Economy

Turnover exemption raised to Sh1m, property auction frozen

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Parliament in a past session. FILE PHOTO | NMG

More small businesses will be exempted from paying turnover tax and property of firms shielded from auctions during the Covid-19 period in the latest legal changes sought by Parliament to cushion businesses.

In a raft of changes in tax laws tabled Wednesday by the National Assembly’s Committee on Finance and National Planning, firms with annual turnovers of just under Sh1 million will be exempted from the one percent tax on their sales.

The figure is almost twice a threshold of up to Sh500,000 in annual sales that is currently enjoying the relief.

The Finance and National Planning Committee, while adopting the Tax Laws (Amendments) Bill, 2020 said the majority of the small and medium enterprises were grappling with dips in revenues.

The Bill is meant to provide legal backing to the tax reliefs President Uhuru Kenyatta announced last month to boost the resilience of small businesses during the pandemic period. If approved by the plenary, firms making up to Sh1 million in annual sales will be classified as small businesses.

“This is because businesses earning less than Sh1 million are still in the bracket of small businesses and the tax relief will cushion them against the negative impact of the pandemic,” Kipkelion East MP Joseph Limo, who chairs the committee, said.

The enhanced tax bracket is expected to boost the liquidity position of traders who run businesses like kiosks, grocery stores, salons that are now struggling as Covid-19 containment measures keep their customers away. The traders have since January 1 been paying three percent of their sales to KRA, irrespective of whether they are selling at a profit or loss with the revenue cuts occasioned by coronavirus piling more pressure on them to pay the taxes.

Similarly, businesses will have their property protected throughout the Covid-19 period.

Among the proposed amendments, the committee said no firm would lose property due to the effect of Covid-19.

“Where the effect of Covid-19 affects the performance of contractual obligations, the following actions shall be prohibited,” the legal changes state in part.

“Enforcement of security over movable and immovable property used for the purpose of trade, business or profession, repossession of any goods used for the purpose of a trade, business or profession…termination of lease or license of immovable property in connection with non-payment of rent or other monies.”