On December 11, 2024, President William Ruto signed into law the Tax Laws (Amendment) Act and the Tax Procedures (Amendment) Act. These amendments, which took effect on December 27, 2024, introduce sweeping changes to Kenya’s tax framework, with significant implications for individuals, businesses, and the economy at large.
Key Highlights of the Tax Amendments
- Increased VAT and Excise Duties:
- The revised laws have raised Value Added Tax (VAT) and excise duty rates, leading to higher costs for goods and services.
- Products such as sugar, alcohol, and plastics are among those that will experience significant price hikes due to increased excise duties.
- NSSF Contribution Hikes:
- From February 2025, salaried employees will see their National Social Security Fund (NSSF) contributions double from Ksh. 2,160 to Ksh. 4,320 per month.
- The increase, as per the NSSF Act of 2013, will apply to both employees and employers, with contributions pegged at 6% of monthly earnings.
- Digital Economy Taxation:
- The digital service tax has been replaced by the significant economic presence tax, which has been raised from 1.5% to 3% of turnover.
- Additionally, a new 5% withholding tax on earnings from digital platforms will affect income for players in the sector.
- Changes to Retirement Benefits:
- The 15% tax relief on contributions to post-retirement medical funds, previously capped at Ksh. 60,000 annually, has been abolished. This change places an added financial burden on retirees.
- Railway Development Levy:
- The levy on imported goods has increased from 1.5% to 2%, further impacting importers and consumers.
Economic Implications
Tax experts have warned that these changes are likely to increase the cost of living in Kenya. Salaried workers, businesses, and retirees are expected to bear the brunt of these amendments. The increased deductions from payslips and higher consumer prices have sparked concerns over financial strain for many households.
Call for Compliance and Planning
Experts are urging Kenyans to take advantage of available tax amnesties and ensure compliance with the new regulations. Businesses and individuals are also advised to reevaluate their financial strategies to mitigate the impact of the higher tax burden.
The introduction of these laws marks a significant shift in Kenya’s tax regime, with far-reaching consequences for the nation’s economic landscape.