Kenya

n
FINANCE ACT
2023/2024

Financial Impact
That Matters

Taxplan Consulting Limited was incorporated in Kenya in 2005 under the Company’s
Act to offer Finance, Accountancy, Tax, Training and Forensic Investigations
consultancy services. Taxplan Consulting Limited is closely associated with two
independent firms namely: MGI Alekim LLP, Certified Public Accountants and Batian
Registrars, Certified Public Secretaries.
Overview & Analysis

Introduction

The Finance Act (“the Act”), 2023 was assented on 26th June 2023. The Act has radical changes to the
tax regime aimed at promoting revenue collection by the government through means such as
increasing tax rates, expansion of tax base and real time collections of taxes all aimed at promoting
the bottom-up economic transformation and climate change mitigation/adaptation for improved
Kenyans’ livelihoods. These changes are likely to have a significant impact on taxpayers and their
businesses. Effective timelines for these changes are 1st July 2023, 1st September 2023 and 1st January
2024.

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 Income Tax Act, Cap. 470
Item Previous Current reading Implications
reading
Winning winnings of any the payout from a betting, gaming, lottery, Brings clarity as to
kind and a prize competition, gambling or similar what qualifies as
reference to the transaction under the Betting, Lotteries and winnings thereby
amount, or the Gaming Act excluding the amount staked eliminating the
payment of or wagered in that transaction.” voluminous
winnings shall be qualification
construed disputes.
accordingly.

Taxation of New definition Digital content monetization means offering for

Enhanced revenue
payments payment entertainment, social, literal, artistic,
collection through
made to digital educational or any other material
minimization of tax
content electronically through any medium or
avoidance by
creators channel, in any of the following forms—
bringing previously
a) advertisement on websites, social media non WHT qualifying
platforms or similar networks by payments
partnering with brands including enhancing tax
endorsements from sellers of such reporting. Digital
brands. content
b) sponsorship where a brand owner monetization will be
pays a content creator for content subject to WHT at
creation and promotion. the rate of5% and
c) affiliate marketing where the 20% for non-
content creator earns a commission residents without
whenever the audience of the a permanent
content creatorclicks on the product establishment in
displayed. Kenya.
d) subscription services where the
audience pays a periodic fee to
access the content and support the
content creator.
e) Offering for use a logo, brand or
catchphrase associated with the
content creator merchandise sales,
eBooks, course, or software.
f) membership programmes for
exclusive content including early
access.
g) licensing the content including
photographs, music or other
businesses or individuals for use in the
user’s own projects; or
h) commissions earned by a content
creator from crowd.
funding.

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“Immovable a mining right, a) land, whether covered by water or
Expansion of the
property” an interest in a not, any estate, rights, interest or
definition of
includes— petroleum easement in or over any land and immovable
agreement, things attached to the earth or
property widening
mining permanently fastened to anything
the qualifying
information or attached to the earth, and includes
gains.
petroleum a debt secured by mortgage or
information. charge on immovable property; and
b) a mining right, an interest in a petroleum
agreement, mining information or
petroleum information.
“Related person” N/A in the case of two persons where a person Provides clarity on
who participates directly or indirectly in the the definitionof a
management, control, or capital of the related person.
business of another person.
“Institution, body N/A For purposes of Paragraph 10 of the First Persons seeking
of persons or Schedule of the Income Tax Act, the Act taxexemptions on
irrevocable has provided clarity that such institutions basis of provision
are required to be more transparent of poverty relief,
and accountable without advancement of
restriction or discrimination regardless of the religion or
level of charges
trust, of a public N/A fees levied for services rendered, and which advancement of
character” utilizes its assets orincome exclusively to carry education will
out the purpose for which the entity was undergo more
established without conferring a private stringent
benefit to an individual. requirements to
obtain and
maintain income
tax exemption.
Interest expense Deductible interest ” Means loans, overdrafts, ordinary trade Lowered operating
restriction restricted to 30% of debts, overdrawn current accounts or any costs as the Interest
EBITDA. Interest other form of indebtedness for which the restriction will only
expense entailed companyis paying a financial charge, interest, apply to foreign
payments made on discount or premium, but shall not include loans.
all loans i.e local & local loans.”
foreign.

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RESTRICTION ON INTEREST EXPENSE

Removal of interest restriction on local loans (Effective 1st January 2024)

Restriction on deductible interest expense based on 30% of the EBITDA will only apply to foreign loans.
This means that interest expense with respect to local loans will not be subjected to the restriction.
The interest expenses on foreign loans in excess of 30% of the EBITDA shall be an allowable deduction in
the subsequentthree years of income provided that the interest expense claimed in each year shall not
exceed 30% of the EBITDA.
Manufacturing companies with cumulative investment of at least KShs five billion will no longer enjoy
exemption from theinterest restriction.
Interest restriction shall not apply where the interest is exempt from tax under this Income
Tax Act.

Deferral of Foreign Exchange Losses (Effective 1st July 2023)

Forex losses for persons whose gross interest paid or payable to non-residents exceeds 30% of the
EBITDA will be deferred (and not taken into account) and claimed over a period of five years from the
date the losses were realized. Initially, there was an interest restriction, the forex losses were to be
deferred, but the period of deferment was not specified. This provides clarity that now such deferment
can be claimed within five years, subject to there being headroom to claim them based on the interest
restriction formula.
Any realized forex losses disallowed by virtue of interest paid to non-residents exceeding 30% of
the EBITDA may be deferred and claimed within 5 years.

CHANGES TO TAXATION OF EMPLOYMENT INCOME-(Effective 1st July 2023)

The Act revises the current PAYE bands as follows:

PAYE BANDS (ANNUAL) OLD RATE NEW RATE

On the first Kshs. 288,000 10% 10%

On the next Kshs. 100,000 25% 25%
On all income over Kshs. 388,000 30% N/A
On the next Kshs. 5,612,000 N/A 30%

On the next Kshs. 3,600,000 N/A 32.5%

On all income over Kshs. 9,600,000 N/A 35%

The changes are aimed to ensure non-reliance on foreign aid and borrowing for economic sustainability..

Additional Taxable Employment Gains (Effective 1st July 2023)

Club entrance and subscription fees allowed against the employer’s income will be taxable on the
employee.

Non-taxable employment gains (Effective 1st July 2023)

The following will be allowable employment benefits:
Travelling allowances received by an employee to perform official duties if the travelling
allowances are computed based on the standard mileage rate approved by the Automobile
Association of Kenya as they are deemed to be reimbursements.
Post-Retirement Medical Fund (PRMF) Relief (Effective 1st January 2024)
A resident individual contributing to a post-retirement medical fund shall be entitled to a post-retirement
medical fund relief equivalent to the lower of 15% of the contribution or KShs. 60,000 per annum.
This is aimed at cushioning old age medical expenditure and incentivizing its uptake.

