Kenya: Finance Bill for 2017

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The Cabinet Secretary (CS) has submitted the national budget to the National Treasury on 30 March 2017. The Finance Bill 2017 has been published thereafter and pending tabling before the National Assembly for debate and approval.

Some changes may occur when the Finance Bill 2017 and subsequently the Finance Act 2017 are published and those are given below:

Withholding Tax:

Dividends paid to non-residents by enterprises operating in Special Economic Zones will be exempt from withholding tax in order to ensure that foreign investors get a good return on their investment. But there is a proposed reduction from the current 20% to 5% of non-resident taxes, paid by Special Economic Zone (SEZ) enterprises in respect of management, training, consultancy fees, among others; royalties and interest.

Corporate tax:

  • A 150% investment deduction allowance has been introduced for capital expenditure in the economy
  • 100% investment deduction on capital expenditure incurred on construction of building or machine installation by or for use in the Special Economic Zone. This is aimed at encouraging investment at the SEZs.
  • To encourage investment and the assembly of motor vehicles in Kenya the corporate tax rate is to be reduced from 30% to 15% for the first 5 year for new assemblers who assembling motor vehicles locally.

Incentives:

  • A 150% deduction incentive will be applicable to the fishing sector
  • A 100% investment deduction will be applied for the special economic zone on buildings and machinery.

Individual taxation:

  • With the expansion of the tax bands by 10%, the lowest taxable income for low income earners will rise from KES 11,180 per month to KES 12,298 per month
  • Personal relief has been increased by 10% from KES 1,280 per month (KES15,360 p.a.) to KES 1,408 per month (KES 16,896 p.a.).

Betting, Gaming and Lotteries Tax:

  • The Finance Act 2017 introduced taxes on betting, lottery, gaming and prize competition revenues at the rate of 7.5%, 5%, 12% and 15%, respectively.
  • The Bill has proposed to change these tax rates by the introduction of a uniform tax rate of 50% for all categories.

Aforementioned changes are expected to be effective from 1st January 2018.

Custom duties:

  • White maize will be exempt from duty for a period of 4 months in the case of importation
  • The importation of dates during the period of Ramadan will be tax free
  • Port charges for fisheries vessels reduced by 50%.

Excise tax:

  • In this two tier tax structure, the cigarettes with filters have been retained at an excise duty of KSh. 2,500 per mille whereas those ones without filters will attract a reduced excise duty of KSh. 1,800 per mille.
  • The tax rate of beverages of alcoholic strength exceeding 10% increase from Ksh. 175 per litre to Ksh. 200 per litre.
  • An 80% of excise duty will be applicable for locally manufactured beer, millet, cassava or other product except barley
  • Commencement of regulations that contribute differentiated prices of excise stamps based on the cost of the product Prices to range from KES 0.5 to KES 2.5.

VAT:

  • Ordinary bread and maize flour previously exempt now zero rated.
  • Locally assembled tourist vehicles;

Aforementioned changes became effective from 3rd April 2017.

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