Our country Kenya was hit by Covid- 19 pandemic 4 months back. Drastic impacts to the whole economy affected every sector including business, industry, manufacturing, agricultural etc. and it's effect echoed across everything.
The bill published on March 30 amends tax-related laws including Income Tax Act (CAP 470), Value Added Tax Act of 2013, Excise Duty Act (2015), Tax Procedures Act (2015), Miscellaneous Levies and Fees Act (2016) and Retirement Benefits Act, 1997.
President Uhuru Kenyatta on Saturday 25th April 2020 signed into law the Tax Laws (Amendment) Bill, 2020 as part of measures to cushion the public against effects of the Covid-19 pandemic.
Increase in personal relief from KES 16,896(KES 1,408 per month) to KES 28,800 per year (KES 2,400 per month)
The Tax Laws(Amendment) Act 2020 has expanded the Individual PAYE bands as follows:
Enhancement of tax rates in respect of payments or withdrawals from pensions comment. This adjustment will incrase the net take home for resident persons.
|Expansion of tax band as at 1st April 2020|
|On first 288,000||On first 24,000||10%|
|On the next 200,000||On the next 16,667||15%|
|On the next 200,000||On the next 16,667||20%|
|On all income over 688,000||On all income over 57,334||25%|
EXAMPLE: If an employee is earning KES 35,000 gross income and currently paying the paye as much as KES 3,743, they will now pay KES 1,650. So there is a reduction of KES 2,093.
If an employee is earning KES 120,000, they will now pay the paye as much as KES 19,980 from previous amount for KES 28,596, a reduction of KES 8,616.
Effectively all income below KES 24,000 per month is now exempt from tax.
COMMENT: The above changes will increase the taxpayer's disposable income as well as cushion taxpayers whose income has been eroded by inflation.
This will have implications on the April payroll since the PAYE is deducted upon payment and where payment is made after the effective date, the new rates should apply.
There is major overhaul of exempt taxes which was previously seen in First schedule Part 1
Mostly related to contracts and agreements that are deleted from the ACT, such as:
Comment: This amendment seeks to broaden the tax base since individuals and incomes that were previously exempt are now subjected to tax,
The Act has reduced marginal rate from 30% to 25% in respect of pension payments and withdrawals from the registered provident fund NSSF or registered individual retirement fund. Tax bands on the Pension withdrawals in line with above as follows:
|On the first 400,000||10%|
|On the next 200,000||15%|
|On the next 200,000||20%|
The due dates for remittance of PAYE and taxes on pension remains on or before 9th of the following month.
By: Daksha Ranpara F.C.C.A., C.P.A.(K)
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