Tax Law Amendments

The President of the Republic of Kenya assented to the new Finance Act, 2016 (the “Act”) on 13^th September, 2016. The new law introduces amendments to various pieces of legislation, including, for the purposes of this article, the Income Tax Act (Cap 470), the Value Added Tax Act 2013, the Tax Procedures Act 2015, the Alcoholic Drinks Control Act 2010, the Special Economic Zones Act, 2015 and the Betting, Lotteries and Gaming Act (Cap 131), Laws of Kenya.

Highlights of tax changes introduced by the Act include the following:-

• Effective 9^th June, 2016, the prescribed minimum rental income exempt from rental income tax has been lowered to include such rent not exceeding K.shs.144,000.00 during any year of income. This will be a relief to those landlords who collect rental income not exceeding K.shs.12,000.00 per month.
• Further, from 1^st January, 2017, developers who construct at least 400 units a year shall be subject to a lower corporate tax of 15% down from the applicable 30%. This comes as an incentive to developers to construct more low-cost units to cater for the current housing shortage of 150,000 housing units mainly in the lower income end of the market.
• Still on construction, commencing 9^th June, 2016, goods taxable for the direct and exclusive use towards construction of specialized hospitals with accommodation facilities are now exempt from VAT, but subject to the recommendation by the Cabinet Secretary responsible for health.
• The annual individual income tax bands have been widened by the Act, with effect from 1^st January, 2017.
• Transfer of assets in the following categories shall also be exempt from Capital Gains Tax from 9^th June, 2016: between spouses; between former spouses as part of a divorce settlement or a bona fide separation agreement; to immediate family; to immediate family as part of a divorce or bonafide separation agreement; or to a company where spouses or a spouse and immediate family hold 100% of the shareholding.
• Motorists will be glad to note that effective 9^th June, 2016, the Fuel VAT exemption has been extended by a further 2 years from 1^st September, 2016 hence expiring on 2^nd September, 2018.
• On the other hand local alcoholic drinks manufacturers will be hit hard by the deletion of provisions on tax remissions for locally manufactured alcoholic drinks, effective 9^th June, 2016.
• The current exponential proliferation of gaming and betting activities in Kenya has also not escaped the taxman’s eye. The Act introduces betting, gaming and lottery taxes at 7.5%, 12% and 5% respectively.
• The Act extends the period within which a person who has overpaid tax may request for a refund, from 1 year to 5 years from the date on which the overpayment was made (with the exclusion of VAT refunds whose claim period remains within 12 months).
• There are a slew of administrative amendments to the Tax Procedures Act, 2015, including tax amnesty on foreign income and the requirement to appoint a tax representative for any taxable non-resident with no fixed place of business in Kenya.

A more in-depth analysis of the tax law amendments is available at the following link: [Click here]

For further information please contact Jacqueline@cfllegal.com