The Kenyan Revenue Commissioner (KRA) has begun the second week of implementing new tax measures following the passage of the 2021 Finance Act, which raises new concerns about the rising cost of living at a time when goods prices have hit a 16-month high .
The National Treasury has targeted several sectors that will play a key role in increasing new tax revenue to fund the Sh3.6 trillion budget for the current fiscal year, while also introducing tax incentives in other sectors to stimulate and stimulate investment Consumption in a tough balancing act that has produced winners and losers.
Employers who offer internships for college students
Employers who offer an internship to at least 10 students from technical or vocational schools are entitled to tax reductions of 50 percent of their salary in the following year from January next year.
The tax incentive is part of the government's plan to encourage employers to accept more technical college graduates, which have emerged as key pillars in creating new jobs, especially in the informal sector, rather than just offering discounts to graduate interns.
Kenya electricity, oil companies
Companies like Kenya Power and Oil Marketing Companies (OMCs), whose retail prices are set by the government, are exempt from minimum tax enforcement.
The KRA's introduction of the tax was temporarily suspended by the Supreme Court in April pending a ruling on a large number of lawsuits from various parties protesting the tax.
Insurers, investors in Special Economic Zones (SEZ), distributors whose income is based entirely on commissions, and manufacturers who have earned at least Sh 10 billion in the four years prior to the tax enforcement date. are also exempt from paying the tax.
Maismüller, goods exporters
Exporters of goods will have less of the cost of moving their goods from Kenya to other countries after transporting exports was tax-free, meaning they no longer have to pay 16 percent value added tax (VAT).
Millers are also thrilled after the supply of corn, wheat and cassava flour has been zeroed instead of exempt, which now allows them to claim input tax to keep prices down and stimulate consumption.
Contributor to NHIF
Starting next January, employees who make a monthly contribution to the National Hospital Insurance Fund (NHIF) will receive a 15 percent discount on their contributions to the fund.
Individuals pay a maximum of Sh1,700 per month to the fund, which means they will receive up to Sh255 relief to attract more Kenyans to join the system, from where they will have to pay a compulsory contribution of at least Sh500 per month.
"The new rule will also result in higher net wages for employees as the insurance relief will be applied to NHIF contributions that are deducted through payroll," KPMG tax experts said.
Equipping your house with solar
It will also be cheaper to equip your home or business with a solar panel after the law lifted the requirement that this type of investment can only qualify for capital bonuses. That is, if you feed electricity into the national grid.
This means that investors in the electricity sector who only have electricity for their own use or who wish to deliver it to a group of people are entitled to these certificates on their devices, machines and buildings that are used to generate electricity.
Currently, investors enjoy an investment deduction of 100 percent of these costs if 150 percent of their value exceeds $ 200 million or if the investment is based outside of Nairobi.
“This is an additional incentive for private companies that want to generate electricity for their own use or for direct sale to their customers without going through the public grid. It will encourage the growth of small renewable power plants, which is an important step in increasing it. "Competition and lowering electricity costs," they said.
Investors in SGR
Investors who build bulk storage and handling facilities with a capacity of 100,000 tons to support the operation of the standard-gauge railway (SGR) by the end of next year will receive an investment deduction of 150 percent to boost investment in warehousing.
Local businesses offering their services online take a sigh of relief after being exempted from paying the Digital Services Tax (DST), which was introduced last year to increase the tax base amid fierce opposition from businesses to its impact on their revenues expand.
The tax is now only collected from overseas companies doing their online business in Kenya.
Investors in mining and raw materials
Starting next year, investors in the mining and raw materials sector will be entitled to allowances for their investments in the acquisition of machinery, even if they have not yet been granted mining rights, which is intended to stimulate investment in the industry.
These investors also enjoy a cap on the interest rates charged by lenders on loans, which means that more investments are made in the sector due to lower debt financing obligations.
Lenders, currently struggling with record-breaking bad debts, have been further hit by the introduction of excise taxes on fees and commissions on loans, which will further detract from their profits.
This will increase the cost of access to credit as lenders pass the additional costs on to borrowers.
Internet and telephone providers
The law increased excise tax on Internet and phone services from 15 percent to 20 percent, which increased the cost of airtime and credit. It will reduce the revenues of internet, mobile loan providers and telecommunications companies due to the lower consumption.
Jewelers, smokers, furniture, pasta, egg, potato and onion consumers
Jewelers were hit with a 10% excise duty, while products containing nicotine intended for inhalation and nicotine substitutes were made a fee of Sh1200 per kilogram.
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In the meantime, imported pasta, whether prepared or not, was subject to an excise duty of 20 percent, while imported furniture, eggs, potatoes and onions were also subject to an excise tax of 25 percent.
The law reintroduced the excise tax on wagering and gambling at 7.5 percent of the amount wagered, which discourages gamblers from wagering. The tax was originally introduced in 2019 and resulted in several betting firms pulling out of the local market, but was abolished by the 2020 Finance Act in July last year.
Investors who offer services abroad
Companies based in Kenya that also provide services in other countries are not entitled to input tax on the services they perform after the provision of the exported services has been changed from tax-free to exempt.
This will increase their operating costs at a time when companies are already facing low revenues due to business losses.
Investors in mining and raw materials
While mining and raw materials investors enjoy capital bonuses and interest caps on their loan obligations, they will be affected by the increase in withholding tax on fees they pay to foreign individuals and legal entities for their services from 5.6 percent to 10 percent.
This will hit businesses hard as their operating costs rise, especially as most of them import their services.