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As preparations for the 2024-2025 budget get into top gear, there are tax measures the government is eying to implement in the upcoming financial year.

While some of the measures are aimed at helping the government achieve its revenue targets in the Ksh4 trillion budget, other measures include reducing the Corporate Tax rate.

Kenyans.co.ke highlights four major tax measures that could be introduced from July as highlighted in the Medium-Term Revenue Strategy.

Job seekers in Nairobi

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Reduction of Corporate Tax

Many corporate entities, especially, international ones will benefit significantly as the government aims to reduce the current corporate tax rate from 30 per cent to 25 per cent.

This is usually a tax that is imposed on profits that are made by companies.

The Why: As explained in the strategy document, the proposal aims to encourage investors to come and set up shop in the country and help the country regain its competitiveness as the preferred investor hub in the region and the continent.

Ripple Effect: The government projects that the move will create more employment opportunities as investors set up their companies in the country.

"Studies have shown that high rates of corporate income tax discourage foreign direct investments and encourage investors to lobby for lower rates or tax exemptions. Further, high rates contribute to increased tax planning and reduced compliance by taxpayers, which is the case in Kenya," the government explained.

Remove VAT Exemptions

As outlined in the strategy document, the government will remove VAT exemptions on processed goods. Already, there are proposals to introduce a 16 per cent VAT on bread and milk.

The Why: The government notes that the move is aimed at helping the government meet its revenue targets.

Ripple Effect: Should the government implement this measure the cost of some commodities is expected to rise in the long run and ultimately increase the cost of living.

"However, the government will develop an appropriate strategy to address the tax burden on essential goods and services. The review will also take into consideration exemptions and zero rating that are granted on a reciprocal basis and as per international conventions to which Kenya is a party," Treasury highlighted in the strategy document.

Collage photo of a loaf of bread alongside milk in a supermarket aisle in Kenya

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Carbon Tax

This is a new tax the government is eyeing to introduce in various sectors that have had negative effects on the environment.

Specifically, this tax targets companies and the motor vehicles industry, especially vehicles that run on fossil fuel. According to the plan the tax is proposed to be based on carbon content released in the air.

For vehicles, the government will implement this tax by increasing the excise tax on vehicles that use Super Petrol and Diesel.

The Why: The government explains that the move is aimed at protecting the environment and encouraging the adoption of green energy and electric vehicles.

Ripple Effect: For starters, this move will make vehicles more expensive for Kenyans. On the other hand, companies may want to minimize the risks of high taxation by increasing the costs of their goods and reducing their workforce.

"Motor vehicle emissions contribute to air pollution which also has significant health effects. The following will be evaluated within the scope of a carbon tax: Gradual increase of excise taxes on vehicles that use fossil fuels to address environmental damage and negative health effects. The increase will be phased over the Strategy on imported vehicles.

"Review the current taxes on electric vehicles that are environmentally friendly and support the transition to a green economy," read the strategy document.

Traffic jam witnessed along busy Uhuru Highway in Nairobi in 2019

Simon Kiragu

Kenyans.co.ke

VAT on Education Services

On the other hand, the government is mulling over introducing VAT on some education services that do not touch directly on the education of students.

This includes services like swimming that are offered in private schools and high-end learning institutions.

The Why: The Treasury explains that some of the schools have been enjoying exemptions for services that are vatable. This move is also expected to help the government meet its revenue targets.

Ripple Effect: This move may see some private institutions raise their fees to factor in the payment of the new tax.

"The exemption from VAT on education that includes all services provided by schools creates unfairness as some services like swimming when offered out of school are vatable. To remove this discrimination, there is a need to impose VAT on the additional benefits," Treasury stated.

A photo of a swimming pool within an Estate in Nairobi County.

Kenyans.co.ke

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If you are looking to own several vehicles united with rhyming, uniform number plates (for instance a specific number like 024R), you can. 

In recent months, a section of motorists debated the likelihood of applying for specific number plates in line with their tastes such as birthday or wedding anniversaries.

