November 13, 2019

There are several proposed amendments to the Income tax Act in line with increasing efficiency and collection by the Kenya Revenue Authority. The agency must increase revenue collection by 12% to meet the Ksh 1,853.9 billion target in the next financial the year 2018/2019.

Proposals in Tax Law
The government is counting on tax reforms in tax policy and revenue administration to bring efficiency. With these there are some changes that seek to reduce the number of goods qualifying for zero-rated status and other taxes such as that on winnings. In this proposal, all winnings from betting and gaming will attract withholding tax at 20%.

Some of the items such liquefied petroleum gas, maize floor and pharmaceutical which are crucial in the day to day lives of Kenyans citizens, have been proposed to exempt supplies. This move means that the supplier will not be allowed deduction of input tax in exempt supplies. Such an act will prompt the supplier to push the input tax cost to the buyer making the cost of floor, LPG gas and pharmaceutical drugs to rise significantly.

Income Tax Amendment
The Cabinet Secretary for treasury has proposals including one fringe benefit tax which seeks to increasethe rate to 30% from the current rate of 8%. Fringe benefit is difference the between the loan interest rate charged by employer and the prescribed rate. Also, the Capital Gains tax which is tax chargeable on transfer of property situated in Kenya, is proposed to increase from the current rate of 5% to 20%.

Higher income earners are set to pay 35 per cent top tax rate, these high-income earners are individuals who earn income over 9 million shillings. Consequently, large corporations whose taxable income exceeds five hundred million shillings are tipped to pay income tax rate of 35 per cent. A company that develops at least one hundred low cost residential units annually with approval of cabinet secretary will pay an income tax rate of 15 per cent.

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