Kenya’s National Assembly has started the consideration of the Finance Bill 2024. This announcement was made on Monday, 13 May, 2024.

The National Assembly also announced an invitation to submit memoranda (comments) on the bill, which detailed the proposed tax measures.

The tax measures from the bill includes:

• Allowing foreign exchange losses incurred by entities under interest restrictions to be deductible within three years of realisation.
• Classifying payments made or facilitated by digital marketplace or platform owners or operators as income sourced from Kenya and imposing a 20% tax rate for non-residents and a 5% rate for residents.
• Repealing the Digital Service Tax.
• Introducing a Significant Economic Presence Tax for non-residents whose income from services is derived from or accrued in Kenya.
• Implementing a Minimum Top-up Tax for covered persons when their combined effective tax rate for a year falls below 15%.
• Defining “covered person” to include resident persons and Permanent Establishments (PEs) in Kenya as part of a multinational enterprise group with annual revenue of at least EUR 750 million in at least two of the previous four years.
• Introducing a Motor Vehicle Tax at a rate of 2.5% of the vehicle’s value.
• Authorise the Commissioner to enter into an advance pricing agreement with any individual concerning the arm’s length price for specified transactions, valid for up to five consecutive years.
• Abolish the penalty for underpayment of instalment tax.
• Establish withholding tax rates for payments made by public entities for the supply of goods, including a rate of 3% for residents and 5% for non-residents.
• Set a resident withholding tax rate of 5% on interest from specified securities with a maturity of at least three years that are used to raise funds for infrastructure and other social services.
• Define criteria for an entity to qualify for a reduced capital gains tax rate of 5%, where the Nairobi International Financial Centre Authority certifies that the firm has invested at least KES 3 billion in a Kenyan-incorporated or registered entity within two years, and the investment transfer occurs within five years of the date of the investment.
• Raise the VAT registration threshold from KES 5 million to KES 8 million for taxable supplies.
• Amend the VAT treatment for various supplies.
• Raise the import declaration fee from 2.5% to 3%.
• Implement an eco levy on specified goods that have a detrimental environmental impact, either manufactured in or imported into Kenya.
• Establish a timeline for taxpayers to apply for tax offsets or refunds, specifying that claims for income tax offsets or refund of income tax must be made within five years of overpayment, and claims for offsets or refunds of other taxes must be made within six months of overpayment.

Most provisions in the Finance Bill 2024 will take effect on 1 July, 2024. However, several key measures are set to apply on 1 January, 2025, such as the repeal of the Digital Service Tax, the introduction of the Significant Economic Presence Tax, the reduced capital gains tax measure, the advance pricing agreement measure, and the reduced capital gains tax measure.