The Bill received its first reading in the National Assembly on May 13 and is currently being debated and analysed in the public domain.
The Finance Bill 2024 has been described as a mixed bag of problematic and good proposals.
Via the bill, the National Treasury aims to raise Ksh3.354 trillion, made up of common payments of Ksh2.913 trillion and appropriations-in-aid of Ksh441 billion. This follows the study of the 2024/2025 Budget Policy Statement (BPS) by the Parliamentary Budget and Appropriation Committee, which authorized payments of Ksh3.914 trillion.
The bill received its first reading in the National Assembly on May 13 and is now being discussed and studied in the public domain.
The bill leans better towards Appropriations in Aid than what we have been seeing in the earlier Finance Bills. It places a heavy emphasis on Value-added Tax (VAT) immunities and zero rating—for illustration, the bread will finish to be VAT zero-rated, meaning that suppliers will pass the cost on to the end customer.
There is also a recommendation to exempt the Kenya Revenue Authority (KRA) from the rules of the Data Protection Act in accessing taxpayers’ data.
There is a positive recommendation to amend the Income Tax Act, raising the monthly permitted pension removal from the current Ksh 20,000 to Ksh 30,000 (moving from a provision of either Ksh 20,000 or 30 percent, whichever is lower, to a flat rate of Ksh 30,000).
The motor vehicle tax
The bill proposes a 2.5 percent tax on the vehicle’s value, with a minimum of Ksh5,000 and a maximum of Ksh100,000. Given the surge in motor cars on Kenyan roads, the proposal seeks to widen the tax base by taxing motor vehicle owners.
Other key highlights
- VAT-related changes
- Banking services
Banking services are about to get more costly since the following will no longer be VAT-exempt. (VAT will apply).
- Making any advances or the granting of honor.
- Cheque handling, processing, clearing and payment, issuance of credit & debit cards, telegraphic money transfers, foreign exchange transactions (including supply of foreign drafts and international money orders), management of unit trusts or collective investment projects registered by the Capital Markets Authority (CMA) and managed by the trustees of the scheme.
Already, the Kenya Bankers Association (KBA) has released a statement on the proposed standards rating of VAT on banking services, urging Parliament to reconsider the proposal.
KBA Chief Executive Officer Raimond Molenje said, “The advanced costs of banking to customers will hamper financial efforts, especially affecting low-income individuals and small businesses. Coupled with excise duty, taxation on financial services would reach 40 percent from the current 15 percent (excise duty only), especially affecting affordability and accessibility.”
- Other VAT-related changes
They include the recommendation to remove the VAT immunity for betting, gaming, and lottery services and set a standard VAT rate of 16 percent.
The bill further suggests that VAT exemptions on certain goods and services in tourism, manufacturing, and building sectors be removed, aiming to standardize the tax structure across various sectors.
- Excise Duty changes.
The Finance Bill 2024 proposes to raise excise duty for telephone and internet services, money transfer assistance by telecommunications providers, and fees charged for money transfer services from 15 percent to 20 percent.
Further, it is proposing to extend the excise duty related to adverts on alcoholic beverages, betting, gaming, lotteries, and prize contests at a rate of 15 percent to include advertisements on the internet and social media.
It further proposes to amend a provision of the Finance Act 2023 mandating 24-hour excise duty remittance on alcoholic beverages by extending the period to five working days. The bill also contains a recommendation to slap a 25 percent excise duty on vegetable oils.
So far, the Edible Oils Sub-sector of the Kenya Association of Manufacturers (KAM) has warned of severe effects of the proposed 25 percent excise duty on vegetable oils included in the Finance Bill 2024.
“If enforced, this excise duty will trigger an unprecedented surge in the price of cooking oil, a staple in Kenyan households. The cost of this essential commodity is set to skyrocket by 80 percent, rendering it unaffordable for millions of Kenyans,” the Edible Oil Manufacturers Association of Kenya said in a report.
- Digital Superhighway
Those operating in the digital space and monetizing digital content will face a 20 percent tax for non-residents and a five percent tax for residents. Additionally, the bill offers a shift from a Digital Service Tax (DST) to a Significant Financial Presence Tax at 30 percent for certain non-residents.
- Infrastructure Bonds
The bill proposes to tax good income from Infrastructure Bonds (IFBs). Under these proposed changes, previously issued IFBs will not be eligible for taxation, but newly issued IFBs are set to be subjected to a five percent Withholding Tax (WHT).
- Tax Procedures Act
The bill wants to expand the timeframe for objection decisions from 60 to 90 days. Additionally, there is a proposal to ban weekends and public holidays from the computation of tax-related deadlines. It is further pushing for the integration of KRA’s system to make it mandatory for certain taxpayers to improve real-time document compliance and compliance monitoring.
- Export and Investment Promotion Levy
The bill is also seeking to reduce the Export and Investment Promotion Levy from 17.5 percent to a max of three percent on different items. The levy currently also applies to vodka, cooking stoves, milk & balm of a fat range by weight surpassing one percent but less than six percent.
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