What You Need to Know
The Finance Bill 2024 in Kenya has sparked significant discussions and debates since its introduction. Aimed at enhancing revenue collection and supporting government projects, the bill encompasses a wide array of tax reforms and new policies. Knowclick Media delves into the critical aspects of the Finance Bill 2024, its implications, and what it means for individuals and businesses in Kenya.
Introduction to the Finance Bill 2024
The Finance Bill 2024, published on May 9, 2024, is part of the Kenya Kwanza government’s efforts to streamline tax collection and increase revenue for ambitious development projects. The bill introduces several new taxes and revises existing ones, affecting various sectors of the economy. The bill is set to undergo public participation. Allowing citizens to provide their views and suggestions before it is enacted (Kenyans) (The Star).
Key Provisions and Their Impacts
Motor Vehicle Tax
The bill proposes a new Motor Vehicle Tax, calculated at 2.5% of the vehicle’s value, which includes factors like make, model, engine capacity, and year of manufacture. This tax is collected at the time of insurance issuance, with a minimum payable amount of Ksh 5,000 and a maximum of Ksh 100,000. This move aims to streamline vehicle taxation and ensure compliance (Kenyans) (The Star).
Minimum Top-up Tax
This tax targets multinational corporations with a consolidated turnover exceeding Ksh 106 billion. The tax ensures that these entities pay a minimum tax rate of 15% on their net income, reducing tax evasion and increasing government revenue from large businesses (Kenyans) (Bowmans).
Digital Content Tax
Digital content creators and online platform operators will be subject to a new tax regime. Non-residents will pay 20% on their gross earnings, while residents will pay 5%. This tax extends to a wide range of digital services, including ride-hailing, food delivery, freelance, and rental services. This aims to capture the growing digital economy and ensure it contributes fairly to the national revenue (Kenyans) (Bowmans).
Economic Presence Tax
The bill replaces the Digital Service Tax with the Economic Presence Tax, set at 30% of the deemed taxable profit for non-residents earning income through digital marketplaces in Kenya. This tax seeks to ensure that foreign entities benefiting from the Kenyan market contribute to the local economy (Bowmans).
Withholding Tax
The bill introduces withholding tax on goods supplied to public entities, set at 3% for residents and 5% for non-residents. This tax is deducted at the source. Simplifying the tax collection process and ensuring compliance (Kenyans).
Value-Added Tax (VAT) Amendments
Several changes to. VAT are proposed, including the removal of exemptions on specific financial services like issuing credit and debit cards. Money transfer services, and foreign exchange transactions. The threshold for VAT registration is also increased from Ksh 5 million to Ksh 8 million, affecting small businesses. Additionally, the bill proposes VAT on betting, gaming, and lottery services, and removes exemptions in the tourism and manufacturing sectors (Bowmans).
Affordable Housing Levy
Contributions to the Affordable Housing Levy, along with those to the Social Health Insurance Fund and post-retirement medical fund, will be tax-deductible. This incentivizes contributions to social welfare programs and supports the government’s housing initiatives (Bowmans).
Implications for Individuals and Businesses
The Finance Bill 2024 brings significant changes that will impact both individuals and businesses. For vehicle owners, the new Motor Vehicle Tax adds an extra cost at the time of insurance purchase. Digital content creators and online service providers will need to factor in the new taxes on their earnings, which could affect pricing and profit margins.
Multinational corporations will face stricter tax compliance requirements, ensuring they pay a fair share of taxes. Small businesses may find the increased VAT registration threshold beneficial, as it reduces the administrative burden for those with lower turnovers.
On the flip side, the removal of VAT exemptions on financial services and other sectors could increase the cost of these services for consumers. The changes aim to widen the tax base and increase revenue but may also lead to higher operational costs for businesses.
Public Participation and Feedback
Senator Okiya Omtatah has emphasized the importance of public participation in shaping the Finance Bill 2024. Kenyans are encouraged to review the bill and submit their views. Ensuring that the legislation reflects the public’s interests and needs. The bill’s proponents argue that the new taxes and reforms are necessary for funding government projects and achieving economic goals, while critics highlight the potential burden on taxpayers (The Star).
The Finance Bill 2024 represents a significant shift in Kenya’s tax policy, aiming to increase revenue and support development initiatives. As the bill undergoes public scrutiny, it is crucial for citizens and stakeholders to engage in the process and provide constructive feedback. The proposed taxes and reforms will have far-reaching impacts, and a balanced approach is essential to ensure economic growth and fairness.
In summary, the Finance Bill 2024 is a comprehensive document that addresses various aspects of taxation in Kenya. It seeks to modernize tax collection, expand the tax base, and ensure that all economic activities contribute to national revenue. By understanding and participating in the legislative process, Kenyans can help shape a fair and effective tax system that supports the country’s development goals.
Also Read: Public Opposition To Finance Bill 2024
