Impact of Proposed Tax Changes Under the Finance Bill, 2021

The Finance Bill, 2021 was published on 5 May 2021 and it proposes to make a raft of amendments to various tax laws, including the Income Tax Act (CAP 470), the Value Added Tax Act, 2013, the Tax Procedures Act, 2015, the Miscellaneous Fees and Levies Act, 2016 and the Excise Duty Act, 2015, among others.

Some of the proposed amendments, particularly those relating to income tax, have an effective date of 1 January 2022 while the rest of the proposed amendments will come into force on 1 July 2021, if passed by the National Assembly and assented into law by the President before 1 July 2021. The Bill was presented to the National Assembly on 11 May 2021 for debate and public participation.

The proposals in the Bill are aimed at streamlining the tax amendments that were introduced in 2020, such as the introduction of digital service tax, and filling the gaps in the tax laws, such as the definition of the term ‘control’ for tax purposes. The Bill has also introduced a shift in the tax regime for certain key tax concepts, such as thin capitalisation restriction, which is proposed to be based on a percentage of earnings before interest, taxes, depreciation, and amortisation as opposed to the current debt to equity ratio of 3 to 1.

Notably, some of the tax exemptions and incentives relating to specific sectors, such as the energy sector, that had been withdrawn by the Tax Laws (Amendment) Act, 2020 and the Finance Act 2020, are proposed to be reintroduced. In addition, there are various amendments to the Income Tax Act and the Tax Procedures Act, 2015 in relation to the implementation of the international framework on automatic exchange of information through Country-by-Country reporting and Common Reporting Standards obligations under the Organisation for Economic Co-operation and Development framework.

We have put together a comprehensive overview of the key proposed tax amendments in the Finance Bill and their potential impact on businesses in Kenya. Read the full article here.


Should you require more information, please do not hesitate to contact Daniel Ngumy or Kenneth Njuguna.

 

Daniel Ngumy
Partner
ALN Kenya | Anjarwalla & Khanna

dng@africalegalnetwork.com
Kenneth Njuguna
Partner
ALN Kenya | Anjarwalla & Khanna
kkn@africalegalnetwork.com

 


The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.

 


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