Key NEW TAXES Coming Into Effect January 1st That You Need To Know

The new year is coming with new opportunities and challenges. Taxation has been a key issue of debate and discussion amongst all Kenyans. Ignorance is no defence hence it’s important to understand what taxes are coming into effect from 1st January 2024.

Let’s break down the key changes from the Finance Act 2023 in a more digestible format for everyone:

Taxation of Employment Income: 

Traveling Allowance: Amounts received by employees as payment for official duties travel, based on the standard mileage rate approved by the Automobile Association of Kenya, will no longer be taxed as gains from employment.

Club Entrance and Subscription Fees: If an employer pays club entrance or subscription fees on behalf of an employee, it will be considered a benefit and taxed on the employee. However, the employer can offset this expenditure against their income.

Market Value of Shares: The market value of shares for taxation purposes will now be determined when an employee exercises the option, rather than the date the option is granted.

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Deferred Taxation for Shares: Employees offered company shares instead of cash emoluments can defer taxation on the benefit of these shares.

Effective Date: These changes take effect from 1st July 2023.

Taxation of Repatriated Income for Non-Residents: 

Non-residents with a permanent establishment in Kenya will now be subject to a 15% tax on repatriated income. Additionally, their Corporate Income Tax (CIT) rate will be reduced from 37.5% to 30%.

Effective Date: This change applies from 1st January 2024.

Turnover Tax:

The upper threshold for turnover tax has been lowered to KShs 25 million (previously KShs 50 million).

The turnover tax rate has increased from 1% to 3%.

Effective Date: These adjustments come into effect from 1st July 2023.

Cryptocurrencies:

Income derived from the transfer or exchange of digital assets (such as cryptocurrency transactions) will now be subject to a 3% tax.

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Effective Date: This change applies from 1st September 2023.

Interest on Mortgages:

Individuals can claim mortgage interest expenses up to a maximum of Kshs 300,000 per year for money borrowed from a cooperative society.

Effective Date: This provision starts from 1st January 2024.

Critical Explanations:

Sokodirectory.com must expound on key issues regarding taxation for better understanding, especially for the entrepreneurial ecosystem.

Travelling Allowance and Club Fees:

What Changed: If you receive a traveling allowance for official work based on the standard mileage rate, it won’t be taxed anymore. Also, if your employer pays club entrance or subscription fees for you, it will be considered a benefit and taxed on your end.

Why It Matters: This change aims to make taxation fairer and encourage official travel. Employers can still offset these expenses against their income.

Cryptocurrencies and Repatriated Income:

What Changed: Income from digital assets (like cryptocurrency transactions) will now be taxed at 3%. Non-residents with a permanent establishment in Kenya will also face a 15% tax on repatriated income.

Why It Matters: These measures help regulate digital transactions and ensure that everyone contributes to the tax system.

Turnover Tax and Mortgage Interest:

What Changed: The turnover tax threshold has been lowered to KShs 25 million, and the rate increased to 3%. Individuals can now claim mortgage interest expenses up to Kshs 300,000 per year.

Why It Matters: These adjustments impact small businesses and homeowners. Understanding them can help you plan your finances better. 🌟

Filing:

No specific changes were mentioned regarding filing procedures.

These amendments aim to improve tax revenue, ensure consistency, and enhance tax administration in Kenya. Remember, understanding these changes can help you make informed financial decisions. 🌟

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