Exemption from Income Tax (Effective 1st July 2023)

Investment income from a PRMF shall be exempt from income tax, whether or not the fund is part of a
retirement benefitsscheme. This is a welcome move as it will encourage the uptake of PRMF policies.
Computing Market Value of Shares under Employee Share Ownership Plans (ESOP’s) (Effective 1st July
2023)
For shares fully listed on any security exchange in Kenya, the market value of shares under ESOP will be determined based
on the fair-market value on the date the option was exercised by the employee. Prior to the Finance Act, 2023 the value was
determined based on the date the shares were granted by the employer.
For shares not fully listed, the market value will be determined based on the price which the shares might reasonably be
expected to fetch on sale in the open market when the option is exercised. Prior to the Act, the market value was determined
based on the amount agreed with the Commissioner before the grant of the options.
Taxation of Shares Issued in Lieu of Cash Emoluments by Start-ups (Effective 1st January 2024)
Taxation of benefit of shares issued by a start-up to its employees in lieu of cash emolument shall be
deferred and taxedwithin thirty days of the earlier of:
a) the expiry of five years from the end of the year of the award of the shares.
b) the disposal of the shares by the employee; or
c) the date the employee ceases to be an employee of the eligible start-up.
The value of the taxable benefit shall be the fair market value of the shares at the earlier of the
occurrence of the events contemplated in paragraphs (a), (b) or (c); or where the fair market value is not
available, the Commissioner shall determine the value of the shares based on the last issued financial
statements.
The subsection shall not apply to any cash emoluments or other benefits in kind offered to an employee
by virtue of theemployment.
For the purpose of this Section, the term “Eligible start-ups" means a business incorporated in Kenya that:
a) Has an annual turnover of not more than Kshs. 100 million.
b) Does not carry on management, professional or training business.
c) Has not been formed as a result of splitting or restructuring of an existing entity; and
d) Has been in existence for a period of not more than

five years.

Income of a Married Woman or Wife (Effective 1st July

2023)
The Act has deleted Section 15(7) (e) (iii) which provided that the gains or profits derived from wife’s
employment income areconsidered as a separate source of income.
The income of a married woman living with her husband is no longer be deemed to be income of the husband
for the husband’s income tax purposes by deleting Section 45 of the ITA.

TAXATION OF NON-RESIDENT PERSONS

Reduced Income Tax Rate for a Permanent Establishment (PE) (Effective 1st January 2024)
Non-resident companies having a PE in Kenya will pay income tax at a reduced rate of 30% from the
current 37.5%. This amendment seeks to encourage non-residents to conduct business in Kenya and
boost foreign direct investment and eliminate perceived “tax discrimination” between resident and non-
resident entities.
Tax on Repatriation of Profits of a PE (Effective 1st January 2024)
Income of a PE being repatriated by a non-resident person shall be subject to tax in Kenya. The following
formula shall be used to compute the repatriated income:
 Repatriated Net Assets* at Net Profit for Tax Payable on Net Assets*
Profit = Beginning of + ( the Year of – the Chargeable ) – at Year End
the Income Income
Year
*Net Assets means the total book value of assets less total liabilities for the year of income and shall not
include revaluation of assets. The tax on repatriated profit shall be in addition to tax chargeable on the
income of the PE. The repatriated profits will be taxed at a rate of 15%.
Allowable deductions for non-residents with a PE (Effective 1 st July 2023)
The following expenses (which were non-deductible) will now be deductible expenses for income tax
purposes:
Remuneration to non-whole-time non-resident directors of a non-resident company who
have a controlling interest of more than 5% of the income of that company; and
Executive and general administrative expenses incurred outside Kenya by a non-resident person.

TURNOVER TAX (TOT) – EFFECTIVE 1 ST JULY 2023

Upper limit reduced to Kshs. 25 million from 50 million and increases the rate from 1% to 3%.
This reduces the qualifying entities for TOT (taxed at a preferential rate of 3%) thus enhancing collectible
at 30% i.e SMEs with income above KShs. 25 million currently registered under the TOT regime will now be
required to pay tax at the corporate rate of 30% on taxable profits. Further, taxpayers eligible for TOT will
be subject to the same at 3%.

INTRODUCTION OF DIGITAL ASSETS TAX (DAT) – EFFECTIVE 1ST SEPTEMBER 2023

The Act introduces Digital Assets Tax (DAT) at the rate of 3% on the transfer or exchange value of digital
assets.
The owner of a platform or the person who facilitates the exchange or transfer of a digital asset shall
deduct the DAT and remit it to the Commissioner within 5 working days after making the deduction
together with a return of the amount of the payment and the amount of tax deducted. A non-resident
person who owns a platform on which digital assets are exchanged or transferred shall register under
the simplified tax regime.

“Digital asset” includes:

a. Anything of value that is not tangible and crypto currencies, token code, number held in
digital form and generated through cryptographic means or otherwise, by whatever
name called, providing a digital representation of value exchanged with or without
consideration that can be transferred, stored, or exchanged electronically; and
b. A non-fungible token or any other token of similar nature, by whatever name called.
“Income derived from transfer or exchange of a digital asset” means:
c. The gross fair market value consideration received or receivable at the point of
exchange or transfer of a digitalasset.
This tax will be payable within 5 working days from the earlier of date of accrual or receipt of
payment and will be payableirrespective of the profitability of the same.
INCOME FROM INTELLECTUAL PROPERTY REALIZED IN RELATED PARTIES TRANSACTION BY A NON-PREFERENTIAL
TAX REGIME– EFFECTIVE 1ST JANUARY 2024
The income from the IP that will be.
subject to the preferential tax rate will be computed as follows:

R&D expenses
excluding
IP income
acquisition costs and
related party including
outsourcing royalties,
Income costs capital gains
receivingtax = x
All R&D expenses and any other
benefits inclusive income from
of acquisition costs thesale of an IP
and asset
related party
outsourcing
costs

** Intellectual property losses shall only be deducted against intellectual property income.
This change is similar to the Patent Box Scheme in the United Kingdom, which provides for a reduced tax rate
of 10% from the normal 19% on qualifying income from intellectual property.
However, the Act does not prescribe the preferential tax rate that will apply on the income from IP.
Therefore, taxpayers may not be able to enjoy this new benefit until the ITA is amended to prescribe a specific
preferential tax rate.

TAXATION OF MEMBER’ S CLUB AND TRADE ASSOCIATIONS – EFFECTIVE 1 ST JULY 2023

Joining fees, welfare contributions and subscriptions of a members’ club or trade association shall be
excluded when computing the taxable income of such club or association. Any other income of
members’ club or trade association will be taxable.
The Act repeals the provision that allowed members’ club or trade association to elect to be deemed
to be carrying on a business chargeable to tax.
Prior to the enactment of the Finance Act 2023, if the income received from members constitutes at
least 75% of the gross receipts (excluding gross investment receipts) of the members’ club or trade
association, the gross receipt (excluding gross investment receipts**) is not subject to tax.
**Gross investment receipt means gross receipt in respect of interest, dividends, rent, and other
payments for right of use or occupation of property or gains on CGT.

TAXATION OF COMPANIES MANUFACTURING HUMAN VACCINES

Income of a company manufacturing human vaccines which is currently exempt from tax will be taxable
at a rate of 10%(Effective 1st January 2024).
Further, the Act widens the scope of this tax benefit to reduce the Income Tax on companies undertaking
other manufacturing activities (such as refining) human vaccines manufacturing activities from 30% to 10%
(Effective 1st July 2023).
On the other hand, the Act exempts the following from tax (Effective 1st July 2023):
Royalties paid to a non-resident person by a company manufacturing human vaccines.
Interest paid to a resident person or non-resident person by a company manufacturing human
vaccines.

