President William Ruto signed important tax laws on December 11 last year, starting big changes in Kenya’s tax system. These changes will start on December 27, 2024, and they affect several tax laws, including the Income Tax Act, VAT Act, Excise Duty Act, and more.
With these new laws, Kenyans can expect to pay more in VAT (Value Added Tax) and excise duties. This means that prices for goods and services will likely go up, making it more expensive for everyone.
Retirees will also be affected because of the 15% relief they used to get on their medical fund contributions, which was limited to Ksh. 60,000 each year, has been removed. This means they will have to pay the full amount now.
Kevin Chege, a tax expert at PKF, mentioned that there have been important changes, especially to VAT and excise duties.
He noted that some excise duty rates have increased significantly. “For example, the levy on railway development for imported goods has risen from 1.5% to 2%,” he said.
People with jobs should prepare for higher deductions from their salaries starting in February. The National Social Security Fund (NSSF) contributions will double, moving from Ksh.2,160 to Ksh.4,320 as part of the NSSF Act of 2013. Chege added that in 2023, the NSSF contribution was Ksh. 1,080; it increased to Ksh. 2,160 this February, and it will double again to Ksh. 4,320 in 2025.
The digital sector will also see major changes. The digital service tax is being replaced by a new tax called the significant economic presence tax, which will go up from 1.5% to 3% of turnover. Additionally, there will be a 5% withholding tax on digital platforms, which could lower the earnings for people in this sector.
Experts are advising Kenyans to use tax amnesties when they can to stay compliant and prepare for tough economic times ahead.