The enactment of the Tax Amendment Act and the Tax Procedures Act by President William Ruto on December 11 of the previous year has paved the way for substantial modifications to Kenya’s tax framework.
These amendments, which will took effect on December 27, 2024, have brought about changes to several critical tax legislations, including the Income Tax Act, VAT Act, Excise Duty Act, Miscellaneous Fees and Levies Act, and the Tax Procedures Act.
The updated regulations are anticipated to result in increased VAT and excise duties, consequently raising the costs associated with consumer goods and business activities.
Items such as sugar, alcohol, and plastics will experience hikes in excise duties, which will directly affect consumer prices.
Additionally, retirees will be adversely impacted as the 15% relief on contributions to post-retirement medical funds, previously limited to Ksh.60,000 annually, has been eliminated, forcing them to cover the entire expense.
Kevin Chege, Manager of Tax and Transfer Pricing at PKF, remarked, “There were significant alterations to what we refer to as the indirect taxes statutes; specifically, we are addressing the VAT Act and the Excise Duty Act. In terms of excise duty, we have observed a considerable rise in the excise duty rates for certain services. Furthermore, another change that is likely to elevate the cost of living is the increase in the railways development levy on imported goods, which has risen from 1.5 percent to 2 percent.”
Salaried individuals in Kenya are preparing for heightened deductions beginning in February, as contributions to the National Social Security Fund (NSSF) will increase from the current Ksh.2,160 to Ksh.4,320, in accordance with the provisions of the NSSF Act of 2013.
“In 2023, the NSSF contribution was Ksh.1,080, which rose to Ksh.2,160 in February 2024, and as stipulated in the NSSF Act of 2013, the contribution will double again in 2025 to Ksh.4,320,” Chege added.
The digital sector is poised for substantial transformations. The previous digital service tax has been substituted with the significant economic presence tax, which has risen from 1.5% to 3% of turnover.
Moreover, a 5% withholding tax imposed on digital platforms may diminish the profits for stakeholders within the industry.
Experts are advising Kenyans to capitalize on tax amnesties to achieve compliance, cautioning that challenging economic conditions are anticipated in the future.
