The government has released the Finance Bill 2023, which proposes a raft of changes, including an amendment to the Employment Act of 2007 to require employers to contribute to the National Housing Development Fund for each of their employees.
In the amendment, employers will now have to pay three percent of their employees’ monthly basic salary to the Fund, and employees will also be required to contribute three percent of their monthly basic salary.
“An employer shall pay to the National Housing Development Fund in respect of each employee, the employer’s contribution at 3 per cent of the employee’s monthly basic salary and the employees contribute,” the Bill states.
Both the employer and the employee’s contributions are, however, capped at Sh5,000 per month.
Here are 11 other tax changes proposed in the 2023 Finance Bill:-
1. Bitcoin and non-fungible tokens (NFTs) will be defined as digital assets that are subject to tax. Sale of Bitcoin and NFTs is subject to tax at 3%.
“The owner of a platform or the person who facilitates the exchange or transfer of a digital asset shall deduct the digital asset tax and remit it to the Commissioner. A person who is required to deduct the digital asset tax shall, within twenty-four hours after making the deduction, remit the amount so deducted to the Commissioner together with a return of the amount of the payment, the amount of tax deducted, and such other information as the Commissioner may require,” the Bill states.
2. All civil servants will be required to pay taxes on per diems. Per diem refers to a fixed daily allowance an organization provides to employees or contract workers to cover business travel expenses.
The state will tax any travel allowances exceeding the standard rates approved by the Automobile Association of Kenya (AA).
“Notwithstanding the provisions of the sub-paragraph(ii), where an amount is received by an employee as payment of travelling allowance to perform official duties, the standard mileage rate approved by the Automobile Association of Kenya shall be deemed to be reimbursement of the amount so expended and shall be excluded in the calculation of the employee’s gains and profit,” the Finance Bill states.
3. All paid partnerships on social media and brand ambassador roles will be taxed if the bill becomes law.
4. Marketing services will be subject to a 5% withholding tax while digital content monetisation is subject to a 15% withholding tax.
“In respect of payments relating to digital content monetisation, 15 per cent (withholding tax),” the Bill proposes.
5. The Bill proposes that if you earn more than Ksh500,000 per month, then your marginal PAYE tax rate should move from 30% to 35%. This will see Kenyans earning Ksh500,000 pay Ksh175,000 in PAYE to the government.
6. If the Bill is adopted into law, LPG and fertiliser inputs will be VAT exempt.
7. If passed into law, the Finance Bill will see turnover tax for businesses with revenues from as low as Ksh500,000 increased from 1 per cent to 3 per cent.
“Section 12C of the Income Tax Act is amended in subsection (1), by deleting the words “Ksh1 million but does not exceed or is not expected to exceed Ksh50 million” and substituting therefore “Ksh500,000 but does not exceed or is not expected to exceed Ksh15 million,” the Bill proposes.
8. If a taxpayer disputes a tax assessment by the KRA and appeals to the Tax Appeals Tribunal, they need to deposit 20% of the disputed tax.
9. Wigs, human hair, false beards, eyebrows and eyelashes will now be subject to 5% excise duty if the Bill becomes law.
10. Imported mobile phones will be subjected to a 10% excise duty in case the Bill is passed into law.
11. Print, TV, billboard and radio advertisements will be charged a 15% excise duty if related to betting or alcohol.
Read: Govt Squeezes Content Creators, Influencers With New Taxes
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