Update: | Compliance Alert – New amendments to the tax laws |
Date: | 2025-01-29 |
On December 13, 2024, Kenya Gazette released the Tax Laws (Amendment) Act, 2024 and the Tax Procedures (Amendment) Act, 2024. These included amendments to the Income Tax Act (ITA) and Value Added Tax (VAT), which impact businesses. The Acts became effective on December 27, 2024.
The Tax Laws (Amendment) Act, 2024 aims to amend several pieces of legislation, including, but not limited to, the list below.
INCOME TAX ACT
- Definition of donations: is given to help set up criteria that charitable organizations must meet to qualify for tax exemption in their income.
- Expanded definition of royalties: which now includes "any software, proprietary or off-the-shelf, whether in the form of license, development, training, maintenance or support fees and includes the distribution of the software." With this new definition, software-related payments will be subject to tax withholding (WHT).
- Significant economic presence tax (SEP) replaces the digital service tax (DST). Non-residents who receive income from Kenya by providing services via digital marketplace will be accountable for SEP.
VALUE ADDED TAX ACT
- Clarification on time of supply for exported goods: Section 12 of the Value Added Tax Act is amended by adding the following information - the time of supply for exported goods shall be the time when the Customs have issued the certificate of export or other equivalent export document
- Change in VAT status for certain goods and services: Certain goods and services changed status from standard to exempt (e.g., betting, gaming, and lotteries services) and from exempt to zero-rated (e.g., agricultural pest control products).
The Tax Procedures (Amendment) Act, 2024 aims to amend several pieces of the legislation, including, but not limited to, the list below.
- Electronic tax invoices - section 23A provides the information below, which is mandatory for an electronic invoice to be considered valid:
- words “TAX INVOICE”;
- name, address, and personal identification number (PIN) of the supplier;
- name, address, and PIN, if any, of the purchaser;
- serial number of the tax invoice;
- date and time when the tax invoice was issued and the date and time when the supply was made, if it is different from the date the tax invoice was issued;
- description of the supply, including quantity of the goods or type of services;
- details of any discount allowed at the time of supply;
- consideration for the supply;
- tax rate charged and total tax amount of tax charged; and
- any other prescribed information.
- Reverse invoicing provisions for small-scale businesses/farmers with an annual turnover of less than 5 million KES (ca, 37,000 EUR). Reverse invoicing shifts the administrative burden away from the small companies, requiring the purchaser to issue electronic tax invoices through the eTims system.
- Tax amnesty extension program on interest, penalties, and/or fines on any unpaid principal tax amount to June 30, 2025. The amnesty is on interest and penalties accrued up to December 31, 2023. It only applies to taxpayers who pay their principal tax by June 30, 2025.
- Withholding VAT agents WHT VAT will not apply to registered manufacturers whose investment value on December 31, 2024, is at least 2 billion KES (ca. 14,810,000 EUR). Those who fail to comply will be penalized 10% of the amount of WHT tax.
More information can be found in the Tax Laws (Amendment) Act, 2024 and the Tax Procedures (Amendment) Act, 2024