The President, H. E. Uhuru Kenyatta signed into law the Tax Laws (Amendment) Bill, 2020 as part of measures to cushion the public against effects of Covid-19 pandemic.
The Bill published on 30th March 2020 amends tax-related laws including Income Tax Act (CAP 470), Value Added Tax Act of 2013, Excise Duty Act (2015), Tax Procedures Act (2015), Miscellaneous Levies and Fees Act (2016) and Retirement Benefits Act, 1997.
The new Act has incorporated tax measures which introduce numerous tax changes and in particular, removing a large number of VAT exemptions on essential goods and services such as medicines and agricultural inputs. It is worth noting that such measures did not involve any public participation.
Some of the tax changes emanating from the new Act include;
- The rate of PAYE for those earning above Sh24, 000 will be 10%, the first Sh16,667 will attract a deduction of 15%, the next Sh16,667 will be deducted 20 per cent. The rate of PAYE for those earning above Sh57,334, will be 25%.
- Turnover tax shall be payable by any resident person whose annual turnover from business is more than Kshs.500,000 but does not exceed Kshs.50 million. This will benefit small business that have a turnover of less than Kshs.500,000 because they will not be liable for this tax.
- The withholding tax rate for dividends paid to non – resident persons has been increased from 10% to 15%. We think that this will reduce the rate of Foreign Direct Investments (FDIs) thus impacting negatively on our economy.
- The VAT rate has been reduced from 16% to 14%. The Act has granted VAT exemption to some medicines and vaccines which were initially zero rated. Therefore, the cost of any local manufacture of medicine will increase. However, if the medicine is imported, then the VAT exempt status will reduce the retail price of such medication, this affordable to the common
The Act has introduced a reward of Kshs.500,000 to any person(s) who provides information that assists Kenya Revenue Authority in enforcing tax laws. Previously, the reward would range between 1% and 5% of the recovered unassessed taxes.
For more information or clarification kindly contact:
Wendy Muganda, CPM (MTI)
Managing Partner, Kijala & Muganda Advocates
Disclaimer: This article is meant for general use only and should not be relied upon solely without seeking legal advice first.
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