TAXATION OF COMPANIES ASSEMBLING MOTOR VEHICLES LOCALLY

Companies assembling motor vehicles locally are taxed at a reduced rate of 15% for the first five years
which can be extended by a further five years if the company achieves a “local content” equivalent to
50% of the ex-factory value of the motor vehicles.
The Act defines “local content” as parts designed and manufactured in Kenya by an original
equipment manufactureroperating in Kenya (effective 1st July 2023).
TAXATION OF COMPANIES IN EXTRACTIVE INDUSTRY – EFFECTIVE 1 ST JULY 2023
Under the indirect transfer of interests in mining/extractive activities, it is a requirement for a licensee or
contractor to notify
the Commissioner if there is a 10% or more change in the underlying ownership of a licensee or contractor.
The Act increases the threshold to 20%.

MONTHLY RENTAL INCOME (MRI) – EFFECTIVE 1ST JANUARY 2024

The Act has revised the MRI rate from 10% to 7.5%. This is a welcome move to encourage resident landlords
to comply with MRI.

TAXATION OF TRUST INCOME – 1ST JULY 2023

Any amount received by a beneficiary from a trust or paid out from a trust on behalf of a beneficiary shall
be deemed to be
taxable income in so far as the amount is received/paid out from income that is ordinarily subject
to income tax. Prior to the Act, only the following incomes of a registered trust, were subject to
income tax from 1st July 2021:

 any amount that is paid out of the trust income on behalf of any beneficiary and is used
exclusively for the purpose of education, medical treatment or early adulthood housing.
 income paid to any beneficiary which is collectively below KShs. 10 million in the year of income; and
 such other amount as the Commissioner may prescribe from time to time and at such rate as
prescribed in Paragraph 5 of the Third Schedule.

DEDUCTIBLE AND NON-DEDUCTIBLE EXPENSES – EFFECTIVE 1 ST JANUARY 2024

The following expense will not be deductible for income tax purposes:
 Any expenditure or loss incurred where the invoices of the transactions are not generated from
an Electronic Tax Invoice Management System (eTIMS) except where the transactions have
been exempted in accordance with the Tax Procedures Act, 2015.
This provision is punitive as it does not take into account exempt supplies from taxpayers who are not
registered for VAT and supplies from taxpayers who have not attained the threshold for VAT
registration.
The following expenses (which are currently non-deductible) will now be deductible expenses for income
tax purposes:
Club fees including entrance and subscription fees; and

Interest expense (to a maximum of KShs. 300,000 per year of income) incurred by an individual on a
loan issued by Co-operative Society registered under the Co-operative Societies Act for the
purpose of purchase or improvement of residential premises.
TRANSFER PRICING (COUNTRY-BY-COUNTRY REPORTING) – EFFECTIVE 1 ST JULY 2023
The Act introduces a new definition of Ultimate Parent Entity (UPE). Under the Act, a UPE means an entity that:
is not controlled by another entity; and
owns or controls, directly or indirectly, one or more constituent entities of a multinational enterprise
group.

Under the current definition of UPE, the UPE has to be resident in Kenya.
The threshold for Country-by-Country (“CbC”) reporting is currently a group’s gross turnover of Ksh. 95
billion. However, the Act does not specify the basis of determining the turnover. The Act provides a more
specific threshold of Ksh. 95 billion of the total consolidated group turnovers in the prior financial year of
income.
The Act further provides that a resident constituent entity (a member of a multinational group that is not
the ultimate parent entity) shall be required to file a CbC report if any one of the following conditions is
met:
a. the UPE is not obligated to file a CbC report in its jurisdiction of tax residence.
b. the jurisdiction in which the UPE is resident has a current international tax agreement which Kenya
is a party to but does not have a competent authority agreement with Kenya at the time of filing
the CbC report for the reporting financial year; or
c. there has been a systemic failure of the jurisdiction of tax residence of the UPE that has been
notified by theCommissioner to the constituent entity resident in Kenya.

WITHHOLDING TAX (WHT) – EFFECTIVE 1ST JULY 2023

WHT on Rental Income
Rental Income Tax Agent (persons receiving rental income on behalf of the owner of the premise)
appointed by the Commissioner shall be required to deduct WHT at 7.5% from the rental income and
remit it to the Commissioner within 5 working days after the deduction together with a return specifying
the amount of the payment and the amount of tax deducted.

Prior to enactment of Finance Act, 2023, the WHT was due on 20th of the following month.
The Act reduces the rental income WHT rate for residents from 10% to 7.5%. The WHT rate for non-
residents remains at 30%. A WHT certificate on the tax withheld on the rental income shall be issued upon
filing the rental income WHT return.
Neither the Act nor the ITA provides that the tax withheld on rental income is final. Therefore, the
appointment of a Rental Income Tax Agent has the potential to create a double-withholding risk on
the same rental income where a tenant is appointed as a rental income-withholding agent and the
landlord’s agent is appointed a rental income withholding agent. Further, the Act does not provide any
remedy for landlords who may suffer double withholding on the rental income.

WHT on sales promotion, marketing, and advertising services

The Act re-introduces WHT in respect to sales promotion, marketing and advertising services offered by
residents at the rate of 5% on gross income. (Effective 1st July 2023)
WHT on Digital Content Monetization (DCM)
DCM will be subject to WHT at the rate of 5% for residents and 20% for non – residents not

having a PE. WHT on Adjusted Expenses (Effective 1st July 2023)

 INVESTMENT ALLOWANCE

Dock Capital Allowances (Effective 1st January 2024)

The Act introduces Industrial Building allowance at a rate of 10% per annum and dock allowance at a rate
of 10% per annum on straight-line basis.
The Act expands the definition of ‘civil works’ to include “earthworks for telecommunication equipment
and construction works undertaken in connection with the installation and maintenance of
telecommunication equipment and related structures.”
The Act also widens the definition of manufacture to include refining. Therefore, persons involved in
refining will now enjoy deductions of investment allowance regarding their buildings and machinery.
To enhance clarity on capital deduction, the Act introduces the following definitions:

Dock includes a container terminal berth, harbor, wharf, pier, jetty, storage yard, or
other works in or at which vessels load or unload merchandise but does not
include a pier or jetty used for recreation
Industrial building includes a building in use for the purpose of transport, bridge, tunnel, inland
navigation water and electricity or hydraulic power undertaking

Machinery used for means machinery used directly in agricultural activities including tilling,
agriculture planting, irrigation, weeding and harvesting

Telecommunications includes civil works deemed as part of the telecommunication equipment or

equipment civil works thatcontribute to the use of the telecommunication equipment

Investment Deductions
The definitions are aimed to provide clarity on the classifications for ease of capital allowance
computation on qualifying expenditure.
ADVANCE TAX ON COMMERCIAL VEHICLES – EFFECTIVE 1ST JANUARY 2024

The Act revises:

Advance tax in respect to Commercial vehicles (vans, pickups, trucks, prime movers, trailers,
lorries excluding tractors or trailers used for agricultural purposes) from the higher of Kshs. 1,500 per
ton of load capacity per year or Ksh. 2,400 per year to the higher of Kshs. 2,500 per ton of load
capacity per year or Ksh. 5,000 per year.
Advance tax in respect to saloons, station wagons, minibuses, buses and coaches from the
higher of Ksh. 60 per passenger capacity per month or Ksh. 2,400 per year to the higher of Ksh. 100 per
passenger capacity per month or Kshs. 5,000 per year.
CAPITAL GAINS TAX (CGT) - EFFECTIVE 1ST JULY 2023

The Act expand incomes subject to CGT to encompass the following:

a) the whole of the gains which accrued to a partnership on or after 1st January 2015, on the transfer
of property situated in Kenya; or
b) gains derived from the alienation of shares or comparable interests, if, at any time during the
year preceding the alienation, the shares or comparable interests derived more than 20% of
their value from immovable propertysituated in Kenya; or
c) gains, other than those to which subparagraph (a) applies, derived from the alienation of
shares of a resident company if the alienator, at any time during the year preceding such
alienation, held at least 20% of the capital of thatcompany:
Provided that, the person alienating the shares shall notify the Commissioner in writing where there
is a change of atleast 20% in the underlying ownership of the property.
Where property is transferred in a transaction that is not subject to CGT, and the property is subsequently
transferred in a taxable transaction within a period of less than five years, then the adjusted cost in the
subsequent transfer shall be based on the original adjusted cost as determined in the first transfer.
The Act changes the due date for CGT from the date of the transfer to the earlier of:
a) receipt of the full purchase price by the vendor; or

b) registration of the transfer.

