Kenya’s Treasury Cabinet Secretary submitted the 2018-19 Budget on 14th June 2018. Government’s big four agenda of creating jobs, transforming lives and sharing prosperity and supporting the construction of at least 50,000 affordable houses by 2022.
The main tax-related measures of the budget include:
Income tax
- Replaced turnover tax with presumptive tax based on the business permit or trading license fees at a rate of 15%;
- Withholding tax rate of 20% for payments for demurrage charges made to non-resident persons;
- Introduced capital gains tax of 5% on transfer of property by general insurance companies;
- Withholding tax rate of 5% on insurance premium paid to non-residents excluding for insurance of aircraft;
- Expansion on the transactions giving rise to dividend subject to withholding tax.
Value Added Tax
- VAT exemption on Parts Imported or purchased locally for the assembly of computers to encourage local manufacture, innovation and job creation;
- VAT exemption of equipment to be used in the construction of grain storage facilities to support safe storage of food;
- VAT exemption for raw materials for animal feeds to make animal feeds affordable to farmers and attract investors.
Definition of dividend
The definition of “dividends” has been expanded in the draft law to include an amount paid by an entity on behalf of its shareholder or a person associated with the shareholder, such as debt or other obligations. According to the law, transfer pricing adjustments that result in additional taxable income or reduced losses are also considered as a dividend distribution. The purpose of the proposal is to ensure that there are no revenue losses when distributing dividends to shareholders.
Other tax
The introduction of a deduction of 30% of the total electricity bill by manufacturers from corporate profit in addition to the normal deduction.
The extension of the tax amnesty from the 30 June 2018 deadline for income declared for the year 2016 to a 30 June 2019 for income declared for the year 2017.
