The Coronavirus disease (COVID-19) has had a devastating impact on people’s health and livelihoods both in Kenya and in the rest of the world since it was declared a global pandemic. Almost a year later, businesses and people are still grappling with the resulting social and economic impact.
The survival of individuals and business is threatened by the continued supply chain disruptions, weakening of the Kenyan Shilling against the major currencies, reduced consumer spending and the ever present threats to health in light of a resurgence of COVID-19 infections.
As businesses continue adapting to the new operating environment, the Kenyan government is coming to terms with the widening budget deficits due to increased demand for funding for the Covid-19 mitigation measures amid declining tax collections on the back of declining demand, shutdowns of critical sectors such as tourism and reduction in payroll taxes due to increased lay-offs and salary reductions.
Amid these competing needs on 27 November 2020, the government published The Tax Laws (Amendment) (No.2) Bill 2020. The Bill seeks to reinstate the tax concessions that the government had provided to mitigate the impact of Covid-19. Critical changes include reinstating corporation tax to 30% and the top PAYE band to 30% among other measures. The Government has also gazetted it intention to return the VAT rate to the pre-Covid-19 rate of 16%.
We provide on the link below our analysis of the proposed changes which take effect from 1 January 2021.
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