Inside President William Ruto’s Finance Bill 2024

The following are changes in respect to the Finance Bill 2024:

1. Banking services will no longer be VAT exempt such as:

• Making of any advances or the granting of credit.
• Cheque handling, processing, clearing & settlement.
• Issuance of credit & debit cards
• Telegraphic money transfer
• Foreign exchange transactions

2. Allowable pension deduction being increased from Kes 20,000 to Kes 30,000 per month.

3. The Tax Procedures Act is being aligned with the Interpretation and General Provisions Act
around the due date for settlement of tax obligations. Going forward computation of the period will exclude Saturdays, Sundays, or public holidays.

4. Amendment of the Data Protection Act to exempt KRA from constraints in access to personal data where access to that data is deemed to be necessary for the assessment, enforcement or collection of any tax or duty under a written tax law.

5. The supply of ordinary bread will cease being VAT zero rated implying suppliers will no longer be able to claim the input element & pass the cost to the end consumers.

6. The Bill proposes to introduce an Eco Levy

• Office machines at Kes 98/unit
• Calculating machines at Kes 225/unit
• Automatic data processing machines at Kes 225/unit
• Arts & accessories at Kes 98/unit
• Telephones (including smart phones) at Kes 225/unit.
• Microphones & speakers at Kes 98/unit
• Monitors & projectors at Kes 1,275/unit
• There’s a class of diapers that will also be subject to the levy at Kes 98/unit.

7. Treasury is proposing the repeal Sec30A of the Income Tax Act – Sec30A of the Income Tax Act provides for Affordable Housing Relief (15.0% capped at Kes 9,000.0 per month or Kes 108,000.0 per annum).

8. Amending the Income Tax Act to provide for Advance Pricing Agreements (APAs).

• If you are in the transfer pricing space, there is hope for greater certainty with respect to tax outcome of international transactions.
• On the side of KRA, this should really help scale down the cost of administration on transfer pricing affairs.
• The APA shall be valid for a period that does not exceed five consecutive years. 9. Motor Vehicle Tax:
• 2.5% the value of the vehicle with the floor being set at Kes 5,000 & the ceiling is set at Kes 100,000.
• One thing to note about this tax is the penalty – 50.0% of the uncollected tax + the actual amount of uncollected tax.

10. Proposal around filing for tax refunds:

• current case – the law only refunds VAT settlement within 6 months & every other tax within 5 years, Finance Bill 2024 proposes to have only income tax refunds within 5 years & every other tax within 6 months.

11. The National Treasury has proposed to increase the rate of Import Declaration from the current 2.5% of the customs value to 3.0%.

12. Alcoholic beverage manufacturers – window for remitting excise duty collections is to be revised from the current 24hrs to 5 working days.

13. Medium-term Revenue Strategy, the threshold for VAT in Kenya will be bumped up from Kes 5.0 Millon to Kes 8.0 Millon.

14. Kenya plans to abandon the Digital Services Tax (DST) & adopt the Significant Economic Presence Tax:

• The taxable profit of a non resident person liable to pay the SEP tax shall be deemed to be 20.0% of gross turnover after which the tax is charged at 30.0%. Coming from 1.5% DST to what is a 6.0% effective rate.

15. Changes around Value Added Tax withholding agents

• Finance Bill 2024 proposes to do away with the Kes 3.0 billion investment threshold.
• Agents will now be expected to remit collections to KRA within 5 working days & not the 20th of every month.

16. eTIMS:

• · KRA will be empowered to require a taxpayer to integrate eTIMS.
• Failure to comply with this requirement will see the taxpayer charged with Kes 2.0M every month.

17. Sec14 of the Excise Duty Act is being repealed.

• It means manufacturers will no longer be able to use excise duty paid in respect of excisable imports used as raw material to offset their obligation on excise for the finished product.
• It also means those who pay excise duty having purchased data/internet in bulk for resale will no longer be able to offset excise to the final consumer with that which they paid to the service provided.
• Excise on telephone & internet data services increased from 15.0% to 20.0%.
• Excise on money transfer services by banks, money transfer agencies and other financial service providers increased 20.0%.
• Excise duty on fees charged for money transfer services by cellular phone service providers increased to 20.0%.
• Excise duty on betting back to 20.0%.

18. Finance Bill 2024 proposes to lower the restriction around sale of affordable housing units by amending the Affordable Housing Act 2024 to do away with the requirement that sales must be preceded by approval by the Affordable Housing Board.

19. Finance Bill 2024 propose taxing of interest income from new Infrastructure bonds.

20. The bill proposes to tax the income of a registered family trust which was previously
exempted.

21. The Finance Bill, 2024 proposes to delete the VAT exemption provided under first schedule to VAT Act for betting, gaming & lottery services.

22. VAT exemption on certain goods and services used in construction of tourism facilities, and construction of specialised hospitals are being removed, aiming to standardize the tax structure across different
sectors.

23. The following items have been moved from zero rating to exempt i) Motor cycles

ii) Inputs for the manufacture of agricultural pest control iii) Agricultural pest control

24. The following items are no longer zero rated

i) Supply of ordinary bread
ii) Transportation of sugarcane from farm to milling house iii) Supply of locally assembled mobile phones
iv) Supply of Electric bicycles
v) Supply of solar and lithium ion batteries
25. The following items have been removed from exempt goods:

Unleavened and gluten bread

26. The finance bill introduces withholding tax on goods supplied to public entities at 3% for resident persons and 5% for non-residents.

27. The Finance bill proposes VAT exemption on transfer of business as a going concern.

28. Contribution to Social Health Insurance Fund, post-retirement medical funds, and the
affordable housing levy will now be deductible expenses.

29. The bill proposes to increase the import declaration fees from the current rate of 2.3% of custom value to 3%.