Several taxes are set to be implemented for the 2023/24 Financial Year after the Court of Appeal allowed the government to implement the Finance Act 2023 pending the determination of an appeal filed by Treasury CS Njuguna Ndung'u.
President William Ruto signed the Finance Bill 2023 into law on Monday, June 27. However, Busia Senator Okiya Omtatah opposed the Act at the High Court, which issued conservatory orders against its implementation.
This prompted the Treasury CS to counter the case at the Court of Appeal, which on Thursday, July 28, ruled that his appeal was valid.
According to the Act, the tax proposals will be implemented in stages from July 2023, September 2023 and January 2024.
Among the taxes to be effected from January 2024 include; advance tax on vans, tax on income for non-residents, residential rental income of 7.5 per cent, taxation on shares for employees and qualifying intellectual property income.
Advance Tax
This tax is charged on commercial vehicles such as vans, trucks, prime movers, trailers and lorries before they are licenced to operate.
In the Finance Act, the charges are estimated at either Ksh2,500 per tonne of load capacity per year or Ksh5,000 per year - depending on which rate is higher.
Tractors or trailers used for agricultural purposes were spared from this taxation policy.
Taxation on Employee Shares
"Where an employee is offered company shares in lieu of cash emoluments by an eligible start-up, the taxation of the benefit from the shares allocated to that person by virtue of employment shall be deferred and taxed within thirty days of the expiry of five years from the end of the year of the award of the shares, the disposal of the shares by the employee or the date the employee ceases to be an employee of the eligible start-up," read the Act in part.
Upon the start of implementation, the policy will not apply to any cash salaries, profit or other benefits in kind offered to the employee.
Tax on income for Non-Residence
As of January 2024, foreigners with business establishments in Kenya will pay tax for income sent overseas to their home countries.
Some of the factors to be considered when calculating the tax include net assets at the beginning of the year, the net profit for the year of income calculated, tax payable on the chargeable income and the net assets at the end of the year.
"The tax imposed under this section shall be in addition to tax chargeable on the income of the permanent establishment
"For the purposes of this section, net assets means the total book value of assets less total liabilities for the year of income and shall not include the revaluation of assets," read the Act in part.
Residential Rental Income of 7.5 Per Cent
Landlords will be charged 7.5 per cent of the gross rental receipts collected from tenants.
The charges were reduced from 10 per cent after an uproar from landlords and other Kenyans who lamented that it would impact rent charges.
Taxes to Take effect on July 1, 2023
Taxes to take effect from July 1 include the 1.5 per cent salary deductions for the Housing Fund. Employers will also match the employee's deductions.
The 16 per cent Value Added Tax (VAT) on fuel products will also take effect in the coming month.
