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| Treasury CS John Mbadi |
President William Ruto’s government is set to reinstate some of the tax provisions it removed from the contentious Finance Bill 2024 that was repealed after massive anti-government protests. Treasury CS John Mbadi seeks to raise more tax revenues. Treasury to introduce 3 new bills The National Treasury will combine the tax reforms into three new bills. These are the Tax Laws (Amendment) Bill, 2024, the Tax Procedures (Amendment) Bill, 2024, and the Public Finance Management (Amendment) Bill, 2024, which will be presented to Members of Parliament (MPs) for debate. Treasury posted an explainer in local dailies detailing the new tax proposals that will burden taxpayers. Which tax proposals will the Treasury reintroduce?
1. Expanding the digital marketplace
The Tax Laws (Amendment) Bill 2024 will amend Section 3 of the Income Tax Act to include additional digital operators in the tax bracket, similar to the Finance Bill. Among the targets are food delivery, professional, freelance, rental, and ride-hailing services. “This proposal is to expand the tax base by bringing the income of the owners of the digital platforms that offer the above services into the tax net,” the Tax Laws (Amendment) Bill, 2024 states.
2. Minimum top-up tax
The introduction of the minimum top-up tax is another measure of the Tax Laws (Amendment) Bill, 2024. The measure proposes foreign corporations doing business in Kenya pay a minimum tax rate of 15%.
3. Pension contributions limit to increase
Pension contribution caps will rise from KSh 240,000 to KSh 360,000 annually.
4. Withholding tax on goods supplied to public entities
The government seeks to impose a withholding tax of 0.5% on residents and 5% on non-residents on products delivered to public entities, such as government offices.
5. Significant Economic Presence Tax
Non-residents who make money from online sales must pay a Significant Economic Presence Tax. It will replace the 1.5% Digital Service Tax, with digital operators being subjected to a 6% tax.
6. Gov’t to tax infrastructure bonds
Under new proposals, the Treasury proposes a 5% tax rate from interest accrued from infrastructure bonds, which are currently untaxed.
7. Kenyans working remotely must have KRA PINs
The requirement that Kenyans working remotely have a KRA PIN is another provision from the Finance Bill that was repealed and is expected to reappear.
8. Affordable housing, SHIF tax deductible
If the Tax Laws (Amendment) Bill 2024 is approved, contributions to the Social Health Insurance Fund (SHIF) and the housing levy will henceforth be tax deductible. Why gov’t is reintroducing tax measures Kipkemboi Rotuk, a tax consultant and advocate of the High Court of Kenya, told TUKO.co.ke that the government proposed amending various acts and regulations to increase tax revenues. “The government can still amend the clauses in the various acts and regulations, plus previous Finance Acts that still have a force of law for any multi-year proposals,” he said. In Kenya, the government can only generate revenue by law, and the preferred tool is the Finance Act and levies, which allows for new areas to expand the tax base either by increased rates or other measures to improve compliance,” he added.
by Japhet Ruto