The Kenyan parliament is considering the 2024 Tax Amendment Bill, which aims to address economic issues like revenue shrinkage and unemployment through various tax reforms.
Key aspects include expanding revenue collection, offering tax reliefs on employee benefits, and increasing tax deductions for statutory contributions like housing and healthcare.
The bill also proposes replacing the Digital Service Tax with a new tax on significant economic presence to ensure fairness in taxation for large international entities.
The 2024 tax amendment bill targets the digital marketplace by closing tax evasion loopholes and expanding the tax base, ensuring fairness, and raising revenue for government services and development.
The new 2024 tax amendment bill offers increased tax relief on employee benefits like meals, non-cash benefits, and gratuities, boosting disposable income.
Highlights of the tax amendment bill include a tax-exempt statutory deduction. The deduction on payslip will now reduce the amount of income that’s subject to tax. The deductions that are tax-exempt are SHIF, housing levy, retirement, and medical funds.
Streamlined Tax Systems: Integrating electronic tax systems with iTax reduces human interaction, cuts costs, and enhances compliance.
Replacing the Digital Service Tax with a new 6% tax on significant economic presence will ensure fairness in taxing large international companies earning over Ksh 5 million online.
The 2024 Tax Amendment Bill clarifies the “digital marketplace” definition to include platforms like food delivery, ride-hailing, and freelancing, ensuring platform owners pay taxes fairly. This is not a new tax but ensures compliance.
The amendment expands tax-exempt pension contributions for both employees and employers, increasing disposable income short-term and boosting long-term savings without tax impact.
Tax-deductible contributions to pensions, Social Health Insurance, and post-retirement medical funds will give workers more take-home pay, encouraging long-term savings.
Raising the tax-free limits for non-cash benefits and gratuities to Ksh 60,000 and Ksh 360,000, respectively, will provide significant financial relief for employees.
Extending the tax amnesty until June 2025 will offer businesses the opportunity to regularize their tax affairs without facing penalties.
