Government and Policy

Kenyans To Pay More As Three New Taxes Take Effect September 1

BY Getrude Mathayo · September 1, 2023 03:09 pm

KEY POINTS

Where a tax law requires a taxpayer to issue an electronic tax invoice, submit a tax return in electronic form or pay a tax electronically, and the taxpayer fails to comply with that tax law, the Commissioner shall issue a notice in writing to the taxpayer requesting the reasons for the noncompliance.

Starting September 1^st, the second phase of three new taxes introduced by the contentious Finance Bill Act 2023 is set to take effect reverberating across several industries and sectors. Kenyans will be required to pay a tax of 3 percent on the revenue they make by selling a digital asset

According to the Finance Act 2023, the new tax measures include Digital Asset tax, Electronic Tax Invoices, and Export and Investment Promotion Levy rates on key products such as cement clickers used to manufacture Portland cement.

From cement and steel industries to digital assets and entertainment, the impact of these measures is set to reshape various facets of the economy.

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According to the Act, whenever a digital asset tax is sold, the platform on which the sale has been made is mandated to deduct three percent and then remit it to the Kenya Revenue Authority (KRA) within five working days.

The tax targets income derived from the transfer or exchange of digital assets such as cryptocurrencies and is set at 3 percent. The taxes will be remitted within five working days after the deduction.

“A digital asset includes anything of value that is not tangible and cryptocurrencies, token codes, and numbers held in digital form and generated through cryptographic means or otherwise, by whatever name called.

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“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.,” reads the Act in part.

There is also the Miscellaneous Fees and Levies Act of 2016 provides for the establishment of a fund in, which proceeds from RDL shall be paid on all goods imported into the country for home use with the designated purpose being to provide funds for the construction and operation of a standard gauge railway network.

As per the schedule, cement clickers used to manufacture Portland cement, Bars, and rods of iron or nonalloy steel, will face a levy of 17.5 percent of the value of the exports.

The Finance Act imposes a levy of 10 percent on the value of imported kraft paper (cardboard) and sacks.

Electronic Tax Invoices, commonly referred to as e-invoicing, is a system in which all the invoices are electronically validated, and signed, and details are transmitted to the tax portal on a real-time basis. The tax targets business people as they will be required to issue an electronic tax invoice through the system established by the taxman.

The electronic tax excludes investment allowances, interest, emoluments, imports, airline passenger ticketing, and similar payments.

“Where a tax law requires a taxpayer to issue an electronic tax invoice, submit a tax return in electronic form or pay a tax electronically, and the taxpayer fails to comply with that tax law, the Commissioner shall issue a notice in writing to the taxpayer requesting the reasons for the noncompliance.

“Where the reasons given under subsection (1) do not satisfy the Commissioner, the taxpayer shall be liable to a penalty of two times the tax due,” read the Act in part.