Speaking to Kenyans.co.ke, a representative at the National Transport and Safety Authority (NTSA) explained that Kenyan motorists are at free will to apply for three different types of number plates.

First up, any individual can apply for the normal number plate at a fee of Ksh3,050 through their eCitizen account.

Former transport Cabinet Secretary Kipchumba Murkomen inspecting the issuance of digital number plates at NTSA offices in Nairobi on September 22, 2023.

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Kipchumba Murkomen

The special number plate, on the other hand, costs Ksh30,000 and is guided by an individual preferring a certain set of letters or numbers. For instance, if you have three cars and want all the plates to end with 024R.

A personalised number plate, however, involves an individual choosing a different pattern for their number plate which may be their names or names of their companies. That type of number plate costs Ksh1 million in the application stage.

Locally, former Nairobi Governor Mike Sonko and former footballer McDonald Mariga are famously known for having their names on their plates.

"You can either have a normal number plate, a specialised number plate, or a personalised number plate," our source explained.

"For instance, if you want to maintain 024R, which is a preference that has a meaning to you such as your birthday, you should apply for a special number plate which costs Ksh30,000."

"If the number you are applying for has already been taken, the system will show you it is not available. You will decide to wait for the following series of number plates," our source added.

How to Apply

• Applicants are advised to log in to eCitizen and proceed to the NTSA portal.
• While on the portal, select a motor vehicle and click on view.
• On the resultant tab, click on the motor vehicle services tab and select a reflective plate, from there you select the number plate type and collection.
• The type of number plate you select can be either of the three; normal, special or personalised.
• From there, attach the required documents, all in PDF format then tick the declaration box.
• Click on submit to pay reflective plate and select complete.
• A notification to collect the plate will be sent to you via SMS.

A photo of samples of the new generation number plates displayed during their launch in October 2022.

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Ministry of Interior

In 2023, through the Finance Act, the government introduced the Tax Amnesty Program which waives accrued penalties for taxpayers.

The deadline was scheduled for June 2024 and taxpayers have been urged to take advantage of the open window.  

Per the guidelines from the Kenya Revenue Authority (KRA), the amnesty applies to any person with penalties but has no principal taxes owing for periods up to December 31, 2022.

It also applies to those who have principal tax accrued up to December 31, 2022 and have paid outstanding principal tax debt by June 30, 2024.

"All taxpayers who do not have principal tax due for periods up to December 31 2022 but have penalties and interest due shall qualify for the tax amnesty. The amnesty under this category shall be automatic and taxpayers will not be required to apply," read part of the guidelines.

Residents of Nakuru lining up to seek services from the Kenya Revenue Authority mobile services on November 24, 2023

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KRA

Additionally, all taxpayers with tax liabilities that are under any dispute process will qualify for the amnesty as long as they meet the conditions of the amnesty.

However, KRA outlines that there are some exclusions from the program, this includes interest and penalties imposed under Section 85 of the Tax Procedures Act 2015.

"If the Commissioner has applied a tax avoidance provision in assessing a taxpayer, the taxpayer is liable for a tax avoidance penalty equal to double the
amount of the tax that would have been avoided but for the application of the tax avoidance provision" reads part of the Act.

Also, those with penalties and interest relating to tax debts accrued for the periods after December 31, 2022, shall not qualify for the amnesty.

How to Apply on iTax

This is a six-step process which begins with the applicant logging into iTax.

The next step is proceeding to the Debt and Enforcement tab and selecting the iTax Amnesty Application.

Under section A select the respective tax obligations and the amnesty details for the specific obligation will be populated.

If undisputed click 'add all' for all obligations and move on to section B.

Section B proposes the number of instalments and instalment frequency. The system will then compute the amount per instalment. Click to agree with the terms and conditions and then click again to submit in order to complete the process.

The iTax system will then generate an amnesty application acknowledgement with amnesty and payment plan details.

In the fifth step, you will be required to generate the payment slip for the respective tax obligation and tax period through iTax and proceed to pay through a bank transfer or the consolidated Paybill number 222222.

