Manufacturers are set to start paying reduced corporate taxes from February when the law that allows them to deduct 30 per cent of their electricity bill from taxable income takes effect.
Energy Regulatory Commission (ERC) Director-General Pavel Oimeke said the agency had finalised the framework that will be gazetted before the end of this month.
The incentive was contained in the Finance Bill 2018 passed last year in the latest attempt by the government to cushion factories from higher costs, and eventually cut prices of consumer goods thereby stimulating demand.
“The incentives of the rebate scheme provided in the Finance Bill 2018 will be gazetted this month and will be effective from February 2019,” Mr Oimeke said Friday without giving more details.
The bill amended Section 15 of the Income Tax Act to guarantee manufacturers a 30pc rebate on electricity.
The framework that has been developed by ERC alongside the National Treasury, Kenya Revenue Authority and the Ministry of Energy also contains the criteria to be used to measure manufacturer’s electricity consumption that will determine the rebates.
Manufacturers whose power bills are Sh100 million every year, for instance, stand to save Sh9 million based on the 30 per cent corporate taxation rate.
The manufacturing industry remains the biggest consumer of the total electricity generated in the country, spending 4,225 Gigawatt hours (GWh) in the year ended June 2018.
The planned changes will effectively lower corporate rate for manufacturing entities below the 30 per cent paid by firms in other sectors.
The cut in income tax is seen as a major boost for job creation in the industry which contributes 8.4 per cent of the Gross Domestic Product (GDP) or Sh684 billion in 2017, according to data from Kenya Bureau of Statistics.
Manufacturing generated 303,000 jobs in 2017 according to the official data. Tax experts had last year said the cut will help make locally produced goods competitive in comparison to imported low-cost merchandise.