The recent Court of Appeal ruling declaring the Finance Act 2023 unconstitutional has significant implications for tax laws in Kenya. If the ruling is not appealed by the Government of Kenya (GoK), here are some of the major highlights of what reverting to the Finance Act 2022 mean:
- Withholding Tax (WHT) on digital content monetization – Removed
- Taxation on repatriated income – Removed
- Turnover tax (ToT) limits – Reverted to a maximum sales limit of KES 50 million (from the current KES 25 million)
- VAT on petroleum products – Standard rate back to 8% (down from 16%)
- Digital Asset Tax – Removed
- Mandatory Electronic Tax Invoice Management System (ETIMS) for expense deductibility – Removed
- Rental income tax rate – Back to 10% (from the current 7.5%)
- Tax penalty waivers – Reinstated; Tax amnesty program removed (though it ended in June)
- Filing deadline for WHT – Reverted to the 20th of every month (from the current 5 working days)
- VAT on export services – Back to 16% (from the zero rated, impacting multinationals significantly)
- Excise duty payment by betting companies and alcohol manufacturers – 24-hour payment requirement removed
- Excise duty rate – Reverted to 7.5% (from the current 12.5%)
- PAYE Rates – Old rates reinstated, benefiting high-income earners (those earning > KES 500,000 per month)
Important to note – The ruling does not affect the housing levy, as it was enacted in March 2024 through the Affordable Housing Act.
These changes have far-reaching impacts on various sectors. What are your thoughts on the Court of Appeal’s decision and its potential implications for businesses and individuals?