In an ever-evolving economic landscape, it is essential for businesses and individuals to stay informed about changes in tax regulations. The Finance Bill 2023 introduces several significant amendments that will have both positve and negative impact on various sectors and income groups. Gaining an understanding of these changes, you can effectively plan and adapt to the new tax landscape.

In this article, we will delve into the key tax updates brought about by the Finance Bill 2023.

1. SMEs to Face Revised Tax Rates

Small and Medium-sized Enterprises (SMEs) form a vital part of any economy, and the Finance Bill 2023 introduces a revised tax structure for SMEs. Under the new regulations, SMEs with an annual turnover ranging from KES Sh1 million to Sh25 million will be subject to a 3% tax on all revenue generated from sales.

According to the GOK, this adjustment aims to strike a balance between promoting economic growth and ensuring a fair contribution from businesses in this revenue bracket.

2. Influencers and Withholding Tax

The rise of digital content creation has led to a surge in influencers who monetize their online presence. The Finance Bill 2023 aims to implement a 5% withholding tax on all income generated by influencers through digital content creation.

This measure aims to align the tax treatment of digital influencers with other income-generating activities, ensuring a more equitable tax system.

3. Fuel Prices Surge Due to Increased VAT

Motorists and consumers relying on petrol, diesel, and kerosene should brace themselves for an increase in prices. The Finance Bill 2023 raises the Value Added Tax (VAT) on petroleum products to 16%, resulting in record-high prices at the pump.

This adjustment reflects the government’s efforts to diversify revenue streams and meet financial obligations.

4. Higher Taxes for High-Income Earners

The Finance Bill 2023 introduces revised tax rates for high-income earners, ensuring a more progressive tax structure.

Individuals earning between Sh500,000 and Sh800,000 will now face a tax rate of 32.5% on their gross salaries, while those earning above Sh800,000 will be subject to a 35% tax rate.

The adjustment aims to distribute the tax burden more equitably, contributing to socioeconomic stability and development.

5. Mandatory Deductions: Housing Levy and NHIF

To support social welfare programs and infrastructure development, the Finance Bill 2023 introduces two mandatory deductions from employees’ gross monthly pay. A 1.5% monthly housing levy will be deducted, while a 2.75% deduction will be made for the National Hospital Insurance Fund (NHIF).

These deductions purportedly aims to enable the government to enhance access to affordable housing and improve healthcare services for all Kenyan citizens.

6. Taxation of Mileage Allowance

Employees who receive mileage allowances will face new tax implications under the Finance Bill 2023. The Kenya Revenue Authority (KRA) will now tax mileage allowance above the tax-free mileage allowance approved by the Automobile Association of Kenya.

7. Excise Duty Adjustments

The Finance Bill 2023 introduces changes to excise duty rates for specific goods and services. Betting activities will face an increased excise duty of 12.5%, reflecting the government’s commitment to regulating the industry effectively. Additionally, a 15% withholding tax will be applied to fees charged on advertisements for alcoholic beverages, gaming, lotteries, and prize competitions in various media outlets, including television and newspapers.

8. Custom Duties on Imports

Importers of certain goods will experience increased custom duties under the Finance Bill 2023. Sugar, powdered juice, furniture, plastic and rubber products, paper and paper products, safety matches, particle boards, plywood, and other timber-related goods will face custom duties ranging from 10% to 30%.

These adjustments purportedly aimed at promoting local production, protect domestic industries, and enhance economic self-sufficiency.

Conclusion

If the revenue collected will be handled and directed to the right purpose, then the Finance Bill 2023 brings forth a range of tax changes aimed at fostering economic growth, achieving fiscal stability, and enhancing social welfare programs.

Kenyans should bres up for a tough enconomic time while the bill takes effect in the coming month. Let us know in the comments your opinion on this bill.