Following the approval of the controversial Finance Act in 2022, Kenyans are bracing for a new round of taxes taking effect in 2024. The measures approved in the Act are expected to inflict more misery on many across the country even as the government struggles to steady a mercurial economy.
In the recent past, there have been widespread demonstrations over the cost of living. Commodity prices have skyrocketed and inflation is at its highest since the beginning of 2019. The inability of many Kenyans to afford basic commodities has been a thorn in the flesh. With new taxes taking effect in 2024, it remains to be seen how Kenyans cope.
The government has given KRA a target of Sh2.14 trillion in tax revenue collection in the financial year ending June 2024, with President William Ruto expecting them to better the collection to between Sh4 trillion and Sh5 trillion.
“We are raising only Sh2.1 trillion in revenue which is 14 percent of GDP. We need to raise 25 percent of our GDP like other middle-income countries. That is between Sh4 trillion and Sh5 trillion,” said Dr Ruto.
Here is a list of taxes taking effect in 2024 that you should know about
1. 1% Gross Turnover Minimum Tax
In a move to widen its tax base, the government has been ruthless on employees and High Net Worth Individuals. The Kenya Revenue Authority (KRA) has a tax revenue collection target set at Ksh2.1 Trillion. A policy to have a mandatory one percent gross turnover minimum tax has since been blocked from rollout by the High Court and the Court Of Appeal – a ruling that KRA is currently fighting at the Supreme Court.
Should KRA win its case at the Supreme Court, small businesses that are unable to turn profits will take the biggest hit in the proposed 30% corporate Income Tax.
2. 20% Excise Duty On Mobile To Bank Transactions
Kenyans took advantage of the waiver on mobile banking charges to send and receive money over the past 3-or-so years. Effective January 2023, this will no longer be the case. Going forward, Mobile-to-bank and bank-to-mobile transactions will be subject to a whopping 20% excise duty. Banks and telcos have, in the past 18 months, been using the pre-covid rates; excluding the excise duty levied on all financial transactions.
3. Taxes Taking Effect In 2024 – 15% Capital Gains Tax
Effective January 2023, there will be a 15 percent capital gains tax on the transfer of property, unquoted shares, and rights. This will be a 300% increase from the old rate of five percent. In a Report on the Finance Bill 2022 by the Departmental Committee on Finance and National Planning, many stakeholders proposed that the Capital Gains Tax rate of 15 percent be reconsidered to a lower rate of 10 percent, citing that Kenya is yet to adopt a mechanism to address inflation adjustment in the increased Capital Gains Tax rate.
4. 16% VAT On Electronically Supplied Services
Tech firms operating across the world have issued notices to customers that they will start applying the standard 16 percent Value Added Tax (VAT) on electronically supplied services such as streaming movies on Netflix and listening to music on Spotify, as the taxman sets sights on the booming digital market in Kenya. Kenya has one of the most vibrant and fastest-growing digital economies. KRA is deliberately targeting this space to achieve quick wins in tax revenue collection. Additionally, online services including e-books and videoconferencing will also start attracting VAT following the introduction of the Value Added Tax (Digital Marketplace Supply) (Amendment) Regulations, 2022. Zoom Video Communications started charging the sales tax in September last year.
5. 5% Capital Gains Tax
In a move aimed at encouraging long-term investment in the country’s financial sector, Capital gains tax has been retained at the rate of five percent for firms certified by the Nairobi International Financial Centre Authority to have an investment of at least Sh5 billion, and which will hold the investments for at least five years before the transfer.
As many continue questioning the government’s real intentions behind the increasingly ‘hostile’ taxation measures, it remains to be seen what the long-term outcome will be. The taxes taking effect in 2024 are an addition to what has been existent.
ALSO READ: Developing Economies Risk Falling Behind In Digital Trade – IMF
