The High Court in Nairobi on 30th June 2023 issued temporary orders suspending the implementation of the Finance Act 2023. Following the High Court orders, the government, through the tax authority and other implementing stopped from effecting and charging the new and additional taxes provided in the Finance Act 2023.
The suspension orders are temporary pending the full hearing and determination of the High Court suit filed by Okiya Omtatah.
The Finance Act 2023 became law on 26th June 2023 following Presidential Assent. The following are the noteworthy changes the act brings into force:
1. Removal of Withholding Tax previously chargeable to the amount staked by punters
The Finance Act 2023 amended the definition of winnings to exclude amounts staked or wagered with the effect that WHT will now not be chargeable to staked amounts as it was previously the case.
2. Digital Content Monetisation
The Finance Act 2023 brings digital content businesses offering digital services in “payment entertainment, social, literal, artistic, educational or any other material electronically, through any medium or channel including paid advertisement partnerships, brand ambassador sponsorships, affiliate marketing, membership, licensing & subscription services” within the scope of taxation.
3. Digital Asset Tax
Also, the Finance Act 2023 introduced the Digital Asset Tax at the rate of 3% on the transfer or exchange value of digital assets. The implementation of this tax shall be effective as from 1st September 2023. Digital Asset is defined as “anything of value that is not tangible and crypto-currencies, token code, number held in digital form and generated through cryptographic means or otherwise…” This inclusion seeks to bring the ever-evolving digital assets innovations such as crypto-assets within the scope of taxation.
4. Deferral of Foreign Exchange Losses
The Finance Act 2023 amended the Income Tax Act to the effect that foreign exchange losses shall be deferred (and not taken into account) and claimed over a period of not more than five years from the date the loss provided that the person’s gross interest paid or payable to a non-resident exceeds thirty per cent of the earnings before interest, taxes, depreciation and amortization in the year of income. This addition did away with the previous provision that deferred duplication of amounts gained or lost in the previous year of income.
5. Value Added Tax (VAT) on Petroleum Products
The Finance Act 2023 also reviewed the VAT charged on Fuel (Petroleum, Kerosene & Diesel) from 8% to 16%.
6. Changes to taxation in Employment Income
The Finance Act 2023 revised the tax bracket for all income between 6 million and 9.6 million per annum to be at 32.5% and 35% for income above 9.6 million per annum. Income between 388,001 and 5,612,000 per annum will be taxed at the rate of 30%.
7. Introduction of Housing Levy
The Finance Act 2023 has also introduced a levy known as the Affordable Housing Levy where both the employer and employee will be contributing 1.5% of the employee’s gross salary. The Employer shall be obligated to remit the deduction within 9 working days after the end of the month.
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