The Act seeks to provide further guidance on the exemptions for CGT on internal restructuring where it
would now be a requirement for the group to have existed for a period of at least two years for any
restructuring to be exempted from CGT.
Following the above amendments, capital gains enjoyed by partnerships from the transfer of
immovable property will be subject to CGT at the partnership level and not at the individual level. This
will reduce the tax compliance burden for the partners in partnerships as CGT will be payable by one
person (the partnership) instead of all the partners based on their revenue sharing agreements.
Further, alienation of shares (or comparable interests) that have immovable property forming at least 20%
of their underlying value shall be subject to CGT.
Gains derived from the alienation of shares of a resident company if the alienator (in the preceding 365
days) directly or indirectly held at least 20% of the capital of the company shall now be subject to CGT.
Ordinarily, a person transferring property that they acquired in a CGT exempt transfer is required to denote
the adjusted cost in the later transfer as the fair market value of the property at the time they
acquired it through the exempt transfer. However, if such persons opt to transfer such property within
5 years of acquiring it, they shall be required to denote the adjusted cost in the later transfer as the
adjusted cost declared in the exempt transfer. This may significantly increase CGT on the disposal of
inherited property and property transferred during group restructuring if such disposals are done within 5
years of the initial transfer.
Going forward, CGT will be due at the earlier of registration of the transfer or receipt of the full purchase price
by the vendor.
The amendment is aimed at sealing the CGT revenue loopholes.
CHANGES UNDER THE SPECIAL ECONOMIC ZONE (“SEZ”) ENTERPRISES - EFFECTIVE 1ST JULY 2023
The Act introduces an exemption for gains on transfer of property within a SEZ enterprise, developer and
operator.
A further exemption is granted on royalties, interest, management fees, professional fees, training fees,
consultancy fee, agency or contractual fees paid by a special economic zone developer, operator or
enterprise, in the first ten years of its establishment, to a non-resident person.
This is a welcome move to SEZ enterprises; as such, exemptions would encourage more economic
development for these enterprises. However, this amendment may be construed as only exempting
property transfers within an entity thereby negating the objective of the exemption as a transfer within
a company is not subjected to Income Tax.
VALUE ADDED TAX ACT, 2013
(EFFECTIVE 1ST JULY 2023)
 ITEM PREVIUOS TAX PROVISION CHANGES BY THE IMPLICATIONS
FINANCE ACT 2023
VAT on petroleum Section 5 of the VAT Act provided The Finance Act VAT on petroleum
products In Kenya for the application of VAT at the makes amendments products at 16% with
rate of eight percent (8%) on the on section 5 of the expected increased
taxable value of the goods stated VAT Act by deleting cost of operation/
in Section B of Part I of the First this provision. living
Schedule of the VAT Act. Effective Date 1st
July 2023
Expansion of VAT Section 8 (2) of the Act provided The Act has The amendment
obligations for that the supply of services shall be amended section 8 seeks to bring into the
suppliers of services deemed to be made in Kenya if (2) of the VAT Act by tax bracket suppliers
without a fixed the supplier has no fixed place of deleting the words of imported digital
place of business in business in Kenya and the ‘not a registered services thereby
Kenya recipient of the supply is not a person’ and enhancing revenue
registered person. replacing them with collection.
the words a
‘registered or
unregistered person’.
Effective Date 1st
July 2023
Restriction on Section 17 of the VAT Act The Act has The introduction of
deductibility of provides that deduction of input amended Section 17 the connector ‘and’
input tax tax is not allowed until the first tax of the VAT Act by the taxpayer seeking
period in which a person holds deleting the word input tax credits is
the documentation prescribed ‘or’ and substituting required to evidence
under the Act or the registered it with the word that the VAT in
supplier has declared the sales ‘and’. Effective Date question has been
invoice in a return. 1st July 2023 declared (paid) to
the KRA by the
supplier of the goods
or services.
Introduction of VAT The act has introduced a subsection 8 to section 17 of Compensation is
on compensation the VAT Act as follows: deemed as a supply
for the loss of Where a bona fide owner of taxable supplies, who has and therefore liable
taxable supplies deducted input tax is compensated for the loss of the for output VAT. This
taxable supplies, the compensation shall be treated as a enhances revenue
taxable supply and — mobilization and
(a) if the compensation includes value added tax, the mitigates undue tax
compensation shall be declared and the value added burden by the KRA on
tax thereon remitted to the Commissioner; or refunds/input claims
(b) if the compensation does not include value added without
tax, the compensation shall be declared and subjected corresponding
to value added tax and the tax remitted to the outputs VATed.
Commissioner. Effective Date 1st July 2023
VAT registration of VAT Act Section 34 (1) contained The act has on The VAT Act makes it
imported digital a provision that persons supplying section 34 of the VAT mandatory that non-
services suppliers imported digital services over the Act deleted the residents offering
internet or an electronic network current provision and supplies over the
or through a digital marketplace including a new digital marketplace
are not subject to turnover of five provision which need not meet the
million shillings threshold of VAT provides that a threshold of KES 5
registration. person supplying million to do VAT
imported digital registration. This
services over the enhances tax
internet, an compliance and
electronic network equity.
or through a digital
marketplace shall
register whether or

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 not the taxable
supplies meet the
minimum turnover
threshold of five
million shillings.
Record keeping VAT Act Section 43 required to The amendment The change allows
of transactions not keeping of records of every under section 43 of record keeping on
limited to Kenya transaction in Kenya for a the VAT Act by digital, electronic
period of five years. deleting the words and remote storage
“in Kenya”. of records in various
locations globally.
Alignment of tariff The amendment has exempted various goods from The East African
definitions and VAT. Some of these include: Community
codes on exempt Other medicaments, Diagnostic or laboratory Common External
supplies reagents, Vaccines for human and veterinary Tariff was revised in
medicine; 2022 and some
Other medicaments, containing hormones or other classifications
products of heading no. 29.37, previously included
Other, medicaments containing hormones or other in the VAT Act were
products of heading 29.37 Containing corticosteroid rendered
hormones, their derivatives or structural analogue of redundant and
tariff; some of the
Chemical contraceptive preparations based on changes are aimed
hormones, on other products of heading 29.37 or at rationalizing the
spermicides; VAT legislation to
the CET.
Introduction of Taxable supplies made to or by a school feeding Lowered cost of
VAT exemption on programme recognized by the Cabinet Secretary feeding
supplies to/by a responsible for matters relating to education. programme aimed
school feeding at enhancing its
programme uptake and
sustainability.
Introduction of The amendment has been introduced at This makes it clear
VAT at the zero paragraph 26 of Part A of the Second Schedule to that supplies of
rate on inbound the VAT Act, inbound international sea freight inbound sea freight
international sea offered by a registered person as a zero-rated services by shipping
freight supply. Effective date 1st July 2023 lines that are VAT
registered in Kenya
are subject to VAT
at the zero rate.
Change of status The VAT Act lists these supplies The act has The act has lead to
from exempt to in the First Schedule as deleted all the an increase in the
standard rated exempt supplies. goods and cost of these
● Taxable goods & services for services listed supplies, maize
direct and exclusive use for alongside from the (corn) flour,
the construction of tourism exemption cassava flour,
facilities, recreational parks of schedule - First wheat or meslin
fifty acres or more, convention Schedule to the flour and maize
and conference facilities VAT Act. flour containing
● Plant, machinery and cassava flour by
equipment used in the more than ten
construction of a plastics percent in weight,
recycling plant. by introducing
● Fetal Doppler-Pocket (Wgd- standard rated
002) Pc and pulse oximeter- status.

