Finance Bill 2024: Key proposals

Motor Vehicle Tax

Tax set at 2.5% of the vehicle’s value. The proposed effective date is 1st January 2025 and will be collected by the insurer at the point of issuing motor vehicle insurance and remitted with 5 working days.

The tax amount shall be a minimum of Ksh. 5,000 and a maximum of Ksh. 100,000, and subject to a penalty of 50% of the tax due.

Vehicles exempted include ambulances, vehicles owned by national and county government or under the Privileges and Immunities Act.

CGT reduced from 15% to 5%.

The proposed effective date is 1st January 2025.

CGT for transfer of Investments reduced to 5% provided that the investment is certified to be at least Ksh. 3 Billion in at least one entity incorporated in Kenya within 2-year period by the Nairobi International Financial Centre Authority.

Incomes brought within the tax net:

Incomes from;

Registered trust scheme;

Registered family trust;

Capital gains related to the transfer of title of immovable property to family trust;

National Housing Development Fund;

Investments of an amateur sporting association.

WHT on payment on the digital marketplace

Digital marketplace redefined to mean: including ride-hailing, food delivery, freelance, professional, rental, and task-based services on digital platform or website.

Proposed effective date is 1st July 2024 at 20% and 5% for non-resident and resident persons respectively.

WHT introduced on income from supply of goods to public entity

At 3% and 5% for resident and non-resident suppliers respectively.

Recognition of this income is deferred to the year of income when payment is received; the proposed effective date is 1st July 2024.

Removal of minimum threshold for WHT for residents

The minimum threshold of income with respect to management, professional, and training fees subject to WHT is currently Ksh.24,000.

Effective 1st July, 2024 it is proposed to delete this threshold, any such income will be subject to 5% WHT regardless of the amount. 

Tax-free per deim

Proposed effective date 1st July 2024, the tax-free per diem rate is to be increased from the daily maximum of Ksh—2,000 to an amount not exceeding 5% of an employee’s monthly gross earnings.

Increase in pension allowable deduction

Allowable pension contribution to a registered pension fund to increase from Ksh. 20,000 to Ksh. 30,000 per month.  The proposed effective date is 1st July 2024.

Tax deductible non-cash employment benefit

Effective 1st July 2024, the bill proposes increasing the aggregate value of employment non-cash benefits from Ksh. 36,000 to Ksh., 48,000 p.a.

Allowable value of meals served to employees

Effective 1st July 2024, proposed to from Ksh. 48,000 to Ksh. 60,000 p.a.

Interest deduction for mortgage holders

Deductible interest payments on loans borrowed for improvement or construction of a first residential premises to increase from Ksh., 300,000 to ksh. 360,000 p.a. Proposed effective date is 1st July 2024.

Tax deductions on AHL, SHIF, and post-retirement contributions 

Introduced tax deductions on contributions made by an employee to AHL & SHIF, and tax deduction maxed to Ksh. 10,000/month for post-retirement medical fund. Effective 1st July 2024.

Exemption of pension benefits

Proposed effective 1st July 2024, to exempt from tax payment of pension benefits .

Claim of excess input VAT reduced to 6 months

Currently, an entity with excess input VAT from supplying zero-rated supplies may apply for a refund within 24 months.  

The proposal is that starting 1st July 2024, taxpayers qualifying for VAT refund claim will be required to lodge the claim within 6 months.

Refund of tax on bad debts

The provision requiring the taxpayer to refund any tax refunded in case of recovery of bad debts will be deleted as from 1st July 2024.

VAT registration threshold 

Proposal to be effected 1st July 2024, the requirement for registering for VAT increased to Ksh. 8 million annual turnover from the current Ksh. 5 million.

VAT on financial and insurance service

Proposed effective date, the following services will move from being exempt to being vatable at the standard rate (16%)

• Issuance of credit and debit cards;
• Telegraphic money transfer services;
• Cheque handling, processing, clearing and settlement, including special clearance or
  cancellation or cancellation of cheques;
• Issuance of securities for money, including bills of exchange, promissory notes, money
  and postal orders;
• The assignment of a debt for consideration;
• The provision of financial services on behalf of another on a commission basis;
• Management and related insurance consultancy services;
• Actuarial services;
• Services of insurance assessors and loss adjusters; and
• Foreign exchange transactions, including the supply of foreign drafts and international
  money orders.

VAT on bread

Proposed effective date 1st July 2024, the bill proposes the supply of bread moved from zero-rated to standard-rated (16%).

Requirements of a valid electronic tax invoice

The following details must be captured in an electronic invoice to be valid.

• (a) The PIN of the registered user of the system;
  (b) the time and date of issuance;
  (c) the serial number of the invoice;
  (d) the buyer’s PIN or details identifying the buyer where applicable;
  (e) the total gross amount;
  (f) the total tax amount where applicable;
  (g) the item code of supplies as provided by the
  Commissioner;
  (h) a brief description of goods and services;
  (i) the quantity of supply;
  (j) the unit of measure;
  (k) the tax rate charged where applicable;
  (l) the unique system identifier;
  (m) the unique invoice identifier;
  (n) a quick response (QR) code; and
  (o) any other requirement as may be specified by the commissioner.

Penalty for failure to deduct withholding VAT

Proposed effective date 1st July, a penalty of 10% of the amount of WH VAT not with held or remitted within 5 working days.

Refund of overpaid taxes

Proposed effective date 1st July 2024, application for refund of income taxes within 5 years, all other taxes within 6 months. 

Penalty for failure to integrate the Electronic Tax System (e-TIMS)

Proposed effective 1st July, a penalty of 2 million for failure to comply and transmit documents through the Electronic Tax System will be subjected.

Computation of Time for purposes of tax payment and submission of returns

Proposed effective 1st July 2024, Saturdays, Sundays, and public holidays will be excluded for purposes of any action under the tax law.

PIN registration for employees working remotely outside Kenya for an employer in Kenya

Employees working outside Kenya for an employer based in Kenya will now be required to obtain a taxpayer PIN to ensure they pay taxes on income earned through such employment arrangements.

Changes in rates for excisable services

Introduction of Eco Levy

Proposed effective date 1st July 2024, certain goods manufactured or imported into Kenya , including 

• Line telephone sets with cordless handsets
• Smartphones
• Other telephones for cellular networks or for other wireless networks
• Other Telephone sets
• Base stations
• Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus
• Other apparatus for transmission or reception of voice, images or other data
• Microphones and stands
• Sound recording or reproducing apparatus – using magnetic, optical or semiconductor media
• High-speed television cameras, digital cameras and video camera recorders
• Assembled monochrome reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus
• other instruments and apparatus, specially designed for telecommunications
• Primary cells and primary batteries.
• Electric accumulators, including separators.
• Plastic packing materials
• Diapers