Low-income earners will now get tax relief among other fringe benefits after President Uhuru Kenyatta signed into law the Finance Bill 2016. The act will also regulate taxation measures in respect of gaming, betting and competition.
Other major amendments in the Finance Act, 2016 include the removal of excise duty on locally assembled motor vehicles and motor cycles to promote assembly, tax amnesty for taxpayers who have investments outside Kenya to reinvest back home and VAT exemption for park entry fees and tour operator services to promote tourism.
The law would also see VAT Exemption for inputs for manufacture of animal feeds, aimed at reducing the cost of the feeds and reduction of income tax corporate tax rate from 30 per cent to 15 per cent for investors who put up more than 400 residential housing units to promote housing development.
Other Amendments include the legal framework for the establishment of the Commodity Exchange Market; the expansion of the income tax brackets by 10 per cent and zero rating of LPG (gas) to reduce cost of living.
President Uhuru Kenyatta early this year instructed the National Treasury to waive taxation on payments of bonuses, overtime and retirement benefits for low-income earners.
The President, who spoke at the 2016 Employers Summit in Naivasha said the directive was part of the drive to improve the living standards of Kenyans. He instructed the National Treasury to include in the 2016 Finance Bill sustainable measures for its implementation.
President Kenyatta’s directive followed a plea by the Central Organisation of Trade Unions (COTU) for the Government to save employees from taxation on payments including retirement savings.
The President, however, said that the taxation adjustment should be done in a manner that does not cause the cost of employment to increase. “This will be done in a manner that does not place an additional burden on employers, or increase the cost of employment,” the President said.
He also urged COTU and the Federation of Kenyan Employers (FKE) to actualise the creation of a Centre to promote productivity. “I urge engagement between my administration, the FKE and COTU, to consider and actualize the creation of a Center dedicated to promoting productivity — much along the lines of one implemented by the Japanese Government.
The Centre will enable Kenya to tackle the question of improving living standards within the broader context of growing productivity and the economy.