A national response unit designed to cushion most vulnerable individuals and businesses from COVID19 is now live. This follows the signing by President Uhuru Kenyatta of the Tax Laws (Amendment) Bill, 2020, into law.
This opens a window for the newly introduced fiscal measures to protect low-income earners, small businesses, and retirees from the negative effects of COVID-19.
Most developed countries are already making huge economic responses to the COVID-19 pandemic and using monetary policy to cushion businesses and households from the harsh economic environment.
But for developing countries like Kenya, financial constraints limit governments’ response to the pandemic.
The Amendment Bill, which was published on 30th March 2020, has revised the Income Tax Act (CAP 470), the Value Added Tax Act of 2013, the Excise Duty Act (2015), the Tax Procedures Act (2015), Miscellaneous Levies and Fees Act (2016) and the Retirement Benefits Act(1997).
The amendments include raising in the threshold for turnover tax to between one million and fifty million shillings so as to exclude small-scale traders from the presumptive tax. The new law further lowers the turnover tax rate from 3 percent to 1 percent.
The amended law, which mainly targets low-income earners, includes a 100 percent Pay As You Earn (PAYE) tax relief for employees earning less than KSh 28,000 per month. Those earning above the new threshold will benefit from a PAYE tax reduction from 30 percent and 25 percent.
Similarly, the new Act has revised Corporate Tax to 25 percent while Non-Resident Tax on Dividends has been adjusted from 10 percent to 15 percent.
The amended law lowers the Value Added Tax rate from 16 percent to 14 percent, a move that is expected to lower the shelf prices of basic commodities.
Kenya’s fiscal measures also include amendments to the tax law to allow access to retirement benefits for purposes of purchase of a residential house.
This is aimed at increasing home ownership in the country as envisaged in the housing pillar under Big 4 Agenda.
The Bill, which was presented to the President for signing by National Assembly Speaker Justin Muturi was passed on Wednesday last week.
ALSO READ:
Parliament Approves Uhuru’s Fiscal Plan to Fight COVID-19