The Finance Bill 2024 has been published ahead of debate in the National Assemble on Monday 13th May 2024. The Bill which proposes a raft of tax increases has been met with a lot of discontent from the general public who feel that they are already overtaxed.
Here are a few highlights of the Finance Bill 2024.
Motor Vehicle Tax
The Finance Bill 2024 introduces a Motor Vehicle Tax which is meant to be paid together with insurance. The tax will be calculated at 2.5% the value of the vehicle with the floor being set at Kes 5,000 & the ceiling is set at Kes 100,000 ·
The value of the car will be determined based on make/model, engine capacity and year of manufacture. The insurance company is supposed to remit the tax within 5 working days failure to which they will be penalized at 50.0% of the uncollected tax and the actual amount of uncollected tax. Given the fact that we already have the Road Maintenance Levy, this will amount to double taxation.
Banking Services
Banking services are about to get a lot more expensive since the following will no longer be VAT exempt.
This includes.
- Loans
- Cheque handling, processing, clearing & settlement.
- Issuance of credit & debit cards
- Telegraphic money transfer
- Foreign exchange transactions
- Management of a unit trust or collective investment scheme registered by the Capital Markets Authority and managed by the trustees of the scheme
Data Protection
The Finance Bill 2024 seeks to amend the Data Protection Act to exempt KRA from constraints in access to personal data where access to that data is deemed to be necessary for the assessment, enforcement or collection of any tax or duty under a written tax law.
This means that KRA will have access to all your financial transactions as it seeks enforce tax collection.
Bread
The Finance Bill 2024 proposes that bread will cease being VAT zero rated implying suppliers will no longer be able to claim the input element & pass the cost we end consumers. This will see a rise in the cost of bread.
Excise Duty
Sec14 of the Excise Duty Act is being repealed. This means that manufacturers will no longer be able to use excise duty paid in respect of excisable imports used as raw material to offset their obligation on excise for the finished product.
Excise duty on some products have been raised which will see their prices rise and become out of reach for a good number of Kenyans.
- Excise on telephone & internet data services increased from 15.0% to 20.0% ·
- Excise on money transfer services by banks, money transfer agencies and other financial service providers increased 20%
- Excise duty on fees charged for money transfer services by cellular phone service providers increased to 20% ·
- Excise duty on betting back to 20%
eTIMS
KRA will be empowered to require a tax payer to integrate eTIMS · Failure to comply with this requirement will see the tax payer slapped with Kes 2.0M every month. This is mostly likely targeted at small businesses which are most likely yet to integrate the system.
Eco Levy
The Finance Bill 2024 proposes to introduce an Eco Levy on various machines and products.
- Office machines at Kes 98/unit
- Calculating machines at Kes 225/unit
- Automatic data processing machines at Kes 225/unit
- Arts & accessories at Kes 98/unit
- Telephones (including smart phones) at Kes 225/unit
- Microphones & speakers at Kes 98/unit
- Monitors & projectors at Kes 1,275/unit.
- Diapers will also be subject to the levy at Kes 98/unit.
Pension Deductions
The Finance Bill 2024 seeks to amend the Income Tax Act increasing the monthly amount of allowable pension deduction from the current Kes 20,000 to Kes 30,000 · The only thing to note here is that we are moving from a provision of either Kes 20,000 or 30.0%, whichever is lower, to a flat rate of Kes 30,000.
Affordable Housing Relief
Treasury is proposing the repeal Sec30A of the Income Tax Act. There’s a problem here because Sec30A of the Income Tax Act provides for Affordable Housing Relief (15.0% capped at Kes 9,000.0 per month or Kes 108,000.0 per annum) · To do away with the relief when the relief itself was a key selling point of the Affordable Housing Bill (now Act) 2024 will be a huge problem for Kenyans
Import Declaration Levy
The Import Declaration Levy which is normally paid by those importing goods into the country has been raised to 3% up from 2.5%.
Alcohol Manufacturers
Alcohol manufacturers in the country have a reason to smile after the window for remitting excise duty collections is to be revised from the current 24hrs to 5 working days.
In the past, alcohol manufacturers like EABL had complained that remitting the duty within 24 hours was eating into their working capital.
VAT Threshold
The threshold for VAT in Kenya which been Kes 5.0 Mln has been raised to Kes 8.0 Mln. This will be the first revision since the upward review from Kes 3.0 Mln to Kes 5.0 Mln in 2007.
Digital Services Tax
Kenya plans to abandon the Digital Services Tax (DST) & adopt the Significant Economic Presence Tax. The tax is payable by a non-resident person whose income from the provision of services is derived from a business carried out online.
The taxable profit of a person liable to pay the tax shall be deemed to be 20.0% of gross turnover.
Tax Procedures Act
Tax Procedures Act is being aligned with the Interpretation and General Provisions Act around the due date for settlement of tax obligations. This means that moving forward computation of the tax period will exclude Saturdays, Sundays or public holidays.
It is worth noting that the Finance Bill 2024 comes at a time when Kenya is undertaking a review with the IMF (7th Review) of the US$4.43 billion program. Part of the issues on the table has been the fact that Kenya has struggled to meet its revenue targets and this move could be seen as a way to address this issue.