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 finger held (Gima brand) Pc of
tariff number 9018.19.00.

Zero rating of The Act has Zero rated the following supplies: Lowered cost of
previously non- i. Exported taxable services. operation aimed at
zero-rated ii. Inbound international sea freight developing the
supplies iii. Liquified petroleum gas sectors, enhancing
iv. All tea and coffee locally purchased for the global
purpose of value addition before exportation competitiveness
subject to approval by the Commissioner- and alignment with
General. international best
v. The supply of locally assembled and practices.
manufactured mobile phones.
vi. The supply of motorcycles of tariff heading
8711.60.00
vii. The supply of electric bicycles
viii. The supply of solar and lithium-ion batteries.
ix. The supply of electric buses of tariff heading
87.02
x. Inputs or raw materials locally
xi. purchased or imported for the manufacture
of animal feeds.
xii. Bioethanol vapor (BEV) Stoves classified
under HS Code 7321.12.00 (cooking
appliances and plate warmers for liquid fuel).

NON – RESIDENTS INVOLVED IN A 100% GRANT FUNDED PROJECT – EFFECTIVE 1ST JULY 2023
The Act provides an exemption for non-resident contractors, sub – contractors, consultants or
employees involved in the implementation of a project that is financed 100% by a grant under an
agreement with the Government of Kenya and the development partner to the extent provided for
in the agreement.

MISCELLENEOUS CHANGES

To ensure gender neutrality, the Act amends Section 31(b) (c) by deleting the word “his”
and “he” as well as “his employer”; and substituting it with “the individuals” and “the individual’s
employer” (Effective 1st July 2023).
The Act has widened the list of financial institutions (for income tax purposes) to include
mortgage refinancecompanies licensed under the CBK Act (Effective 1st January 2024). As
a result of this amendment, interest paid to such mortgage refinance companies will be
exempt from withholding tax.

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 Excise Duty, 2015
Item Previous Current reading Implication
reading
Excise control Section 2 of the Deletion of the phrase The Amendment aligns the
definition Excise Duty Act, “section 23” and replacing it definitions to the provision
2013 (“EDA”) states with “section 24.” Effective titles i.e from part III to Part IV
that excise control Date: 01 July 2023 of the Act
has its meaning
assigned to it in
section 23.
Revocation of As per Section 10 Repealing section 10 of the Brings certainty to the
annual of the EDA, the EDA Effective Date: 01 July applicable rates by
inflation Commissioner 2023 eliminating powers of the
adjustment General commissioner with regards to
has powers to rates adjustments
adjust the specific
rate of excise duty
once a year to
take into account
inflation.
Suspension of Section 20 (5b) of the Commissioner is required. The amendment brings
a license the EDA provides provide the licensed person clarity to the procedural
issued under that the with written notice of the technicalities thereby
the EDA. Commissioner is action required to be taken minimizing misinterpretations.
required to provide before the date specified in
the licensed person the notice being not less
with written notice than fourteen days to
of the action remedy the
required deficiencies that led to the
to be taken before suspension of the licence
the date specified and revoke the
in the notice to suspension if the action is
remedy the taken within the specified
deficiencies that time: Effective Date: 01 July
led to the 2023
suspension of the
license and revoke
the suspension if
the action is taken
within the specified
time.
Clarity on Section 28 of the Introduction of subsections 6 The amendment brings
offences EDA provides for and 7 to section 28 of the clarity as to the offences
relating to the administration EDA with regards to offence and repercussions
excise stamps and use of Excise relating to excise stamps. enhancing compliance.
and other Duty stamps and Introduction of a fine of KES 5
markings other markings. million or a jail term not
Further, section 40 exceeding 3 years or both
of the EDA upon conviction to offences
provides that any relating to excise stamps.
person who The offences include:

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 contravenes a. Defacing or printing over
section 28 commits an excise stamp affixed on
an offence any excisable goods or
package;
b. Being in possession of
excisable goods on which
stamps have not been
affixed and which have not
been exempted from the
requirements under law;
c. Acquire or attempt to
acquire an excise stamp
without authority;
d. Prints, counterfeit, makes
or in any way creates an
excise stamps without
authority;
e. Being in possession of an
excise stamp which has
been printed, made or in
any way acquired without
authority;
f. Being in possession of,
conveys, distributes, sells,
offers for sale or trades in
excisable goods without
affixing excise stamps in
accordance with the Act or
Regulations; or
g. Being in possession of,
conveying, selling,
distributing, or trading in
excisable goods which have
be affixed with counterfeit
excise stamps follows, as well
as repeal section 40 of the
EDA.
Introduction of introduction of section 36A. (1) Despite the This enhances prompt
24 hours provisions of section 36, Excise Duty on betting and revenue collection while on
timeline to gaming, offered through a platform or other the other hand gives rise to
pay Excise medium, shall be remitted to the Commissioner by additional operation costs
Duty on a bookmaker within twenty-four hours from the on the taxpayers i.e filing
betting and closure of transactions of the day. (2) and remittance (initially
gaming For the purposes of this section, “closure of done by the 20th day of the
transactions of the day” means midnight of that succeeding month on
day. (3) The Commissioner may, by notice in the monthly transactions)
Gazette, require taxpayers in
any sector to remit Excise Duty collected on
certain excisable services within twenty- four hours
from the closure of transactions of the day.
Effective Date: 01 July 2023

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 Clarity in the The EDA provides Insertion of “or gaming” after This clarifies the definition of
definition of for the definition of the word “betting” so that it the amount thereby
amount amount wagered reads “the amount of money minimizing qualification
wagered or or staked to mean placed by a person conflict
staked the amount of for an outcome in a betting
money placed by or gaming transaction”.
a person for an Effective Date: 01 July 2023
outcome in a
betting transaction
Introduction of Manufacturers of alcoholic beverages to remit This enhances prompt
Daily excise duty within 24 hours upon removal of the revenue collection while on
remittance of goods from the stockroom. the other hand gives rise to
Excise Duty on additional operation costs
manufacturers on the taxpayers i.e filing
of alcoholic and remittance (initially
Beverages done by the 20th day of the
succeeding month on
monthly transactions).

