On 21 June 2022, Kenya’s President has given his assent to the Finance Act 2022 which was presented to the Parliament on 13 April 2022. The act contains following tax measures mostly take effect on 1 July 2022.
- The Bill proposed to introduce a definition of the term “fair market value” which means the comparable market price available in an open and unrestricted market between independent parties acting at arm’s length and under no compulsion to transact, which is expressed in terms of money or money’s worth.
- The Bill proposed to increase the rate of CGT from 5% to 15% with effective from 1 January 2023.
- The Bill proposes to exempt Microfinance institutions licensed under the Microfinance Act,2006 from interest expense deductibility restriction (thin capitalization rule) which is currently capped at 30% EBITDA effective from 1 July 2022.
- The Bill seeks to amend Section 18(A) of the Income Tax Act expanding the scope of transfer pricing rules to cover transactions between resident entities and nonresident entities located in a preferential tax regime.
- The Bill proposed to introduce CbC documentation requirement for MNEs resident in Kenya in line with OECD BEPS Action 13.
- The act proposed to increase the tax rate of the digital services tax from 1.5%. to 3% of the gross turnover.
