sh.2,800,000 on 1 October 2025. Proceeds were credited to sales.

Required: 
(i) Compute investment allowances for the year 2025. 

(ii) Prepare a statement of adjusted taxable profit or loss for 2025.  
 
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5a
Customs Taxes and Excise Taxes
​​Explain the term “ex-factory selling price” as used in the assessment of excise duty on locally manufactured goods citing TWO components included in its determination.
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5b
Administration of Income Tax and Tax Procedures
​​With reference to the Tax Procedures Act, 2015 explain the following:

(i) The rule regarding the computation of time for a taxpayer who intends to lodge an objection to a tax decision.

(ii) TWO obligations of a taxpayer’s tax representative.

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5c
Taxation of Income
​ ​​Wema Retailers is a resident business registered for Turnover Tax (TOT). For the month of December 2025, the

following transactions were extracted from the business records:

  1. Cash sales of general merchandise: Sh.3,800,000.
  2. Credit purchases of goods from a regular wholesaler: Sh.1,200,000.
  3. Rental income from subletting two residential units: Sh.180,000.
  4. Management and consultancy fees received for training services: Sh.250,000.
  5. Net interest received from a fixed deposit account with a local bank: Sh.42,500.
  6. Returns inwards for goods sold during the month: Sh.150,000.
  7. Proceeds from the disposal of a business delivery van: Sh.900,000.

Required:

Compute the turnover tax payable by Wema Retailers for the month of December 2025.  

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5d
Administration of Value Added Tax (VAT)
​​Analyse TWO circumstances under which the Commissioner may cancel the registration of a person for Value Added Tax (VAT) as provided under the Value Added Tax Act.
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5e
Customs Taxes and Excise Taxes
​ ​​Fidel Gaming and Logistics Ltd. provided the following data for the month of February 2026:

  1. A total of Sh.15,000,000 was transferred by customers into their betting wallets for placing wagers. The excise duty rate was 5% of amount deposited.
  2. The company imported ceramic sinks and wash basins with a customs value of Sh.5,000,000. The prevailing export and investment promotion levy was at the rate of 3% for ceramics.
  3. The company imported semi-finished iron and non-alloy steel products with a customs value of Sh.10,000,000. The prevailing export and investment promotion levy was at the rate of; 17.5% for steel.
  4. The company paid Sh.2,000,000 to a non-resident person for digital content monetisation services.

Required:

Compute the following taxes arising from the above transactions for the month of February 2026:

(i)   Excise duty on betting.

(ii)  Export and Investment Promotion Levy for ceramics and steel.

(iii) Withholding tax on digital content monetisation.

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