KPMG on Kenya Taxes in 2020

Last month, Kenya’s President announced proposals to cushion residents from impacts of the Coronavirus that has affected many industries and companies by disrupting supply chains and reducing consumer spending. He cited measures such as reduction of income taxes, and Value-Added Tax (VAT goes down from 16% to 14%), that have now taken root in April 2020.

But the details of the proposal are now clear with the publication of the tax laws amendments. They are contained in a 97-page bill that is to be tabled at and debated at a special session of Kenya’s National Assembly (Parliament) on Wednesday, April 8, for their approval.

KPMG East Africa has nicely summarized some of the proposals in the bill, picking through the details. Some notable items are:

  • VAT: Items that were previously exempt including bread, milk cream, vaccines, and medicaments, move from the zero list to the VAT exempt list, and this may push up their costs.
  • Items that previously did not incur VAT but which will now be charged 14% include agricultural pest control products, tourism park fees, LPG, helicopters, mosquito nets, equipment for solar & wind energy, museum exhibits & specimens, tractors, clean cookstoves, insurance services, and helicopter leasing which previously did not attract VAT.
  • For investors: VAT is now charged on the transfer of a business as a going concern, as well as on assets transfers to real estate investment trusts (REIT’s) and asset-backed securities.
  • Income tax: Is reduced across different bands with those earning below Kshs 24,000 per month exempted from paying income tax, while the tax rate for top earners goes down from 30% to 25%.
  • Non-residents will pay 15% withholding tax on dividends they receive, an increase from the current 10%.
  • Corporate tax: This reduces from 30% to 25%.
  • Businesses earning between Kshs 500,000 to Kshs 50 million a year are to pay turnover tax, which will now be reduced from 3% to 1% of income, monthly. The previous upper limit was Kshs 5 million.
    It is now mandatory for businesses to keep records of all their transaction for 5 years
  • Anti-industry moves?: An electricity rebate for manufacturers has been ended, VAT has been introduced on goods used to build large industrial parks, and there will also be reductions of building investment allowances.
  • Kenya Revenue Authority: When KRA appoints banks as revenue collection agents, they are to remit collections to the Central Bank of Kenya within two days.
  • Removes a requirement that KRA publishes tax rulings in newspapers.
  • KRA may pay rewards of up to Kshs 500,000 for people who give information leading to tax law enforcement (i.e whistleblowers). 

The National Assembly will also consider regulations of a new Covid-19 Emergency Response Fund that the President announced on March 30. They will also dispense with appointments to the CDF board and the Teachers Service Commission, and consider any bills from the Senate.

So while Parliament debates this under the rush of emergency provisions, most of the clauses are financial items unrelated to Coronavirus.

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