Changes in rates for excisable services

Effective 1st July 2023
Item Old rate New rate
Excise duty on Telephone and internet 20% 15%
data services
Excise duty on fees charged for money 20% 15%
transfer services by banks, money transfer
agencies and other financial service

Excise duty on fees charged for money 12% 15%

transfer services by cellular phone

Excise duty on betting 7.5% 12.5%

Excise duty on gaming 7.5% 12.5%
Excise duty on prize competition 7.5% 12.5%

Excise duty on lottery (excluding 7.5% 12.5%

charitable lotteries)

Excise duty on fees charged on N/A 15%

advertisement on television, print media,
billboards and radio stations on alcoholic
beverages, betting, gaming, lotteries and
prize competitions

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 CHANGES TO EXCISE DUTY RATES AND INTRODUCTION OF NEW ITEMS
Effective 1st July 2023
Item Old rate (%) New rate (%)

Imported Glass bottles (excluding imported glass 25 35

bottles for packaging of pharmaceutical products)
Imported Alkyd 10 20
Imported Unsaturated polyester 10 20
Imported Emulsion VAM 10 20
Imported Emulsion -Styrene Acrylic 10 20
Imported Homopolymers 10 20
Imported Emulsion B.A.M 10 20
Imported fish N/A 10
Powdered juice N/A Kshs 25 per kg
Imported sugar purchased by a registered N/A
Kshs 5 per kg
pharmaceutical manufacturer
10% of value or Kshs 1.5
Imported cement N/A
per kg, whichever is higher
Imported furniture of tariffs heading 9403 excluding
furniture originating from East Africa Community
N/A 30
Partner States that meet the East African Community
Rules of Origin.
Imported cellular phones
N/A 10

Imported paints, varnishes and lacquers of heading NA 15

3208, 3209 and 3210

Imported non-virgin test liner of heading 4805.24.00 N/A 25

Imported non-virgin fluting medium of heading N/A 25

4805.19.00

Imported cartons, boxes and cases of corrugated N/A 25

paper Imported cartons, boxes and cases of
corrugated paper or paper board and imported
folding cartons, boxes, and case of non-corrugated
paper or paper board and imported skillets, free-hinge
lid packets of tariff heading 4819 .10 .00, 4819.20.10
and 4819.20.90

Imported plates of plastic of tariff heading N/A 25

3919.90.90, 3920.10.90, 3920.43.90, 3920.62.90 and
3921.19.90

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 TAX PROCEDURES ACT, 2015
Item Previous Current reading Implications
reading
Tax Decision inclusion of (e) a exclusion of tax refund and inclusion of Brings clarity to the
refund decision; in both a demand for penalty or late definition thus minimizing
the definition payment interest qualification conflicts.
Introduction of N/A Any multilateral agreement or treaty Effective competent
mutual that has been entered into by or on authority assistances with
administrative behalf of the Government of Kenya signatory parties.
assistance relating to mutual administrative
assistance in the collection of taxes
shall have effect in the manner
stipulated in such agreement or treaty.
Record Keeping N/A A trustee resident in Kenya who This enhances tax
Requirements for administers a trust registered in Kenya compliance and
a Trustee or outside minimization of avoidance
Kenya shall maintain and avail to the mechanisms.
Commissioner records required under a
tax law, whether the income
generated is subject to tax in
Kenya or not. Effective date 1st July
2023.

Withholding VAT The TPA in section The Act has amended Section 42(A) of The payment deadline will
42A provides that the TPA, to limit the exemption from create an administrative
the Commissioner withholding VAT to only payments burden for taxpayers from
may appoint a made for zero-rated supplies and to a compliance perspective.
person to withhold registered manufacturers who have
two percent of invested at least three billion in the
the taxable value preceding three years from 1st July
on purchasing 2022.
taxable supplies at · Previously, this exemption applied
the time of paying to zero-rated supplies and registered
for the supplies. manufacturers whose value of
The amounts investment in the preceding three
withheld are paid years was at least three billion from the
within on or before commencement of the TPA. This
the twentieth day specifies that the exemption for
of the month manufactures is anchored to
following the investment of at least three billion from
month in which for three years after 1st July 2022.
the deduction is · The Act has also changed the
made. remittance date of withholding VAT
However, the from the current timeline (by the 20th
withholding tax day of the month following the month
shall not apply to in which the deduction is made) to
the taxable value within five working days after the
of zero-rated deduction is made.
supplies and · The Act has also amended Section
registered 42 (A) of the TPA to align offences
manufacturers related to withholding VAT to be where
whose value of one fails to withhold VAT within five
investment in the working days after the deduction was
preceding three made.

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 years from the ·
commencement
of this Act is at
least three billion.

Appointment of N/A The Act has conferred power to the The provision seeks to
rental income Commissioner to appoint and revoke enhance tax compliance
tax agents appointment of rental income tax and prompt remittance
agents for the purpose of the thereby enhancing
collection and remittance of rental revenue cycle.
income tax to the Commissioner.
Offset of Section 47 of the Section 47 amendment to provide for The provision seeks to
overpaid taxes TPA allows the offsetting of overpaid taxes against enhance refund efficiency
against existing taxpayers to apply outstanding tax debts and future tax and administrative clarities
liability for a refund of liability. with regards to timing and
overpaid tax Where a taxpayer opts to apply for a expectations.
within 5 years of refund of taxes, The Act reduces the
the date which time within which the Commissioner
the tax was must refund the taxes from two (2)
overpaid. The years to six (6) months.
section provides The Act further provides that where an
that the overpaid application for refund has been
tax can be offset subjected to an audit, the
only against future Commissioner shall ascertain and
taxes. determine the application within 120
days failure to which, the application
shall be deemed to have been
ascertained and approved.
Objection Section 51 KRA to request the taxpayer to submit This brings clarity as to the
application and provides that information specified in a notice of procedural timelines and
validation where a Notice of objection within seven (7) days after a remedies required thus
objection lodged notice of invalidity of a notice of minimizing procedural
by a taxpayer has objection. conflicts and inefficiencies
not been validly Also, if the taxpayer fails to provide the
lodged, the documents or delays providing the
Commissioner shall documents, the Commissioner may
inform the make an Objection Decision within 60
taxpayer within 14 days.
days.
Settlement of Section 55 of the The Act extends the timeline for the The longer timeline is a
dispute out of TPA provides that settlement of disputes out of court/TAT welcome relief to
Court or Tribunal any disputes to be to 120 days. taxpayers to
settled out of comprehensively resolve
court must be technical matters which
settled within 90 requires time.
days.

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 Data N/A introduction of section 59A which The amendment provides
management provides for the establishment of a for a framework for the
and reporting data management and reporting Commissioner to collect
system system for the submission of electronic transaction data for the
documents. purpose of determining the
The system allows for the submission of taxes payable.
electronic documents relating to The system would
transactional data from persons especially be useful for the
selected and notified by the Commissioner to monitor
Commissioner. transactions in industries
The data include payments made by a viewed by the
person in the ordinary course of Commissioner to be at high
business, lump sum payments in risk of tax leakage.
respect of a royalty or such other The effective date for this is
commercial or financial transaction as 1 September 2023
may be designated by the
Commissioner.
Compliance with Section 86 of the repealing the section and providing The increased penalty in
Electronic Tax TPA provides that that where a taxpayer fails to issue an the is to ensure that
System where a taxpayer electronic tax invoice, submit a tax taxpayers fully comply with
fails return in electronic form or to pay a tax the various electronic tax
to submit a tax electronically as required by a tax law, systems that the KRA has
return in electronic they are liable to rolled out.
form or to pay a a penalty of KES 1,000,000 or ten times The effective date for this l
tax electronically the amount of the tax due, whichever is 1 September 2023
as required by is the higher.
a tax law, they are
liable to a penalty
of KES 100,000.
Remission of Section 89 repealed The amendment seeks to
penalty and (6)(7)(8) provides reduce tax expenditures
interest that the relating to abandonment
Commissioner of taxes. Further, the
may remit penalty provision seeks to ensure
or interest clarity on remission of
payable upon penalties and interest with
application by a introduction of an amnesty
taxpayer. under section 37E of the
TPA.
Impersonification N/A Introducing an offence of Aimed at deterring
impersonation of an authorized officer impersonation related
and impose an imprisonment for a term fraud.
not exceeding 3 years for the offence
effective date: 1 July 2023

