Earlier this week, President William Ruto signed into law, seven bills including the Tax Laws (Amendment) Bill, the Tax Procedures (Amendment) Bill, the Business Laws (Amendment) Bill, and the Kenya Revenue Authority (Amendment) Bill.
- The Tax Bills were introduced in the National Assembly by Kikuyu Legislator Kimani Ichung’wa (UDA) and were passed on 4th December; only the Kenya Revenue Authority Bill was passed on 28th November.
- The bills re-introduced some provisions that were in the flopped Finance Bill 2024, including the replacement of the Digital Service Tax for multinational companies with the Significant Economic Presence (SEP) tax.
- Other bills that were signed into law included the Statutory Instruments (Amendment), the Ethics and Anti-corruption commission (Amendment), and the Kenya Roads (Amendment).
In this article
The Tax Laws (Amendment)
Aside from introducing a 6% SEP tax on multinational firms, this act will increase the deductible interest limit from KSh 300,000 to KSh 360,000 for mortgages. The government believes this will enable more Kenyans to own homes as individuals will deduct a higher amount of interest paid on loans to purchase or improve residential properties.
Contributions to the Affordable Housing Levy or post-retirement medical funds can now be deducted from payable tax liability to prevent double taxation after amendments to the Income Tax Act. Tax exemptions for payments of pension benefits from registered funds upon reaching retirement age have been included. Locally assembled EVs have also been exempted from excise duty.
The act will also see firms certified by the Nairobi International Finance Centre Authority pay 5% in Capital Gains Tax as opposed to 15%. The qualifications for this lower CGT rate have been reduced from KSh 5 billion to KSh 3 billion in investments. The amendments of the tax law will allow alcohol manufacturers to pay excise duty on the 5th day of the following month instead of the 24 hours that strained their operations. Taxes on alcoholic beverages will be based on the strength of alcohol content as opposed to quantity, which would see excise duty on spirits go up and that of beer reduced.
The Tax Procedures (Amendment) Bill
The law sought to clarify how electronic tax invoices would be done. This was after an uproar from small businesses which were incapable of complying effectively with the prior directives.
The information needed on the invoices include the designation ‘TAX INVOICE’, the name and address, the supplier’s PIN, and purchaser’s details. The amendments saw the introduction of reverse ticketing – where a buyer would issue a tax invoice to ascertain tax liability. However, this would only apply to businesses with less than KSh 5 million in turnover.
The government also reintroduced import duty on some raw materials to protect local steel manufacturers. By preventing the influx of cheap imports, the government believes that the local economy would grow to satisfy local demand and spur employment in the construction industry.
The Business Laws (Amendment) Bill
This bill changed provisions in the Banking Act, CBK Act, and Special Economic Zones Act. It increased the core capital requirements for banks from KSh 1 billion to KSh 10 billion. Lenders who fail to achieve this requirement will be fined KSh 20 million or three times the financial gain from the breach by the regulator. However, after intense lobbying from banks, the timeframe for this attainment was upped from 3 years to 8 years.
The CBK will also have the power to regulate non-deposit taking credit providers to tame a sector that has been a subject of controversy over exploitation. It empowers the regulator to oversee ‘buy now, pay later’ agreements. Most of the amendments made in this act were intended to tighten rules governing data utilisation in financial institutions.
On SEZs, the law now allows the Cabinet Secretaries overseeing the sector to set the minimum amount investible in a special economic zone. It also permits public entities to conduct business in SEZs and assure investors on 10-year tax incentives.
The KRA (Amendment) Bill
The amendments in this act allow KRA Commissioner-Generals to appoint Deputy Commissioners after board approval.
The law will also allow the Treasury Cabinet Secretary to waive penalties exacted on appointed individuals who failed to transfer funds collected in the person was under statutory management or under receivership.
