21 June 2023
Employment Tax
Impact High
The Detail
The Kenyan 2023/24 budget speech contained pronouncements which are likely to affect individual workers as follows.
1. There is an introduction of two new additional tax bands for individuals. The review expands the marginal tax brackets from the traditional 30% to a maximum of 35% per month. The intention is to raise more revenue from those earning monthly gross income of above KES 500,000. However, the reality is that it’s a very small number of people that are within the targeted bracket. Statistics indicate that most Kenyan employees earn much less than KES 100,000 per month. The proposed additional tax brackets are as follows.
2. An amendment of the Employment Act, 2007 to introduce Affordable Housing Levy. The levy will be contributory where the employee contributes 1.5% and the employer matches up the contribution. The contributions will be based on the employee’s gross salary.
3. An introduction of a tax relief of 15% of contributions to a post-Retirement Medical Fund, to be capped at KES 5,000 per month.
4. Proposal to introduce a one-year tax amnesty. This amnesty will be on penalties and interest on tax liabilities that accrued up to 31 December 2022. The amnesty will crystallise only if the outstanding principal tax is paid by 30 June 2024. In our view this is likely to affect both the companies and individual taxpayers.
5. Proposal to allow taxpayers who overpay taxes to utilise overpaid tax against both outstanding tax debts and future tax liabilities.
6. The Kenya Revenue Authority (KRA) directed to pay all approved tax refunds within 6 months. Taxpayers will be allowed to automatically offset approved refunds against outstanding tax liabilities in other tax heads or future tax liabilities where the KRA fails to settle the refunds within the specified period.
If the Finance Bill is debated and passed as it is, the proposed changes will be effective between 1 July 2023 and 1 January 2024.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
© 2023 Vialto Partners. All Rights Reserved.