Kenya: Finance Bill 2024

published on 22 May 2024 | reading time approx. 3 minutes

The Kenyan Finance Bill 2024 (National Assembly Bills No. 30 of 2024) was published on 9 May 2024 and submitted to the National Assembly by the Cabinet Secretary for the National Treasury and Economic Planning. This sets up the stage for delivery of the Budget Statement for the Financial Year 2024/25 to Parliament on 13 June 2024. Parliament already commenced with the First Reading of the Bill a few days ago on 13 May 2024. Currently the Budget and Appropriations Committee of Parliament is undertaking Public Hearings in the counties, and has also set a deadline of 20 May 2024 for submission of written memoranda.

The Bill sets out various amendments to the Income Tax Act (Cap.470), the Value Added Tax Act 2013, the Excise Duty Act, Tax Procedures Act and the Miscellaneous Fees and Levies Act among other related statutes.

In this edition we have outlined the major proposals under the five main tax laws.

Highlights of Tax Proposals

Income Tax Act Highlights	Withholding tax on royalties expressly extended to use and right to softwares including licensing, development, training, maintenance/support fees and software distribution. Digital Service Tax transformed to a withholding tax and will apply to both residents and non-residents. Recognition and taxation of income from the business of supply of goods to public entities shifted to cash basis from accrual basis. Tax free Per diem limit increased from Kes. 2,000 to 5 percent of the monthly gross employee earnings. Limit for exempt non-cash employment benefits raised to Kes. 4,000 p.m. from Kes. 3,000 p.m. Likewise exempt meal benefit raised to Kes. 5,000 p.m. from Kes. 4,000 p.m. Allowable pension deduction raised to Kes. 30,000 p.m. from Kes. 20,000 p.m. Leadership in adoption of the two pillar approach under the OECD Inclusive Framework on BEPS by introduction of Significant Economic Presence Tax (under Pillar 1), and Minimum Top Up Tax (under Pillar 2). Introduction of motor vehicle tax. Legislation of Advance Pricing Agreements (APA) in Transfer Pricing cases. Repeal of tax exemptions on incomes earned by amateur sporting associations, registered trust schemes, infrastructure bonds interest, payment of benefits by retirement schemes and funds, registered family trusts, National Housing Development Fund and Ajira Digital Program. Capital allowances extended to purchase of spectrum licenses by a telcom operator. Non resident air transport operators without a reciprocal arrangement or treaty to be taxed at 3 percent of gross amount received. Withholding tax introduced on supply of goods to public entities. Exemption of taxes on payment of retirement benefits to retirees and withdrawal after 20 years. Tax free limit of Kes. 24,000 p.m. applicable to withholding tax on resident payments abolished. Capital Gains Tax extended to transfer ofinterests in member clubs and trade associations.
VAT Act Highlights	Repeal of VAT refunds arising from withholding VAT credits and supplies to Official Aid Funded Projects (OAFPs). No claiming of input tax on materials for supply to OAFPs, and application of the 10% limit in input restriction formula. Raising of VAT registration threshold to Kes. 8 million p.a. Standard rating of bread, electric buses, solar & lithium batteries et al. Repeal of COViD interventions in medical facilities construction, tourism and film sectors, manufacturing sector et al. Removal of exemptions on financial services, insurance services and gambling activities.
Excise Duty Act Highlights	Harmonization of tariff numbers with the new EAC Common External Tariffs classifications. Excise duty introduced on excisable services offered by non residents through a digital platform. Claiming of excise duty from inputs in declarations abolished. Introduction of two week timeline for processing of excise license registrations. Raising of the 24-hour deadline to 5 working days. Exemption of specified items originating from EAC Partner States that meet the EAC Rules of Origin. Repeal of annual requirement for effecting of inflationary adjustment of tax rates. Increase of tax rates on telephone and internet data, money transfer services, mobile money transfer and gambling activities. Introduction of tax on advertising on internet and social media. Exemption of supplies to the National Intelligence Service.
Miscellaneous Fees and Levies Act Highlights	Import Declaration Fees increased to 3 percent. Introduction of eco levy targeting items that pollute the environment especially non-biodegradable products. Exemption of supplies to the National Intelligence Service. Addition of items that are subject to Export and Investment Promotion Levy.
Tax Procedures Act Highlights	Restriction of powers in registration of Tax Agents by the Tax Agents Committee to requirements in the relevant published Regulations. Restoration and regulation of KRA’s powers to waive taxes in line with the constitutional requirements. Exclusion of weekends and public holidays in computing statutory deadlines.