Finally, once the payment is received, the iTax system will vacate respective penalties and interest accrued for the period and an amnesty certificate will be issued.

Kenya Revenue Authority offices

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KRA

Seme MP James Nyikal who doubles up as a Member of the National Assembly's Health Committee has explained why medics receive hefty allowances in comparison to other civil servants.

Speaking to journalists on Monday, Nyikal noted that the government instituted bigger allowances for medics to compensate for the occupational hurdles they face within their jobs such as longer shift hours.

According to the MP, the medics are prone to hazards such as exposure to health risks which they need to be compensated for.

He also explained that the medics salary structure was carefully put together to include allowances instead of having an inflated basic pay. 

This he said, was done to ensure that medics' salaries don't disrupt the civil service wage structure. 

Doctors strike outside Afya House in Nairobi.

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Anadolu Agency

Nyikal narrated that the alternative of including the allowances created a balance between maintaining the structure for civil servants' basic pay and also compensating the doctors fairly.

“We agreed that increasing their pay would destablise in the salary structure, let's give them allowances to compensate them for that time,” stated Nyikal

However, he has noted that the allowances have continued to be slashed despite the push to have them increased.

Nyikal has also faulted the delays in posting interns citing that this affects the career progression of doctors as they are not eligible for licenses to practice without having being interns.

A Collective Bargaining Agreement (CBA) signed in 2017 between doctors and the Health ministry which has since borne a bone of contention regarding its implementation outlines the compensation as follows:

A senior deputy director either in medical, dental or pharmaceutical services, who is the highest paid doctor should be paid a maximum of Ksh 282,000 basic salary plus Ksh 230,000 as allowances.

Medical, and dental officers and pharmacists were expected to be paid a maximum of Ksh68,000 as a basic salary and Ksh155,000 in allowances.

The minimum basic pay for the lowest-paid doctor is Ksh54,000. 

KMPDU Secretary General Davji Atellah (right) speaks during his submissions to the Senate Committee on Health.

Parliament of Kenya

The current regime has embarked on increasing the tax base to collect more revenue, as the government moves towards its vision of ensuring it relies on revenues raised instead of loans to finance its operations.

Kenya Revenue Authority (KRA) is the constitutionally mandated body responsible for collecting taxes and ensuring all eligible persons contribute their fair share towards nation-building.

To that end, the taxman spells out tax offences and various penalties that each of the infractions attracts.

According to a guideline published on the KRA website, late filing of Pay as You Earn (PAYE), attracts a penalty of 25 per cent of the tax due, Ksh 10,000 or whichever is higher.

Those who pay PAYE tax late, on the other hand, attract a penalty of 5 per cent of the tax due and an interest of 1 per cent per month.

Times Towers in Nairobi which houses Kenya Revenue Authority’s head office. The photo was taken on Thursday, February 20, 2020.

Kenyans.co.ke

On the other hand, for those who fail to deduct Withholding VAT and Withholding Rental Income Tax, KRA requires they pay 10 per cent of the tax due.

For those who make late Withholding Tax (Withholding Income Tax Withholding VAT, Withholding Rental Income tax) payments face a penalty of  5 per cent of the tax due.

Meanwhile, late filing of Monthly Rental Income Tax returns (MRI) attracts a penalty of 5 per cent of the tax due, Ksh2,000 or whichever is higher for individuals. Meanwhile, the offence attracts a penalty of 5 per cent of the tax due or Ksh20,000, whichever is higher for non-individuals. 

By the same token, for the offence of late payment of MRI, a person faces a penalty of paying 5 per cent of the tax due and an interest of 1 per cent per month.

Conversely, Kenyans who pay Stamp Duty late are required to pay 5 per cent of the duty payable. While the late filing of the Excise Duty returns attracts a penalty of 5 per cent of the tax due, Ksh 10,000, whichever is higher.

Late payment of Exercise Duty Tax attracts a penalty of 5 per cent of the tax due and an interest of 1 per cent per month.

