A Summary of the Kenya Finance Bill, 2024

I know reading the entire finance bill can be daunting, for that reason, I have read for you and below is a summary of key concepts within the Kenya Finance Bill, 2024.

The proposed bill is expected to take effect between July 2024 and January 2025. According to the bill, the reforms are intended to be a part of a broader strategy to align the tax system in Kenya with international practices and enhance economic resilience. However, a significant majority of Kenyans are against the bill.

New Taxes That Have Been Introduced

• Motor Vehicle Tax: There has been an introduction of a 2.5% tax on the value of motor vehicles, with a minimum of KES 5,000 and a maximum of KES 100,000.
• Significant Economic Presence Tax: This is a newly introduced tax that is aimed to replace the Digital Service Tax with a 30% tax on non-resident entities earning income from digital services in Kenya.
• Minimum Top-Up Tax: Moreover, there has been introduction of a 15% tax on resident entities in multinational groups with a turnover above EUR 750 million, ensuring they pay a minimum level of tax.

Changes to VAT:

• Increase in VAT Registration Threshold: There has been an increase in the registration of VAT from KES 5 million to KES 8 million to reduce the burden on small businesses.
• Application of VAT on Additional Services: There is an enormous addition of VAT tax on various services such as financial services i.e. credit and debit card issuance, and certain tourism and construction services.

Corporate and Individual Tax Changes:

• Pension Contribution Limits: the limit for pension contribution has been increased from KES 20,000 to KES 30,000 per month.
• Tax Deductions for Contributions on Various Sectors: Contributions to the Social Health Insurance Fund, post-retirement medical funds, and affordable housing are now deductible expenses.

Administrative Changes:

• Extension of Objection Decision Period: The Kenya Revenue Authority (KRA) will now have 90 days to issue objection decisions, up from 60 days, to allow more thorough reviews.