MPs have voted and passed 51 amendments to the 2023 Finance Bill with the changes now forming the basis of the 2023 Finance Act, which only awaits Presidential approval.
The amendments, which include new clauses following public comments and consultations between the Treasury and MPs, are both minor and far-reaching tweaks to key legislation. Here is a summary of some of the key changes MPs made to the Bill:
Advanced tax levied on commercial vehicles including pick-ups and trucks has been set at Sh2,500 from the proposed Sh3,000. The rate rises from Sh1,500 currently.
Excise duty
Duty on imported fish falls to 10 percent from the proposed 20 percent. Human hair, wigs, false beards, artificial nails, eyebrows and eyelashes have been spared from the duty. However, the duty is imposed at 25 percent on imported cartons and boxes, plastic plates and paper or paper boards. Duty on wagered amounts in betting raised to 12.5 percent from 7.5 percent.
Housing levy
Each employee and employer pays a levy known as the Affordable Housing Levy at the rate of 1.5 percent. Employers are to remit the levy within nine working days or face fines equivalent to two percent of the unpaid funds.
Punters earned a reprieve as MPs made changes to the definition of winnings where the amount staked or wagered will be excluded in determining winnings, which are subjected to a withholding tax of 20 percent.
Forex losses
Non-resident companies and businesses incurring forex losses will be able to offset the losses for a period of up to five years from the proposed deferment period of three years.
Club and subscription fees
Employers shall be allowed to offset club and subscription fees while determining their gains and profits.
Turnover tax
MPs amended the threshold for turnover tax to cover businesses making gross sales of between Sh1 million and Sh25 million, amending the previous proposal which would have set the threshold at between Sh500,000 and Sh15 million. The rate of turnover tax was, however, retained at the proposed three percent from the current one percent.
Digital content monetisation
MPs upheld the taxation of income derived from digital content but lowered the rate of withholding tax for local content creators to five percent but lifted the rate for non-residents to 20 percent.
The changes increased the time required to remit the remitted taxes from 24 hours to five working days.
Non-resident contractors, sub-contractors, consultants and employees involved in grant-funded projects shall be exempt from income tax with the government backing the change to attract grant projects. Gains from the transfer of properties within a special economic zone enterprise shall also not be taxed. Royalties, interest, management fees, professional fees, training and consultancy fees earned by non-resident persons in SEZs shall not be taxed for the first 10 years of the SEZ establishment.
PAYE
The 2023 Finance Bill has introduced two new pay-as-you-earn (PAYE) tax bands above the previous 30 percent upper limit at 32.5 and 35 percent for income between Sh500,000 and Sh800,000 a month and income above Sh800,000 respectively.
Repatriated income for non-residents will meanwhile be taxed at 15 percent.
Zero-rating
The supply of the following products has been zero-rated meaning the products will not only not attract VAT but its manufacturers and suppliers will recover input VAT; LPG, tea and coffee locally purchased for value addition before exportation, locally assembled and manufactured mobile phones, motorcycles, lithium-ion batteries, electric buses, bioethanol vapour stoves and inputs used in the manufacture of animal feed.
Tax penalties
The penalty for unpaid taxes is retained at 75 percent of the unpaid amount and not double the amount as proposed previously.
Export and investment promotion levy
The export and investment promotion levy for cement clinker, semi-finished products of iron and non-alloy steel was raised from 10 to 17.5 percent.
Alcohol
KRA to set minimum prices for all alcoholic beverages as a countermeasure against the proliferation of illicit alcohol.
VAT on petroleum products
Super petrol, diesel and kerosene to attract VAT at the rate of 16 percent from the previous eight percent.
