13 Products and Services Facing New Taxes in Kenya’s Latest Proposal
Months after Kenyans staged protests against the Finance Bill 2024, the government has unveiled another series of tax measures, aiming to address a budget deficit estimated at Ksh500 billion. In the Tax Laws Amendment Bill, prepared by the National Treasury and introduced to the National Assembly by Majority Leader Kimani Ichung’wah, several new tax proposals have been made, targeting both local and foreign investments as well as various goods and services.
A notable aspect of the bill is the proposed 5% tax on interest earned by investors who purchase infrastructure bonds. These bonds, issued by the Central Bank of Kenya (CBK), allow the government to raise funds through debt. The new tax is expected to affect both domestic and foreign investors, potentially impacting demand for these securities.
Commodity-Specific Taxes
The bill also outlines increases in excise duty rates for various imported goods. Imported sugar, for instance, will see excise duty rise from Ksh5 per kilogram to Ksh7.50. However, there are exemptions for sugar imported by registered manufacturers and raw sugar brought in for licensed refineries, shielding local industry players from the additional costs.
Additionally, excise duty on imported electric transformers and select vehicle parts will be levied at 25%. Imported printing ink will also be subjected to a 15% tax, though ink from East African Community partner states that meet specific criteria will be excluded.
The tourism industry may also be impacted by the new proposal of a 16% tax on airplanes, helicopters, spacecraft, and specially designed vehicles assembled locally for tourist transportation. This measure could raise operational costs for tourism businesses reliant on specialized transportation.
Internet usage and social media interactions will also become more expensive if a proposed 15% excise duty on fees for these services is implemented, potentially increasing the cost of online access and social media usage for Kenyans.
Proposed Tax Exemptions
While the bill introduces several new taxes, it also proposes tax exemptions on certain goods and services to stimulate growth in specific sectors. Locally assembled electric vehicles, for example, would be exempt from excise duty, a move intended to support Kenya’s green energy initiatives and encourage job creation in local manufacturing.
Income tax exemptions have been proposed for pension payments, including gratuities and benefits from registered pension funds like the National Social Security Fund (NSSF). Non-resident contractors, sub-contractors, consultants, and employees working on fully grant-funded projects would also be spared from income tax obligations.
In an effort to support industries tied to essential and agricultural products, the bill proposes tax exemptions for imported raw materials and inputs used in manufacturing baby diapers, sanitary towels, tampons, certain fertilizers, and agricultural pest control products. These exemptions are aimed at lowering production costs for manufacturers and ensuring affordability for consumers.
Additional Exemptions for Agricultural Products
To further support the agricultural sector, the bill suggests that imported raw materials used in producing fertilizers and pest control products should also be tax-free, potentially reducing costs for Kenyan farmers.
As these proposals are debated in Parliament, they are likely to be closely scrutinized by both lawmakers and citizens due to their wide-ranging implications on various sectors.
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13 Products and Services Facing New Taxes in Kenya’s Latest Proposal
