The Finance Bill, 2023
Status Timeline
Proposed
Active now
Public Review
Pending
Debate
Pending
Executive
Pending
Final
Pending
Mandatory Electronic Invoicing (eTIMS) with KSh 1 Million Penalty
Sections 23A and 86 of the Tax Procedures Act, 2015 are amended to require businesses to issue electronic tax invoices through the electronic tax invoice management system (eTIMS). Failure to comply or issue eTIMS invoices attracts a penalty of KSh 1 million or an amount equal to ten times the tax due, whichever is higher.
New Digital Asset Tax and Digital Content Monetisation Taxes
Introduces a digital asset tax at 3% on the transfer or exchange value of digital assets such as cryptocurrencies and non-fungible tokens (Section 12F). It also introduces a 15% withholding tax on income earned from digital content monetisation, covering advertisements, sponsorships, affiliate marketing, and subscription services.
National Housing Development Fund Mandatory Contributions
Amends the Employment Act, 2007 (adding Section 31B) to mandate that both employers and employees contribute 3% of the employee's monthly basic salary to the National Housing Development Fund. The total joint monthly contribution is capped at KSh 5,000.
Turnover Tax Threshold Adjusted and Rate Raised to 3%
Amends Section 12C of the Income Tax Act to lower the turnover tax minimum threshold to KSh 500,000 (down from KSh 1 million) and reduce the upper limit to KSh 15 million (down from KSh 50 million). The tax rate on this gross turnover is increased from 1% to 3%.
Disputed Tax Deposit Requirement for High Court Appeals
Amends Section 32 of the Tax Appeals Tribunal Act, 2013 to require taxpayers appealing a Tribunal decision to the High Court to deposit an amount equivalent to 20% of the disputed tax, or provide equivalent security, with the Commissioner before filing the appeal.
Bill No.
No. 14 of 2023
Gazette No.
Supplement No. 56
Sponsor
Kuria Kimani
Background
The Finance Bill, 2023 is proposed to amend the laws relating to various taxes and duties to align with the fiscal projections and revenue targets of the Government of Kenya for the 2023/2024 financial year. Submitted by Kuria Kimani, Chairperson of the Departmental Committee on Finance and National Planning, the Bill targets multiple primary statutes including the Income Tax Act (Cap. 470), Value Added Tax Act (No. 35 of 2013), Excise Duty Act (No. 23 of 2015), Tax Procedures Act (No. 29 of 2015), and the Miscellaneous Fees and Levies Act (No. 29 of 2016).
Key Amendments
Income Tax Act (Cap. 470)
- Winnings Definition: Restructured to mean the payout from betting, gaming, lottery, or similar transactions under the Betting, Lotteries and Gaming Act (Cap. 131) without deducting the amount staked or wagered.
- Digital Content Monetisation: Formally defined as offering entertainment, social, literary, artistic, or educational material electronically for payment. This includes sponsorships, advertisements, affiliate marketing, merchandise sales, and crowdfunding.
- Repatriated Income Tax: Introduces Section 7B, imposing tax on repatriated income of non-resident persons operating through a permanent establishment in Kenya, calculated via a specific assets-and-liabilities formula.
- Tax Deferral on Startup Shares: Defers taxation on shares offered to employees of eligible start-ups (turnover below KSh 100 million, in existence for less than 5 years) in lieu of cash emoluments for up to 5 years, or until share disposal or cessation of employment.
- Individual Income Tax Rates: Establishes a new tax band of 35% on all individual income exceeding KSh 6,000,000 per year.
Value Added Tax Act, 2013
- Digital Services Registration: Section 34 is amended to require non-resident providers of imported digital services or electronic marketplace platforms to register for VAT, irrespective of whether they meet the KSh 5 million registration threshold.
- Petroleum Products: VAT on petroleum products, including liquefied petroleum gas, is set at 16% (removing earlier lower rates).
Excise Duty Act, 2015
- Excise Duty on Betting and Gaming: Imposes a 15% excise duty on fees charged on advertisement on television, print, billboards, and radio for alcoholic beverages, betting, gaming, and prize competitions.
- Excise Rates updates: Imported cellular phones attract 10% excise duty; imported paint, varnishes and lacquers attract 15%; imported furniture (excluding EAC partner states) attracts 30%.
Tax Procedures Act, 2015
- International Tax Agreements: Enables the mutual recovery of tax claims under international tax agreements where the Commissioner can assist a requesting state to collect outstanding taxes.
- Amnesty Programme: Introduces Section 37E, granting an amnesty on penalties and interest for tax debts outstanding before 31st December 2022, provided the principal tax is paid in full by 30th June 2024.
New Obligations
- Electronic Tax Invoicing (eTIMS): All business taxpayers must generate and transmit electronic tax invoices through the system established by the Commissioner. Expenses not backed by an eTIMS invoice are disallowed for income tax purposes.
- Digital Asset Tax: Owners of platforms facilitating the exchange of digital assets (including cryptocurrencies and NFTs) must deduct a 3% digital asset tax from the gross transaction value and remit it to the Commissioner within 24 hours of the transaction.
- Withholding Tax on Content Monetisation: Payers of digital content monetization services must deduct a 15% withholding tax on payments made to resident individuals and remit it within 24 hours.
- Housing Fund Levy: Employers must deduct 3% of each employee's basic monthly salary and add a matching 3% contribution, remitting the combined total (capped at KSh 5,000) to the National Housing Development Fund by the 9th day of the following month.
Penalties
- eTIMS Non-Compliance: Failure to issue electronic tax invoices as required under Section 23A of the Tax Procedures Act, 2015 attracts a penalty of KSh 1 million or an amount equal to ten times the tax due, whichever is higher.
- Excise Stamps Offences: Defacing or counterfeiting excise stamps, or being in possession of excisable goods without stamps, is an offence carrying a fine up to KSh 5 million, imprisonment up to three years, or both.
- VAT Withholding Penalty: Withholding agents failing to withhold or remit VAT are liable to a penalty of 10% of the amount involved.
Transitional Provisions
- Section 1 specifies distinct commencement dates for different provisions: specific sections on tax procedures and returns take effect on 1st September 2023, changes to start-up share benefits and specific withholding lists take effect on 1st January 2024, and all other sections take effect on 1st July 2023.
No updates tracked yet
Updates will be visible here once they are approved and applied to this bill.