Kenyans are looking at tougher times and more tax burdens ahead after the National Treasury revealed plans to reinstate eight tax provisions that had been removed from the rejected Finance Bill 2024.
The eight tax measures will be consolidated into three new bills—the Tax Laws (Amendment) Bill, 2024, Tax Procedures (Amendment) Bill, 2024 and the Public Finance Management (Amendment) Bill, 2024.
According to Treasury Cabinet Secretary John Mbadi, the proposed amendments will provide a conducive environment for sustainable growth, innovation, and long-term economic resilience.
The tax measures set for a comeback include the minimum top up tax, digital marketplace expansion, pension contributions and introduction of withholding tax on goods supplied to public entities.
Others include economic presence tax, taxable infrastructure bonds, mandatory KRA PINs for remote working Kenyans, and deductions on affordable housing and Social Health Insurance Fund (SHIF).
The bill seeks to introduce a minimum top up tax that will see foreign cooperation with an annual turnover of Sh100 billion pay a minimum tax rate of 15 per cent. It is also targeting to tax non-resident businesses that are conducted in the online space including ride hailing services, food delivery services, freelance services and professional services.
“This proposal is to expand the tax base by bringing the income of the owners of digital platforms that offer the above services into the tax net,” the proposed bill read in part.
Additionally, the bill seeks to increase the amount of deductible contributions to registered pension on provident funds from Sh240,000 to Sh360,000 per year and Sh20,000 and Sh30,000 per month.
Under the new bill, controversial affordable housing and SHIF will be declared tax deductible while residents and non-residents delivering products to public entities will henceforth be taxed 0.5 per cent and five per cent, respectively.
Infrastructure bonds
Treasury is also proposing a five per cent new tax rate on infrastructure bonds which have always been tax free. However, this only applies to residents as foreign investors are spared from the new tax.
Kenyans working remotely will also be subject to taxes as they will be required to have KRA PINs.
The reinstatement of the tax measures comes barely a day after the IMF concluded its review of its funding programme to Kenya. Also, it comes just four months after the anti-finance bill protests that steered unrest among citizens grappling with overtaxation under the President William Ruto administration.
Consequently, the president rejected the finance bill for this fiscal year in June, and later dismissed most of his Cabinet, bowing to pressure from the protests which had spread countrywide.
The bill had contained new taxes and hikes to raise an extra Sh346 billion – plans that the protesters said would pile pressure onto a population already struggling with surging living costs.
Mbadi, who was brought into the Cabinet from the opposition benches as Ruto tried to prop up his government, had ruled out further tax hikes during his first public remarks in the post. It remains to be seen whether he is going against his word.
