New Taxation measures introduced by the Kenya National Treasury are expected to generate an additional Ksh. 37 billion in revenues.
The Kenya National Treasury has proposed the review of Capital Gains Tax legislation to enhance fairness and equity.
The Capital Gains Tax will be increased from 5% to 12.5% in the effort to harmonize with the other East African Countries.
Further, the Kenya National Treasury plans to expand the tax base for withholding tax. In the past it used to cover professional and management fees. Now it include security services, cleaning and fumigation services, catering services offered outside hotels and restaurants, transportation of goods, sales promotion, marketing and advertising services.
CS Rotich has proposed a number of tax reforms to expand the tax base touching on the digital economy.
The Kenya National Treasury aims at modernizing Kenya’s taxation system. This will be reflected in the draft Income Tax Bill which is at the advanced stages.
Value Added Tax (VAT)
- CS Rotich proposed to exempt locally manufactured motherboards from VAT in order to make locally manufactured electronics more competitive;
- In order to promote recycling of plastics in Kenya, The Kenya National Treasury has proposed a lower corporation tax (15% for five years) to encourage companies to invest in plastic recycling.
- Details of Customs measures will be published on EAC Gazette and will be effective from 1 July 2019;
- Kenya is increasing the external tariff on paper and paper products in order to protect local industries and as a result, external tariff will be increased from 10% to 25%.
- Import duty which was increased last year will be retained at 25%.
- Logging of trees was banned in Kenya last year and this has severely affected Kenyans who depend on raw timber to manufacture furniture and other related products. In order to address these concerns and at the same time protect Kenyan forests, National Treasury has lowered import duty on raw timber from 10% to 0%.
- However to protect local industry from influx of cheap finished timber products, Kenya National Treasury has proposed to retain an ad valorem rate of import duty at 25%;
Increased Taxation on BETTING Activities
The Kenya National Treasury has introduced excise duty on all betting activities at the rate of 10% of the amount staked. This new tax is expected to curtail the negative impact of betting on young people and vulnerable members of the society.
Electric Powered motor Vehicles
Currently, there is a low uptake of electric vehicles in Kenya despite the environmental benefits associated with these type of vehicles.
The CS Treasury proposed to reduce the excise duty on motor vehicles fully powered by electricity to 10 percent.
Excise Duty on Cigarettes, wines and spirit
The excise duty in wines, cigarettes and spirits are expected to increase to 15 percent in FY 2019/2020.
- 750 ml bottle of wine will have an excise duty of Ksh. 136 hence Ksh. 18 more than the current rate;
- 750 ml of whisky excise duty will increase by Ksh. 24 to Ksh. 182;
- A packet of 20 cigarettes will attract Ksh. 61 in excise duty per packet;
Requirement to have KRA PIN to open bank account
Foreigners will be exempted from having KRA Pin in order to open bank accounts. This is after realizing that the requirement makes it not conducive for foreigners to seamless engage in Kenya’s financial sector. In order to make that possible the Tax Procedures Act will be amended.
Fees and Levies
The Kenya National Treasury introduced an anti-adulteration levy on illuminating kerosene in order to prevent or reduce adulteration of fuel. This has affected the manufacturers of resin and paint through increased cost of production.
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To remedy this, the CS Treasury has directed that new provisions will be introduced in the Miscellaneous, Fees and Levies Act 2016 to provide for refunds on the levy paid by the paint and resin manufacturers.
