Documenting finance

Finance Act 2023 Summary

The Finance Act 2023 summary

The Finance Act, 2023 was assented by the President of Kenya on 26th June 2023. This Act brought about significant changes to the country’s tax and financial regulations.

The Act faced legal challenges, and on June 30, 2023, the High Court of Kenya issued orders suspending its implementation pending the outcome of a petition challenging its constitutionality.

However, the suspension was later lifted by a ruling from Kenya’s Supreme Court (Reuters).

Key changes in the Kenyan Finance Act, 2023

  • Digital Asset Tax: Introduction of a 3% tax on income derived from transferring or exchanging digital assets (like cryptocurrencies). This aims to capture revenue from the growing digital economy.
  • Repatriated Income for Non-Residents: Non-residents with a permanent establishment in Kenya will now be taxed at a rate of 15% on repatriated income. Their standard corporate income tax (CIT) rate will be reduced from 37.5% to 30%, aligning with resident company rates.
  • Housing Levy: A new non-refundable levy of 1.5% on gross salary has been introduced for both employers and employees, to be contributed to the National Housing Development Fund.
  • Tax Bands: New PAYE (Pay-As-You-Earn) tax bands have been introduced:
    • 32.5% for income between KES 500,000 and KES 800,000
    • 35% for income exceeding KES 800,000
  • Excise Duty: Increases in excise duty on items like beer, wines, spirits, and some non-alcoholic beverages. This aims to generate additional revenue.
  • Turnover Tax: The upper threshold for turnover tax has been lowered from KES 50 million to KES 25 million. The rate has increased from 1% to 3%.
  • Mortgage Interest Relief: Individuals can claim mortgage interest expense up to a maximum of KES 300,000 per year as a deduction for loans taken from cooperative societies.

Implications

  • Revenue Generation: The changes aim to increase government revenue to support the national budget.
  • Digital Economy Regulation: The digital asset tax begins to bring the cryptocurrency sector into Kenya’s regulatory framework.
  • Housing Development: The housing levy intends to boost funding for affordable housing.
  • Tax Burden: Some changes have increased the tax burden on various sectors and individuals.
Moneyspace Ke
Moneyspace Ke
We understand the hustle of everyday Kenyans – the drive to do more, save more, and be more, all while not earning just enough. At Money.ke, we aim to provide reliable information to help you build a scalable sidehustle business. Subscribe to find insights on financial products, practical saving tips, and viable business ideas in Kenya. 🇰🇪🤝📈.
Moneyspace Ke
Moneyspace Ke
We understand the hustle of everyday Kenyans – the drive to do more, save more, and be more, all while not earning just enough. At Money.ke, we aim to provide reliable information to help you build a scalable sidehustle business. Subscribe to find insights on financial products, practical saving tips, and viable business ideas in Kenya. 🇰🇪🤝📈.

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