Tax, VAT, customs and trade alerts

In this alert:

Tax Alert - Alert on changes proposed by recent Tax Amendment Bills

This Tax Alert provides an in-depth analysis of the proposed amendments in the Tax Laws (Amendment) Bill, 2024, and the Tax Procedures (Amendment) (No. 2) Bill, 2024 (the “Bills”), presented to Kenya's National Assembly on 4 November 2024. These Bills aim to revise various tax laws, including the Income Tax Act, Value Added Tax Act, Excise Duty Act, Tax Procedures Act, and the Miscellaneous Fees and Levies Act. Some of the key amendments proposed by the Bills include:

• The introduction of new employment tax reliefs ranging from increase in the tax-free thresholds to tax reliefs for contributions to the Social Health Insurance Fund and Affordable Housing Levy. These reliefs will be welcomed given the inflationary impact on taxpayer wages over the years.

• The imposition of withholding tax on goods supplied to public entities. The introduction of a tax on goods within the Income Tax Act is a trend of shifting the focus of the Income Tax Act from the taxation of income to a turnover tax system.

• Another amendment to the digital services tax which is now replaced with the significant economic presence tax. This is the fifth proposed amendment that has been introduced in respect of the digital services tax in the last four years demonstrating the uncertainty of tax policy around digital platforms.

• The trend of increasing the Commissioners powers and constraining taxpayer’s rights continues under the Tax Procedures Act. The amendments to integrate taxpayer’s systems with the Commissioners may intrude on taxpayer’s privacy.

• Exemption of "transfer of a business as a going concern" from VAT which provides a welcome relief to taxpayers pursuing business restructuring, as they will not be required to charge VAT on the transaction.

In this Alert, we provide a comprehensive overview of the changes proposed (including the changes highlighted above), their potential impact on taxpayers, and the broader implications for tax administration in Kenya.