Agency Notices (14) No notice Setting of limits within which the A relief to taxpayers as it
to Taxpayers’ shall be issued Commissioner can issue a notice to clarifies on when KRA
Debtors under this section collect tax from taxpayers’ debtors should impose an agency
unless the only if: notice.
Commissioner has a. The taxpayer has defaulted in
either confirmed paying tax under an agreed payment
its assessment plan; b. Commissioner has raised an
through an assessment and the taxpayer has not
Objection objected.
Decision and the c. The taxpayer has not appealed
taxpayer has against an objection decision within
defaulted to the stipulated timelines.
appeal to the Tax d. The taxpayer has made a self-
Appeals Tribunal assessment but not paid the tax due
within the before the due date, or

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 prescribed e. The taxpayer has not appealed
timelines against an assessment specified in a
decision of the Tribunal or court.
Effective 1st July 2023
International Tax The international Inclusion of any multilateral agreement It is unclear if the current
Agreements tax agreements or treaty entered by the Government in non-disclosure provisions
outlined in the TPA relation to mutual administrative (Sec 6A(2)) that apply to
only relates to assistance in the collection of taxes as the other international tax
international tax part of international tax agreements agreements will apply to
compliance, effective date: 1 July 2023 the multilateral
prevention of agreements for assistance
evasion of tax or in collection of taxes.
exchange of
information on tax
matters but not
collection of
taxes. It is unclear
if the current non-
disclosure
provisions (Sec
6A(2)) that apply
to the other
international tax
agreements will
apply to the
multilateral
agreements for
assistance in
collection of
taxes.

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 Tax Appeals Tribunal Act, 2013

Item Previous reading Current reading Implication

Appeal Section 13 provides that Appellants to the Tax Appeals Tribunal The provision
form to after filing the Notice of to submit the “appealable decision” creates an
TAT Appeal at the Tax Appeals instead of the “tax decision” and avenue for
Tribunal (“Tribunal”), an other documents as may be taxpayers to
appellant is required to file: necessary to enable the Tribunal to introduce
a memorandum of make a decision on the appeal in documents
appeal; addition to the memorandum of considered vital to
statements of facts; and appeals and statement of facts the appeal.
the tax decision.

Miscellaneous Amendment
ITEM PREVIOUS TAX POSITION Changes as per the IMPLICATIONS
Finance Act, 2023
Reduction in rate of The Miscellaneous Fees and The act has reduced the rate Reduction in
Import Declaration Levies Act, 2016, provides that, of Import Declaration Fee international trade
Fee IDF shall apply at the rate of from 3.5% to 2.5% of the related costs
3.5% on goods imported for customs value. boosting global
home use. trade.
Scrapping of reduced The Miscellaneous Fees and The Act has repealed this Manufacturers and
rate of Import Levies Act provides for a provision. players in the
Declaration Fee on reduced Import Declaration Fee construction of
imports by rate of 1.5%. affordable housing,
manufacturers and will have to incur
players in the additional
construction of importation costs
affordable housing with Import
Declaration Fee
applying at the rate
of 2.5%.
Scrapping of reduced The Miscellaneous Fee and The Act has repealed this Goods imported
rate of IDF on goods Levies Act provides that goods provision. under duty remission
imported under duty imported under the East African will be subject to
remission Community Duty Remission Import Declaration
Scheme are subject to a Fee at the rate of
reduced rate of import 2.5% effectively
Declaration Fee at 1.5%. increasing the cost
of manufacture
which is bound to be
passed on to
consumers.

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 Introduction of an The export and investment The Act has introduced an This levy will
export and investment promotion levy does not exist exports and investment significantly increase
promotion levy under the current tax laws. promotion levy at the rate of the taxes paid on
10% of the Customs value to importation of the
the Miscellaneous Fee and various items which
Levies Act. already attract
import duty at the
rates of 0%, 10%, 25%
and 35%.
Reduction in rate of The Miscellaneous Fee and The Act has reduced the rate This will reduce the
Railway Development Levies Act provides that, Railway of Railway Development Levy cost of importation.
Levy Development Levy shall apply at to 1.5%. Effective 1st July 2023
the rate of 2% on goods
imported for home use.
Scrapping of reduced The Miscellaneous Fee and The Act has deleted this The deletion of the
rate of Railway Levies Act provides for a provision. Effective 1st July provision have no
Development Levy on reduced Railway Development 2023 adverse impact.
imports by Levey rate of 1.5%.
manufacturers
and players in the
construction of
affordable housing
Changes in the First The Miscellaneous Fee and The act has now stripped the Stability of export
Schedule of the Levies Act provides for export commission on export levy be price will be
Miscellaneous Fee levy on various products of applied on additional base enhanced making
and Levies Act (goods Chapter 41, 43, 80, and 81 at metals of tariff number Kenya exports
subject to export levy) varied rates. 810500.00 Bismuth and attractive
articles thereof including
waste and scrap,8109,30.00
waste and scrap of
zirconium,4101.40.00. hides
and skins of equine
animals,8107.30.00 waste and
scrap of cadmium,8110.20.20
waste and scrap of antimony.
Effective 1st July 2023
Changes in Part A of The Miscellaneous Fee and Change to the Second Changes to the
the Second Schedule Levies Act provides for the Schedule will be a reprieval Second Schedule
to the Miscellaneous exemption of the following to the affected stakeholders. will be a relief to the
Fee and Levy Act, goods from Import Declaration Import Declaration Fee affected
goods exempt from Fee: exemption on LPG will help stakeholders.
Import Declaration ● Gifts and supplies for the government to achieve RDL exemption on
Fee diplomatic and consular missions its goal of making LPG LPG will help the
and to the United Nations affordable with a view to government to
Missions; minimizing the destruction of achieve its goal of
● Aircraft, excluding aircraft of the making LPG
unladen weight not exceeding country’s forest cover and affordable to its
2,000kg and helicopters of dependence on biomass fuel citizens.
heading 8802.11.00 and
8802.12.00; and
● All goods, including materials
supplies, equipment, machinery
and motor vehicles for the
official use by the Kenya
Defense Forces and National
Police Service.

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 Changes in Part B of The Miscellaneous Fee and The amendment to the .
the Second Schedule Levies Act provides for the Schedule clarifies that goods
to the Miscellaneous exemption of the following for official use by diplomatic
Fee and Levies Act, goods from Railway and consular missions and
goods exempt from Development Levy: the United Nations and its
Railway Development agencies are exempt from
Levy. Railway Development Levy.

Tax free treatment of No Provision Introduction of a new Currently, KRA

an amount received paragraph 5(2)(a)(iv) to recognizes the
by an employee from provide for tax free treatment application of AA
their employer as of mileage reimbursement for Kenya rates for
mileage employees who receive such reimbursement of
reimbursement payments when travelling to employee mileage.
perform official duties.