Further, the late filing of VAT Returns attracts a penalty of 5 per cent of the tax due or Ksh 10,000 whichever is due. Similarly, the late payment of the VAT tax attracts a penalty of 5 per cent of the tax due and an interest of 1 per cent per month.

The late filing of Income tax company or partnership returns attracts a penalty of 5 per cent of the tax due or Ksh20,000 whichever is higher.

Further, the late payment of Income Tax for non-individuals attracts a penalty of 5 per cent of the tax due and an interest of 1 per cent monthly.

KRA further specifies that non-residents found culpable of late payment of Income tax are required to pay 5 per cent of tax due and an interest of 1 per cent each month.

Conclusively any KRA PIN-related offences attract a Ksh2,000 penalty for each offence.

A file image of the reception area at KRA offices in Nairobi.

KRA

Allocation of houses under President William Ruto's Affordable Housing Programme will be based on three major salary and income scales.

In the revised Affordable Housing Bill, which is set to be debated in the Senate in the coming days, the houses will be categorised into Social Housing Units, Affordable Housing and Affordable Middle Class.

Social Housing Units

These housing units will be the cheapest and will target Kenyans who earn Ksh20,000 and below. This also includes Kenyans in the informal sector who earn below Ksh20,000 monthly.

Affordable houses constructed in Mombasa County.

PCS

According to the plan, the houses will be the smallest, measuring at least 18 square metres.

On the other hand, the State Department of Housing details that the houses will range between one to three-room houses and will cost between Ksh756,000 to Ksh1.5 million.

Affordable Housing 

Houses categorised under this category will be allocated to Kenyans who earn between Ksh20,000 and Ksh149,000.

In terms of size, the houses will be bigger than those in the Social Housing Units category and will measure at least 30 square metres.

These houses will either be studios, two-bedroom or three-bedroom apartments. Kenyans will buy these houses from Ksh864,000 to Ksh2.5 million, depending on quality variation.

Affordable Middle Class

"An affordable middle-class housing unit with a plinth area of at least 80 square metres for middle to high-income housing is targeted at persons whose monthly income is over Ksh149,000," read the bill in part.

These houses will either be two-bedroom or three-bedroom units and will cost between Ksh3.8 million to Ksh5.1 million.

Requirements for Allocation of a House

Apart from the use of the salary/income scale, the government will require Kenyans to have requisite documentation before being allocated houses. One of the mandatory requirements includes a national identity card.

"An application made under subsection (1) shall be accompanied by a proof of requisite deposit as may be prescribed by the Cabinet Secretary; a copy of the incorporation certificate in the case of a body corporate; a copy of Kenya Revenue Authority personal identification number certificate and tax compliance certificate.

"In determining the allocation of an affordable housing unit under this section, the Board shall give preference to marginalised persons, vulnerable groups, youth, women and persons with disabilities," read the Bill in part.

Affordable houses constructed in Ongata Rongai.

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Kings Serenity

The Kenya Revenue Authority (KRA) has unveiled a user-friendly electronic Tax Invoice Management System (eTIMS) to ease customer experience when transmitting their invoices to the taxman.

In a statement on Monday, March 4, the authority indicated that the new system covers all businesses both large and small including those in the informal sector.

The users who are non-Value Added Tax (VAT) registered taxpayers will be able to generate and transmit their invoices using the platform.

"Kenya Revenue Authority (KRA) would like to remind the public that all persons carrying on business including those in the Informal Sector and Small Businesses are required to electronically generate and transmit their invoices to KRA via the electronic Tax Invoice Management System (eTIMS)," read the statement dated March 4 in part.

Residents of Nakuru lining up to seek services from the Kenya Revenue Authority mobile services on November 24, 2023

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KRA

How it Works

According to KRA, eTIMS Lite will be accessible through eCitizen platform as well as USSD code, where Kenyans will be able to acquire services by dialling *222#.

The targeted business people and traders can also access the simplified system by logging onto www.ecitizen.kra.go.ke for the web-based invoicing solution.

