What You Need to Know: Kenya's Finance Bill 2024 Explained

 

Kenya's government has introduced the Finance Bill 2024, a comprehensive tax reform aimed at enhancing tax compliance, broadening the tax base, and promoting economic growth. The bill proposes significant changes to the country's tax regime, impacting both corporate and individual taxpayers .

Key Proposals

- Significant Economic Presence (SEP) Tax: A 30% tax on non-resident entities providing digital services, replacing the 1.5% Digital Service Tax .

- Minimum Top-Up Tax (MTT): A 15% tax on large multinational enterprises to ensure fair contribution .

- Withholding Tax (WHT) Amendments: Changes to WHT rates for various transactions, including digital marketplaces, shipping, and air transport .

- Deductible Expenses and Reliefs: Expansion of deductible expenses to include contributions to social health insurance, affordable housing, and post-retirement medical funds .

- Indirect Taxation: Introduction of a 2.5% motor vehicle tax and adjustments to capital gains tax rates .

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The Finance Bill 2024 aims to address challenges facing Kenya's tax system, including:

- Frequent changes in tax laws: The bill proposes predictable tax rates and bases to enhance certainty .

- High VAT tax expenditure: Reforms in VAT and excise duty to reduce exemptions and increase revenue .

- Taxing the informal sector: Measures to bring informal businesses into the tax net .

- Low tax compliance: Improved tax administration and dispute resolution mechanisms .

The proposed changes are expected to take effect between July 1, 2024, and January 1, 2025. The reforms will have a significant impact on Kenya's economy, promoting fairness, stability, and growth. Taxpayers and investors should closely monitor these developments to ensure compliance and take advantage of new opportunities .

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Kenya's Finance Bill 2024 marks a significant step towards a more robust and equitable tax system. The proposed changes demonstrate the government's commitment to enhancing tax compliance, promoting economic growth, and aligning with international best practices. As the bill becomes law, it is essential for taxpayers, investors, and stakeholders to stay informed and adapt to the new tax landscape.