New Tax Reliefs to Last Four Months amid Draft Tax Laws Amendment Bill 2020

The new tax reliefs announced by President Uhuru Kenyatta on Income Tax and Value Added Tax will be effective until August this year.

According to the draft Tax Laws Amendment Bill 2020 published on Thursday, April 2, by the National Treasury, companies including hotels, hospitals, petroleum or gas storage facilities and manufacturing premises will now be allowed to claim up to 50 percent of their investment as tax allowances for the first year of operations.

Those renting commercial buildings and educational premises including student hostels can also claim up to 10 percent of their investment annually on reducing balance.

The bill, which is part of the incentives headed to Parliament in the coming days that are expected to reduce the weight of economic constraints on individuals and businesses in Kenya impacted by the spread of the COVID 19 pandemic, spells out a wide array of tax relief measures affecting individuals and corporations.

If passed, the draft Tax Laws Amendment Bill 2020 will also see individuals and businesses pay new taxes on some income streams previously exempted as Treasury seeks to balance tax reliefs and safeguard revenue collections.

Also, legal fees accrued by companies looking to list shares or securities at the Nairobi Securities Exchange will now attract income tax.

The same applies to club subscription fees paid by employers on behalf of staff that was previously exempted from income tax.

However, businesses’ bad debts deduction from their income alongside other expenditure, has been deleted in the proposed amendments.

This means businesses and banks cannot claim income tax relief on account of non-performing loans.

In the proposed bill, non-residents citizens of Kenya operating sales promotion, marketing, advertising services, and transportation of goods will now have to pay income tax at applicable rates.

The proposed amendments also make it mandatory for everyone transacting any business to keep a record of each transaction for at least five years, a provision that was previously mandated for only registered businesses.