Background:
Two months after the passing of the Tax Laws (Amendment) Act 2024 on 27th December 2024 we take a look at the ramifications of the passing of the acts.
In this news flash we will look at the below changes:
- Significant Economic Presence Tax(SEPT)
- PAYE
- Objections
- Reverse invoicing
- Tax Amnesty
- Transfer of business as a going concern
- Increase in NSSF rates as from February
1. Significant economic Presence Tax
- This was a tax introduced with the intention to bring multinational corporations with no physical presence to tax it is a replacement to the Digital Service Tax (DST).
- The new tax rate is set at 3% of the gross turnover and should be filed and paid by the 20th day of the following month.
- Have you complied?
2. Employment Taxes
- In regards to employment taxes the bill brought a bunch of goodies for salaried folk among them;
- Contributions to the Housing Levy and the Social Health Insurance Fund(SHIF) have been made allowable deductions.
- Post retirement medical/insurance deductions have been made an allowable deduction and capped at Kes 15,000 per month.
- Allowable deductions to pension contributions have been increased to Kes 30,000 allowing for more savings.
- Is your finance team using the new PAYE template?
3. Calculation of timelines
- Did you know that in lodging objections we now exclude weekends and public holidays.
4. Reverse invoicing
In an attempt to capture all taxpayers on the tax register the KRA introduced the concept of reverse invoicing. Where a supply is received from a small non registered business/small scale farmer whose turnover does not exceed Kes 5 million the purchaser can now issue out a tax invoice on behalf of the supplier.
5. Tax Amnesty
The tax amnesty was reintroduced where all penalties and interest are waived after payment of the principal tax liabilities by 30th June 2025 . Provided that the taxes demanded relate to the period before 31St December 2023.
6. Transfer of business as a going concern
The amendment reintroduced the VAT exemption on the transfer of a business as a going concern. Previously they were subject to VAT at 16%.
7. Increase in NSSF rates as from February
The pension income limit under the NSSF will increase from Kes 36,000 to Kes 72,000 amounting to an contribution of Kes 4,320 (highest amount) from the employee with an equal contribution from the employer for those earning 72,000 or more beginning February 2025.