KRA To Resume Old Tax Rates On PAYE And VAT From January 1st

National Treasury to reinstate old tax rates on PAYE and VAT from 1st January 2021 as Cabinet Secretary Ukur Yatani says government revenues dipped significantly due to Covid-19 measures.

CS Yatani says the government will continue to cushion low-income earners by retaining 100 percent tax exemption for those earning monthly incomes of 24,000 shillings and below.

According to him, the decline in revenue has and will affect the implementation of the government’s priority programs under the Big Four Agenda and the recovery of the economy in general.

“The government will continue to cushion the low-income earners, by retaining 100% tax exemption/ relief for those earning monthly incomes of Ksh 24,000 and below,” CS Yatani stated.

In a statement, the CS disclosed that as of January 1, 2021, the corporate tax rate reverts to 30 percent from the current 25 percent while the individual Income tax rate reverts to 30 percent from the current 25 percent for those earning above 24,000 shillings.

“In respect to the foregoing, and given the easing of some of the containment measures and subsequent resumption of normalcy, it has, therefore, become necessary to return to the pre-COVID-19 tax rates effective 1st January 2020,” he said in a statement.

“It is important to note that these are not new taxes, but just a return to the prevailing tax rate before the onset of the pandemic,” he noted.

CS Yatani stated that by December 31, 2020, the government will have foregone tax revenues totaling 65 billion shillings, over the course of the preceding seven months.

“This in due course has and will affect the implementation of the government’s priority programs under the Big Four agenda and the recovery of the economy in general,” he stated.

This will weigh heavy on many Kenyans who suffered pay cuts due to the pandemic and may likely not revert to their pre-Covid paycheques

According to CS Yatani, the government would continue to roll out interventions under the Ksh58.1 billion Economic Stimulus Programme (ESP), such as Kazi Mtaani and others, to cushion vulnerable citizens and also enhance the liquidity of businesses.

In April 2020, President Uhuru Kenyatta ordered the lowering of corporate, individual income (PAYE) and Value Added Tax (VAT) rates as part of temporary measure to cushion Kenyans from the adverse effects of the Covid-19 pandemic.

Corporate tax for residents and top individual income tax was brought down from 30 per cent to 25 per cent.