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Kenya: Tax provisions in Finance Act, 2019

Kenya: Tax provisions in Finance Act, 2019

The Finance Act, 2019, has been published in the official gazette.

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Income tax, VAT, other tax measures

Income tax

The tax provisions in the Finance Act, 2019, include the following income tax-related items. These are generally effective 7 November 2019 (unless otherwise noted below).

  • Tax introduced on income accruing through a digital marketplace
  • Expanded scope of taxable income of non-resident ship owners to include income from demurrage and detention of containers at a port
  • Clarification of the corporate tax (30% rate) on dividends paid out of untaxed profits
  • Turnover tax reintroduced at a rate of 3% on gross receipts payable by resident persons with a turnover of less than KES 5 million (approximately U.S. $49,000), (effective 1 January 2020)
  • Provide a cap on affordable housing relief to 15% of an employee’s contribution (effective 1 January 2020)
  • Reduced corporation tax rate of 15% for companies operating a plastics recycling plant for five years
  • Measures concerning home ownership savings plans
  • Extended income tax exemption to investee companies in real estate investment trusts (REITs)
  • A withholding tax requirement on re-insurance premiums paid to non-residents (except when paid regarding aircraft)
  • Withholding tax rules for permanent establishments making payments to their head offices
  • Exemption from capital gains tax on transfers necessitated by certain corporate transactions including incorporation, recapitalisation, mergers and acquisitions, etc.
  • Exemption from thin capitalisation rules for foreign controlled corporations implementing projects under the affordable housing plan (effective 1 January 2020)
  • Measures concerning exemptions from income tax for certain housing-related funds (effective 1 January 2020)

 

VAT

The measures concerning value added tax (VAT) in the Finance Act, 2019, include the following:

  • Broadened scope of the definition of supply of imported services, applicable to persons not registered for VAT
  • Concessional loans (eligible for a VAT exemption) defined as a loan with at least a 25% grant element
  • Expanded scope of supplies subject to VAT to include supplies made through a digital marketplace
  • Expanded relief for goods exported from special economic zones
  • Expanded list of supplies exempt from VAT to include plant, machinery, and equipment used with regard to certain plastics recycling plants; electric accumulators and accessories; certain supplies of corn, flour, and wheat; certain “motherboards” and parts to manufacture them; goods for construction of housing
  • Addition of propane gas and agricultural pest control products to zero-rated supplies

 

Excise tax

The Finance Act, 2019, also reflects certain excise tax (duty) measures concerning betting transactions, motor vehicles, and changes to the rates of excise tax for tobacco and alcoholic products.

Read a November 2019 report [PDF 611 KB] prepared by the KPMG member firm in Kenya

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