The Finance Bill 2024 was introduced in the National Assembly on May 9, 2024. It proposes various amendments to Kenya’s tax laws with the goal of modernizing tax regulations, improving compliance, and broadening the tax base. Here’s a detailed summary of the main provisions and their potential impacts.
Key Changes to Income Tax
1. New Definitions and Amendments
- Digital Content Monetization: Now includes creative works, sharing material, and other non-exempt content.
- Individual Retirement Fund & Pension Fund: Updated definitions now require registration with the Retirement Benefits Authority.
- Digital Marketplace: Defined as an online platform enabling the sale of goods or provision of services, including ride-hailing, food delivery, freelance services, and more.
2. Significant Economic Presence Tax
Non-residents providing digital services in Kenya will be taxed at 20% of their gross turnover.
3. Motor Vehicle Tax
A new tax payable at the time of issuing an insurance cover for each motor vehicle. Rates range from Ksh 5,000 to Ksh 100,000 based on the vehicle’s value. Certain vehicles, such as ambulances and those owned by the government, are exempt.
| Vehicle Type | Tax Rate (Ksh) |
| General Vehicles | 5,000 – 100,000 |
| Exempt Vehicles (Ambulances, Govt, etc.) | No Tax |
VAT and Excise Duty Updates
1. Value Added Tax (VAT):
- Changes in Taxable Goods: The bill introduces new taxable items and adjusts rates for certain goods and services.
- Time of Supply for Exported Goods: VAT on exported goods is applicable when the required export confirmation documents are in possession.
2. Excise Duty
- New Items and Rates: Several new goods and digital services provided by non-residents will be subject to excise duty.
Miscellaneous Fees and Levies
1. Eco Levy:
- Introduction of Eco Levy: This levy is applied to specific goods to cover their environmental impact.
- Rates: Detailed in the Fourth Schedule, including items such as office machines, data processing units, and telecommunication devices.
| Item Description | Tariff Number | Eco Levy Rate (Ksh) |
| Office Machines | 8472.90.00 | 98 per unit |
| Telecommunication Devices | 8517.11.00 | 225 per unit |
| Data Processing Units | 8471.30.00 | 225 per unit |
Online Services Included in Digital Marketplace
The definition of a digital marketplace now covers a wide range of online services. Key services included are:
- Ride-Hailing Services: Platforms like Uber and Bolt.
- Food Delivery Services: Services such as Glovo and Uber Eats.
- Freelance Services: Online platforms like Upwork and Fiverr.
- Professional Services: Consulting and advisory services offered through digital platforms.
- Rental Services: Websites and apps for renting properties and vehicles.
- Task-Based Services: Platforms for gigs and short-term tasks, like TaskRabbit.
- Other Non-Exempt Services: Any other online service not explicitly exempt under the act.
Implementation Dates
The bill specifies different commencement dates for various sections:
- July 1, 2024: Most sections of the bill.
- September 1, 2024: Specific sections related to income tax adjustments.
- January 1, 2025: Sections impacting digital marketplaces and significant economic presence tax.
Detailed Analysis of Selected Provisions
Income Tax Adjustments
The bill includes several significant changes to the Income Tax Act, summarized below:
| Provision | Amendment |
| Digital Content Monetization | Includes creative works and sharing material |
| Pension Fund Definition | Requires registration with Retirement Benefits Authority |
| Digital Marketplace | Expanded to include various online services |
VAT and Excise Duty Amendments
The changes in VAT and excise duty aim to increase revenue collection and streamline the taxation process. The inclusion of digital services under excise duty ensures that the growing digital economy is adequately taxed.
The Finance Bill 2024 presents a comprehensive update to Kenya’s tax laws, addressing emerging economic activities and ensuring that the tax system keeps pace with digital advancements. Businesses and individuals should familiarize themselves with these changes to ensure compliance and optimize their tax planning strategies.
For more detailed information, it is advisable to review the full text of the Finance Bill 2024 and consult with tax professionals for specific guidance.