Tax treatment of club Income Tax Act, Section 16(2)(v) Introduction of a new Deletion of Section
entrance and provides that club fees including paragraph 5(2) (fa) that 16(2)(v) means that
subscription fees paid entrance and subscription fees provides for taxation of an club entrance and
by an employer on paid by an employer on behalf employee in relation to club subscription fees
behalf of an of an employee are not entrance and subscription paid by an employer
employee deductible expenses in the fees. on behalf of an
ascertainment of the taxable employee may be
corporate income of the allowed as a
employer. deductible expense
on the employer’s
Income.
Reimbursement of No Provision An Amendment to the This provision will
expenditure incurred Income Tax Act has result in public
by public officers introduced a new paragraph officers not being
for the purpose of 5(4) (fa) providing that any taxable on any
performing official amount paid or granted to a amounts reimbursed
duties public officer to reimburse an for the following:
expenditure incurred for the 1. expenditure
purpose of performing official incurred for the
duties shall not be taxable on purpose of
the public officer, performing official
notwithstanding the duties.
ownership or control of any 2. public officers will
assets purchased. not be taxable on
any assets
purchased using the
amounts so
reimbursed,
regardless of the
ownership or control
of the assets
purchased.
Amendment to the Section 5(6)(c) of the ITA The Act seeks to amend The previous
definition of market provides that market value in Section 5(6)(c) of the ITA to amendment to this
value in relation to an relation to a share, means: read as follows: section in the
employee share i) where the shares are fully “market value”, in relation to Finance Act, 2022
ownership plan listed on any securities a share, means - moved the tax point
exchange operating in Kenya, (i) where the shares are for the benefits
the mid-market value on the fully listed on any securities chargeable to tax
date the shares were granted exchange operating in under an employee
by the employer; or Kenya, the mid-market value share ownership
ii) where the shares are not fully on the date the option was plan from vesting
listed, the price which the shares exercised by the employee; date to the date of

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 might reasonably be expected or exercise.
to fetch on sale in the (ii) where the shares are not The changes will
open market, which, shall be fully listed, the price which ensure that taxation
agreed upon with the the shares might reasonably of benefits under an
Commissioner before the grant be expected to fetch on sale employee share
of the options; in the open market, when the ownership plan is
option is exercised; based on the market
The effective date for this is 1 value on the date
January 2024. the option is
exercised.
Deferral of taxation of No Provision It is the
the award of shares to Government’s efforts
employees of an creating a
eligible start-up conducive
environment for
young businesses by
introducing policies
that make Kenya an
attractive
investment
destination.
Tax free treatment of The amendment will be affected on the Income Tax Act through Currently, KRA
an amount received introducing a new paragraph 5(2)(a)(iv) to provide for tax free recognizes the
by an employee from treatment of mileage reimbursement for employees who receive application of AA
their employer as such payments when travelling to perform official duties, Kenya rates for
mileage provided that such reimbursement is based on the standard reimbursement of
reimbursement mileage rate approved by the Automobile Association of Kenya. employee mileage.

Tax treatment of club Income Tax Act, Section 16(2)(v) The Act deletes Section Deletion of Section
entrance and provides that club fees including 16(2)(v) of Income Tax Act 16(2)(v) means that
subscription fees paid entrance and subscription fees and introduce a new club entrance and
by an employer on paid by an employer on behalf paragraph 5(2)(fa) that subscription fees
behalf of an of an employee are not provides for taxation of an paid by an employer
employee deductible expenses in the employee in relation to club on behalf of an
ascertainment of the taxable entrance and subscription employee may be
corporate income of the fees which have been allowed as a
employer. disallowed against the deductible expense
employer’s income. on the employer’s
Income.
Reimbursement of No Provision An Amendment to the This result in public
expenditure incurred Income Tax Act has been officers not being
by public officers made introducing a new taxable on any
for the purpose of paragraph 5(4)(fa) providing amounts reimbursed
performing official that any amount paid or for the following:
duties granted to a public officer to expenditures
reimburse an expenditure incurred for the
incurred for the purpose of purpose of
performing official duties shall performing official
not be taxable on the public duties, any assets
officer, notwithstanding the purchased using the
ownership or control of any amounts so
assets purchased. reimbursed,
regardless of the
ownership or control
of the assets
purchased.

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 Amendment to the Section 5(6)(c) of the ITA The act amends Section The previous
definition of market provides that market value in 5(6)(c) of the ITA to read as amendment to this
value in relation to an relation to a share, means: follows: “market value”, in section in the
employee share i) where the shares are fully listedrelation to a share, means - Finance Act, 2022
ownership plan on any securities exchange (i) where the shares are fully moved the tax point
operating in Kenya, the mid- listed on any securities for the benefits
market value on the date the exchange operating in chargeable to tax
shares were granted by the Kenya, the mid-market value under an employee
employer; or on the date the option was share ownership
ii) where the shares are not fully exercised by the employee; plan from vesting
listed, the price which the shares or date to the date of
might reasonably be expected (ii) where the shares are not exercise.
to fetch on sale in the fully listed, the price which
open market, which, shall be the shares might reasonably
agreed upon with the be expected to fetch on sale
Commissioner before the grant in the open market, when the
of the options; option is exercised;
The effective date is 1
January 2024.
Deferral of taxation of The act introduces a new subsection 5(7) in the Income Tax Act The changes targets
the award of shares to creating provision on taxation of the benefit from shares start-up companies
employees of an allocated to an employee by an eligible start-up in lieu of cash hence this move is
eligible start-up emoluments payable by virtue of employment shall be deferred likely to boost the
and taxed within thirty days of Government’s efforts
the earlier of: of creating a
a) expiry of five years from the end of the year of the award of conducive
the shares; environment for
b) the disposal of the shares by the employee; or young businesses by
c) the date the employee ceases to be an employee of the introducing policies
eligible start-up. that make Kenya an
attractive
investment
destination.

Introduction of tax The Act introduces a new section 31A to provide that a resident The change will
relief on post- individual who proves that in a year of income the person has introduce an
retirement medical contributed to a post-retirement medical fund shall for that year additional tax relief
fund contributions of income be entitled to a personal relief referred to as post- to be known as post-
retirement medical fund relief. The amount of post-retirement retirement medical
medical fund relief shall be 15% of the amount of contribution fund relief. This
paid or KES 60,000 per annum, whichever is lower. effective date additional relief will
is 1 January 2024. supplement the
current tax reliefs
provided under the
Income Tax Act,
including insurance
relief and personal
relief.
Deductions into the The Act introduces a new Section 31B in the Employment Act, These introduction of
National Housing 2007 to provide that an employer shall pay to the National additional
Development Fund Housing Development Fund established under Section 7 of the deductions from
Housing Act, in respect of each employee: employee salary will
(a) the employer’s contribution at 1.5 per cent of the further reduce the
employee’s monthly basic salary; and take home pay of
(b) the employee’s contribution at 1.5 per cent of the employees and
employee’s monthly basic salary, overall employer
Provided that the sum of the employer and employee cost on human
contributions shall not exceed five thousand shillings a month. capital.

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 Taxation Human Resource
Management
Our tax advisory services address the
needs and objectives of our clients, Services
enabling them to balance compliance
with value creation. We have a strong Our Human resource management
team of tax specialists that enhances services cover: Personnel recruitment &
our client business by anticipating the selection, wage, salary & incentive
strategic opportunities and risks that plans etc.
may impact their tax situations.

Business Advisory Book-keeping

Services
Our Bookkeeping Services cover
We provide Business Advisory Services Preparation and maintenance of simple
to profit & non- profit-making cash book, Preparation and
organizations. Maintenance of books of maintenance of petty cash book etc.
accounts etc

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info@taxplan.co.ke | +254721 587 039