To boost usage, the taxman has made concerted efforts towards publicity, awareness and tax literacy through continuous stakeholder engagement and taxpayer education targeted at players in the informal sector.

The targeted taxpayers include farmers, jua kali traders and artisans amongst others.

"KRA wishes to invite taxpayers and representative bodies who may experience challenges adopting the existing solutions to reach out to further explore solutions tailored to cater to their specific needs," added the Authority.

"One such consideration is the reverse invoicing solution where a seller can/may give consent or authority to the buyer to issue invoices on their behalf."

The system will also give sellers the flexibility of allowing buyers to issue invoices on their behalf.

Small business owners and those in the informal sector are expected to file their taxes on a monthly basis.

Traders selling goods at Kikuyu Market in Kiambu County

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Kikuyu Market

On February 29, 2024, the Kenya National Bureau of Statistics (KNBS) announced that the cost of electricity  increased by 37 per cent in 2023, with the price projected to increase over the coming years.

To put it into perspective, the price of 50 Kilowatts (KW) of electricity increased by 42.7 per cent while the price of 200 Kilowatts rose by 31.8 per cent. 50 KW in this case, can power a water heating system, cooking, and washing machine among other household appliances.

Besides high electricity prices, Kenyans have also had to contend with frequent blackouts over the last year.

These factors combined, have precipitated a desire amongst Kenyans to switch to solar power systems with one eye on saving costs.

Several Kenyans have already resorted to this, installing solar systems in their houses which serve as a much needed mainstream option or alternative.

A solar-photovoltaic plant in Kitonyoni Village, Kenya.

Photo

James Butler

Requirements

Those seeking to install the system at their house will be required to consider the cost of setting up.

Among the equipment needed includes;  photovoltaic panels (PV panels), a racking system, electrical wiring components, batteries, a charge controller, a power inverter and roof sealant. 

Some users also opt to install a heat sink and an energy metre.

Costs

Experts observe that the price of installing solar power is capital intensive, but this ends up being more beneficial in the long run considering the low maintenance costs.

"Solar power depending on the intended use can be expensive to install but once it's complete, maintenance is close to nil," electrical engineer James Ogutu stated in a past interview with Kenyans.co.ke.

For a standard household, users require a solar power system with a capacity of up to 5,000 watts on average. Most retailers charge Ksh100 per watt, translating to Ksh500,000 in installation.

Others, however, argue that the price can be lowered depending on the requirements needed. Hence the price can be reduced by half to cost around Ksh250,000.

"The cost varies because if one needs more power, it means more solar panels and batteries," Ogutu noted.

Observers, however, voiced concerns that the installation costs essentially lock out the poor households due to the  associated high cost. The systems albeit are more effective for users with low power connectivity.

Additionally, the systems come in handy during blackouts, hence most argue that it is a worthwhile investment,

To solve the issue of high installation fees, experts recommend users to purchase solar systems from companies that offer subscriptions for solar installation whereby one can pay a certain figure and after some time, they own the solar system.

Kenya Power Staff working on electricity lines

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News Projector

In recent days, the political scene has been dominated by debate over the proposed Farm Produce Tax which the government is seeking to introduce as part of its revenue strategy.

As detailed in the Medium-Term Revenue Strategy, the government has proposed to set the tax at a rate of 5 per cent of the total value of farm produce delivered to cooperatives and other organised groups.

In the document that was prepared by the Treasury, under the leadership of Cabinet Secretary Njuguna Ndung'u, it is proposed that the tax be effected between the upcoming Financial Year, 2024/2025 and 2026/2027.

Treasury explained that the tax was aimed at helping raise revenue for government programmes.

Treasury Cabinet Secretary Njuguna Ndung'u addresses a congregation in 2018.

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AERC Africa

Treasury also added that the agricultural sector had been undertaxed over the years.

"The Kenyan economy remains highly dependent on the agriculture sector, contributing an average of 21.2 per cent of the GDP in 2022 and has the highest employment multiplier in the economy. Despite this, the sector's contribution to tax revenue is less than 3 percent indicating that the sector is undertaxed.

