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Understanding the 2020 amendments to Kenya’s income tax laws

The Income Tax Laws (Amendments) Bill 2020 was published on 30th March 2020. The Bill proposes amendments to Kenyan tax laws. Among the affected acts include:

  • The Income Tax Act (CAP 470),
  • the Value Added Tax Act, 2013,
  • the Miscellaneous Fees and Levies Act, 2015 and
  • the Excise Duty Act, 2015.

The Bill sets out place measures outlined by the President of Kenya to cushion Kenyans and the economy from adverse effects as a result of the global pandemic of Covid-19, some of the highlights are as indicated below:

  1. Personal Tax

The existing Pay as you earn (PAYE) rates have been revised to:

Individual Tax Rate %
First KShs 288,000/= per annum (KShs 24,000/= per month) 10%
Next KShs 200,000/= per annum (KShs 16,666/= per month) 15%
Next KShs 200,000/= per annum (KShs 16,666/= per month) 20%
Over KShs 688,000/= per annum (KShs 57,333/= per month) 25%

Payments of KShs 24,000/= and below will not qualify for a deduction of any PAYE amounts, the personal tax relief has been increased from KShs 16,896 per annum (KShs 1,408 per month) to KShs 28,800 per annum (KShs 2,400 per month), the highest income tax rate for employees earning over KShs 57,333/= per month has been reduced to 25% while the income subject to the highest tax bracket has also been increased from KShs 47,059/= to KShs 57,333/=, as outlined above.

  1. Value Added Tax

The rate of VAT has been reduced from 16% to 14% effective 1st April 2020. There is also a revision in rates for products such as petroleum oils previously taxed at the rate of 8%.

  1. Corporation Tax

The Corporation tax rate for resident companies has been reduced from 30% to 25% effective 1st January 2020.

Allowable expenses

The following expenses that were previously allowed as deductible expenses will now not be allowed as deductible expenses from the taxable profit:

  • Club subscriptions paid by an employer on behalf of an employee;
  • 30% electricity rebate; and
  • Entrance fees and annual subscription costs paid to a trade association;Scribe Services