Finance Bill 2023 Tax Guide
Kenya Tax Guide
When Kenya attained independence, the structure of statutory tax entailed income, trade, and excise duty. The initial 10 years of independence were mainly spent on enhancing a comprehensive taxation structure. Nevertheless, the government had to take some measures due to the oil crisis for which the government introduced the fiscal reforms. Given the laws dynamic nature, several amendments have been brought in by the government. There are some changes in tax laws and the rates of tax incurred have been brought in.
It is for this reason that dennykins and associates over the years have dedicated their time to ensure that they provide tax advisory, and business advisory services. Dennykins Associates is among the few tax agents in the country, Kenya, with excellent comprehension of the whole concept of taxation. Besides providing support and tax advice, Dennykins also offers bookkeeping and accounting services, penalty remission, filing of income tax returns, filing tax returns, and PAYE.
The Kenya Revenue Authority is the entity vested with the right pf tax collection, assessment, and accounting. There are two key categories of taxes in Kenya, indirect and direct taxes. The direct statutory taxes in Kenya entails collecting and assessing income taxes, which is one of the essential statutory taxes in Kenya. Income tax if further divided into four categories which include Pay as You Eran (PAYE), corporate tax, Value Added Tax, and imported and exported services. On the other hand, the indirect statutory taxes apply on purchase of goods.
Measures of Raising Revenue
The government has outlined many measures to alleviate the crisis of debt, with consolidation of fiscal policies, reforms of policy, strategies for waste reduction, moratorium of debt with external creditors, political answerability is low and attaining the accountability is doubtful if the set policies and reforms are deep enough to anchor the various private interests invested in debt management. Kenya has weak reforms and oversight over management of debt since vital information is inaccessible.
The following are some of the measures the government has put in place to raise revenue:
Income Tax
| Tax measure | Tax implication | Winners | Losers |
| Introduction of WTH (withholding tax) of 5% on gross payment in respect to digital content monetization.
|
Expanding the tax base and harmonize with other professional services that attract 5% WHT
|
– | Content creators on digital platforms |
| Introduction of two new tax bands for PAYE at 32%, a percentage for those earning between 500k to 800k and over 800k at 35%.
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For equity in taxation
|
– | Employees earning over Kshs. 500,000 |
| To lower the upper threshold for turnover tax from Kshs 50 million to 25 million and retain the lower threshold at Kshs 1.0 million and a turnover tax at 3%.
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Increasing the tax base and bring more MSMEs into the tax net.
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– | MSMEs |
| Introduction of WTH at the rate of 5% on payments made to residents with respect to marketing, advertising and sales promotion services.
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Intend to expand the tax base and enhance revenue collection and harmonize taxation and ensure equity for residents and non- residents.
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– | The media and marketing agencies.
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| Tax reliefs of 15% to 5% post-retirement medical fund contributed by employees to a maximum of medical of 5,000 monthly.
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Encourage saving towards medication after retirement. | Pensioners Employees | – |
| Monthly residential rental income rate reduced from 10% to 7.5%.
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To enhance compliance and encourage more landlords to pay rent.
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Tenants and Real estate owners | – |
Excise Duty
| Tax measure | Tax implication | winners | losers |
| Reduced excise duty from 12% to 10% of the excisable value of the fees charged for money transfer services by cellular phone service providers.
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This is to support the digital superhighway pillar of BETA and enhance trade and support mobile money transactions.
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Local money transfer traders, telecommunications, and consumers of money transfer services.
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– |
| Excise duty rate of 25% of excisable value of fees charged on advertisement by all TVs, print media, billboards and radio stations in promotion of alcohol, betting, gaming, lottery and price competition.
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Moral deterrence to discourage consumption of the target products and increased moral societal fabric.
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– | Advertisement/media agencies, local alcohol companies, and betting industries.
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| Excise duty on imported sugar at the rate of ksh 5 per kg excluding sugar imported or purchased locally by registered pharmaceuticals.
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To discourage imports and boost local production and to regulate the amount of sugar intake due to increase in diabetes and other related ailments
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Local cooperatives, local sugar industries, and sugarcane farmers.
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Importers |
| Excise duty on imported furniture at a rate of 45% of the customs value excluding furniture originating from EAC countries
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This to encourage local production.
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Local furniture dealers | Importers |
Value Added Tax
| Tax measure | Tax implication | winners | losers |
| VAT on LPG zero rated
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Suppliers can claim input VAT there by reducing the cost of production and it also encourages clean energy
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Climate change, the environment, and households who consume LPG
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Loggers, cartels, and middlemen. |
| Removal of VAT from aircraft spare parts.
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This is meant to spur growth in the aviation sector and reduce the administrative burden of accessing its VAT exemption.
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Local airlines and dealers in aircraft spare parts.
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– |
| Exported services to remove VAT on exported taxable services.
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This will reduce the cost of exportation and encourage local manufacturing and shifting the focus from imports to exports.
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Local consumers and local manufacturers.
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importers |
| VAT on petroleum products to be at 16%
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To cure the perpetual credit position by oil marketer. However, this will further escalate the already high cost of living.
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– | Consumers |
| Removal of VAT on tea purchased from local factories or tea auction centers.
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Improve cashflows for tea exporters involved in the local value addition.
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Local tea farmers and local tea factories
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Tea importers |
Miscellaneous And Other Acts
| Tax measure | Tax implication | winners | losers |
| TPA to be amended to compel KRA to pay tax refunds within 6 months. Failure to refund, the law to be amended to allow automatic utilization of the amount against current and future tax liabilities of the taxpayers.
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This is good and will deal with the perennial challenge of tax refunds.
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Eligible tax payers | – |
| Introduction of a housing levy payable at 1.5% by employers and employees through amendment of the employment act
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Potential reduction to the disposable income of salaried individuals, providing affordable home financing strategies, providing funds for development of affordable housing and associated social and physical infrastructure, and an additional deduction to the salaried individuals.
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– | Salaried individuals. |
For more information and guidance on tax, reach out to us at www.dennykinsandassociates.com.
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