The Treasury has reached a deal with manufacturers on implementation of a law that allows industrialists to deduct 30 percent of their electricity bill from earnings that is subject to taxation.
The State has been keen to tie the tax benefits to production levels, but industrialists wanted the output targets to account for a share of the tax benefit.
The Finance Bill 2018 allows industries to deduct 30 percent of their electricity expenses from their taxable income in the latest government drive to cushion factories from higher costs, cut consumer goods prices and grow demand.
The Treasury has reached a deal with manufacturers on implementation of a law that allows industrialists to deduct 30 percent of their electricity bill from earnings that is subject to taxation.
The State has been keen to tie the tax benefits to production levels, but industrialists wanted the output targets to account for a share of the tax benefit.
The Finance Bill 2018 allows industries to deduct 30 percent of their electricity expenses from their taxable income in the latest government drive to cushion factories from higher costs, cut consumer goods prices and grow demand.
It took effect in January and will see manufacturers enjoy a corporate tax rate that is lower than the 30 percent paid by firms in other sectors.
Energy secretary Charles Keter said his Treasury counterpart Henry Rotich will within two weeks gazette criteria for measuring manufacturer’s electricity consumption or output that will determine the rebates
This sets the stage for manufactures to seek refunds on the tax benefits before the June 30 deadline for filing the 2018 tax returns.
“There must be KPIs (Key Performance Indicators) which are measurable because when we are giving that (energy rebate), it is not for free. There must be what to do and it is the Treasury who are going to monitor that through KRA,” Mr Keter said.
“We agreed it (framework) should be signed any time, probably this week or next week.”
Kenya Association of Manufacturers (KAM) said it reached a deal with the Treasury for factories get a flat 20 percent refunds on their power bills and an extra 10 percent rebate based on increased energy use, which reflects rise in production.
Experts say the tax incentive will help make locally produced goods competitive in comparison to imported low-cost merchandise.
If, for instance, a manufacturer’s power bill stands at Sh100 million per year, they stand to save about Sh9 million from the tax relief, calculated against the country’s 30 percent corporate tax.
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