The Kenyan government recently introduced the Finance Bill 2024, proposing significant changes to various tax laws. Here’s a breakdown of the key points you need to understand, explained in a clear and concise way:
Tax on Motor Vehicles, Digital Marketplaces, and More
- New Motor Vehicle Tax: The Bill proposes a 2.5% tax on the value of your car, payable when you get car insurance.
- Taxing Digital Businesses: Companies operating digital marketplaces or platforms, or facilitating digital content monetization, will be taxed at a rate of 20% (non-residents) or 5% (residents).
- Goodbye DST, Hello Significant Economic Presence Tax: The Digital Service Tax (DST) is being replaced with a Significant Economic Presence Tax of 30%, targeting non-resident businesses earning income from Kenyan digital marketplaces.
Changes to Income Tax
- Minimum Tax for Multinational Groups: The Bill introduces a minimum 15% tax rate for certain resident companies belonging to large multinational groups.
- Tax Reliefs: Contributions to medical funds, affordable housing levy, and investments in spectrum licenses by telecom operators can be deducted from taxable income.
- Taxation of Family Trusts: The income of registered family trusts will now be subject to tax.
Updates to Value Added Tax (VAT)
- VAT on Financial Services: Several financial services, previously exempt, will now be charged VAT at the standard rate (currently 16%).
- Increased VAT Registration Threshold: The threshold for mandatory VAT registration is rising from KES 5 million to KES 8 million.
- VAT on Business Transfers and Insurance: Transfers of businesses as a going concern and insurance/reinsurance premiums will be exempt from VAT.
Changes to Excise Duty
- Digital Services Taxed: Excise duty (20%) will be applied to specific services offered in Kenya by non-residents through digital platforms, including phone/internet data, money transfers, and gambling.
- Increased Money Transfer Duty: The excise duty on money transfer fees is rising from 15% to 20%.
- More Time for Excise Duty Payment: Licensed alcoholic beverage manufacturers will have five working days to pay excise duty after stock removal.
Tax Procedures Act Updates
- Extended Time for Tax Objections: The Kenya Revenue Authority (KRA) will have 90 days (instead of 60) to issue decisions on tax objection cases.
- Relief from Tax Recovery: Under certain circumstances, the KRA may waive tax recovery at the Cabinet Secretary’s approval.
- Weekends and Holidays Excluded from Tax Timelines: Weekends and public holidays won’t be counted when calculating tax deadlines for filing returns, paying taxes, or submitting documents.
- KRA System Integration: The KRA can now require taxpayers to integrate their systems with the KRA’s for real-time document submission.
Export and Investment Promotion Levy Reduction
The levy rate on various items is reduced to a maximum of 2% of the customs value. However, the list of applicable items has been expanded.
Remember, this is a summary. For the full details and legalities, consult the official Bill or a tax professional.
