PR&MB 2020 – The Provision of Tax Incentives

The Bill provides that were a pandemic is such that it affects the economic or purchase power of the public, the Cabinet Secretary responsible for matters relating to finance may, with the approval of Parliament, introduce tax measures to cushion the affected persons for the duration of the pandemic. Even though the Bill is yet to be assented to, the Government of Kenya has been keen to employ various tax incentives to cushion Kenyans from the economic ramifications of the persisting pandemic. On 25 March 2020, President Kenyatta urged the National Treasury to move to parliament to initiate deliberations on the enactment of various tax laws. This led to the enactment of the Tax Laws (Amendment) Act 2020 which has provided for various measures to cushion Kenyan citizens and corporates from the economic effects of the pandemic.

As per the Act, employees earning less than Kshs. 24, 000/= have been granted 100% tax relief. Further, those earning more than Kshs 24,000 shall only pay a maximum tax of 25% of their earnings. The VAT rate has also reduced from 16% to 14%. The language of the Bill is very temporal as it is only to apply during a pandemic and The Act has also reduced the corporate income tax rate from 30% to 25% for resident companies. In our opinion, the introduction of tax incentives is a welcome move and one of the most strategic measures in cushioning individuals and businesses.