"The agriculture sector has unique challenges, including being weather dependent, perishability of the produce, the subsistence nature of the sector and inadequate tax literacy which makes the taxation of this sector difficult. In addition, the sector is highly informal, cash-based and characterized by the notion that the incomes generated from the sector are meagre and should not be taxed," read the strategy report.

Notably, the government anticipated resistance from farmers with the Treasury also outlining a strategy to address the concerns.

"To address these challenges, the government will intensify taxpayer education to ensure that taxpayers understand their role in nation-building and the need to pay taxes," the report added.

The Fallout

The proposed tax has seen a split in the Mt Kenya political leadership. Notably, a section of leaders from the ruling party including Gatanga MP Edward Muriu have stated that they will not support the government proposal.

The leaders explained that the tax would negatively affect a majority of their supporters given that the region's economy is highly dependent on agriculture.

Some of the food items that are produced in the region include; avocado, tea, coffee, and milk among others.

"As an MP, I can tell there is a problem with this proposal. We are the aggregators; the aggregators should be the farmers. These avocado taxes should be imposed on the consumers. The tax should be carried in by the exporter," the MP stated.

Following the unfolding storm, Deputy President Rigathi Gachagua promised that the government would relook the proposal.

Former Deputy President Rigathi Gachagua (left) and his wife Pastor Dorcas Rigathi (in red) at a coffee plantation on April 8, 2023

DPPS

On Monday, February 26, the Ministry of Health announced the extension of Social Health Insurance Fund (SHIF) deductions from March to July 2024.

Nakhumicha stated that the registration exercise would conclude on June 30 and members would commence enjoying benefits in the 2024/2025 financial year.

While revealing the new deduction timeline, the Health CS highlighted that all relevant stakeholders had been consulted, and the document would be presented to the Attorney General for gazettement.

The government also outlined plans to leverage Artificial Intelligence (AI) to enhance the efficiency of the proposed Social Health Insurance Fund (SHIF).

President William Ruto (right) holds the umbrella for Health CS Susan Nakhumicha while making their way to Syokimau, Machakos County on November 22, 2023.

PCS

The initiative aims to equip SHIF with real-time data on these activities, ensuring timely detection of loopholes previously exploited by unscrupulous individuals for fraudulent activities.

For those who had already registered for NHIF:

Individuals registered under the previous National Health Insurance Fund (NHIF) are required to re-register with the new Fund within 90 days from its effective date.

Current NHIF cards will remain valid until December 2024, as revealed by National Assembly Health Committee Chairperson Dr. Robert Pukose.

For parents: 

The Ministry of Health has mandated that all 7-year-olds must be registered for the Social Health Insurance Fund (SHIF) within 90 days, commencing from March 1.

"Within ninety days upon the coming into force of these regulations, every person resident in Kenya shall apply for registration as a member of the SHIF," the regulations state.

Residents assemble outside CDF offices in Githurai 45 to receive bursary forms in 2023.

Image KNA

For the Salaried and for those who are unemployed:

Under the new health insurance fund, employed Kenyans will have 2.75 per cent of their gross salary deducted monthly.

On the other hand, individuals with non-salary income will contribute 2.75 per cent of their household income annually, determined through means-testing by the Ministry of Health.

However, the monthly contribution shall not be less than Ksh300.

For Couples:

Couples will no longer be required to provide their marriage certificates during registration into the new Social Health Insurance Fund (SHIF), following a review by the Ministry of Health.

However, the government has justified its stance to impose additional charges on polygamous families for insurance.

"In the spirit of fairness and equality, it is appropriate for each spouse to make an additional payment. The household income encompasses the total income of all spouses," explained the Public Health PS.

These proposals come in light of the recent government schedule outlining the registration process for the new health insurance, scheduled to commence on Friday, March 1. However, clear guidelines for the exercise are yet to be provided by the Ministry.

A collage of two couples on their wedding day

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