The Finance Act, 2023 has brought various changes to Kenyan tax laws. The changes will take effect on three separate dates: 1st July 2023, 1st September 2023, and 1st January 2024.
On 1st July 2023, the following changes/taxes will take effect:
- The revenue of members’ clubs and trade associations (excluding joining fees, welfare contributions and subscriptions) shall be liable to tax.
- Digital content monetization will be subject to withholding tax.
- Rental income tax shall be submitted to the Kenya Revenue Authority (KRA) within five days of deduction from rental income.
- The due date for capital gains tax in respect of transfer of real property shall be the earlier of— (a) receipt of the full purchase price by the vendor; or (b) registration of the transfer.
- Applications for Value Added Tax refunds shall not be made after 10 years from the date of supply of goods/services.
- All persons supplying imported digital services over the internet, an electronic network or through a digital marketplace shall register for Value Added Tax. It is not necessary that their taxable supplies meet the turnover threshold of KES 5 million as per the Value Added Tax Act, 2013.
- Statutory instruments will no longer expire automatically at the end of 10 years (i.e., Section 21 of the Statutory Instruments Act, 2013 has been repealed).
- Every employer and employee shall pay a monthly tax known as the “Affordable Housing Levy”. In respect of each employee, both the employer and employee shall separately pay the levy at a rate of 1.5% of the employee’s monthly gross salary.
- The individual tax rates will be:
- On the first KES 288,000 10%
- On the next KES 100,000 25%
- On the next KES 5,612,000 30%
- On the next KES 3,600,000 32.5%
- On all income over KES 9,600,000 35%
On 1st September 2023, the following changes/taxes will take effect:
- Digital asset tax: This will be payable from non-fungible tokens, cryptocurrencies, and any similarly situated electronic, intangible assets. The rate of tax will be 3% of the transfer or exchange value of the digital asset.
- If you are required to issue an electronic tax invoice and file returns, KRA will send you a written notice asking for reasons justifying the failure. If the reasons are unsatisfactory, you will pay a penalty of two times the tax due.
- Export and investment promotion levy rate of 17.5% of the customs value shall be payable on the items such as cement clinkers, bars and rods of iron or non-alloy steel – the full list is contained in the Third Schedule to the Miscellaneous Fees and Levies Act, 2016. However, the export and investment promotion levy shall not be charged on goods originating from East African Community Partner States that meet the East African Community Rules of Origin.
On 1st January 2024, the following changes/taxes will take effect:
- A non-resident person who carries on business in Kenya through a permanent establishment shall pay tax on repatriated income for each year of income.
- In ascertaining the total income of a person, any expenditure or loss where the invoices of the transactions are not generated from an electronic tax invoice management system shall not be an allowable deduction unless the transactions have been exempted in accordance with the Tax Procedures Act, 2015.
- A resident individual who contributes to a post-retirement medical fund shall for that year of income be entitled to personal relief, i.e., the post-retirement medical fund relief. The amount of post-retirement medical fund relief shall be 15% of the amount of contribution paid or KES 60,000 per year, whichever is lower.
- An “eligible startup company” is a business incorporated in Kenya that has an annual turnover of less than KES 100 million, does not carry on management, professional or training business, has not been formed because of restructuring an existing entity, and has been in existence for 5 years or less. If an employee is offered company shares in lieu of cash by an “eligible start-up”, the value of the shares shall be taxed within 30 days of the earlier of:
- the expiry of five years from the end of the year of the award of the shares;
- the disposal of the shares by the employee; or
- the date the employee ceases to be an employee of the eligible start-up.
Note: The above information is provided for general information only. You may contact us for further assistance.