Introduction to the Finance Act 2022
The Finance Act 2022 received presidential assent on 21st June 2022. Most of the changes introduced by act will be effective from 1st July 2022 except for the following which will become effective from 1st Jan 2023.
- Capital gains tax
- Financial derivatives
- Ascertainment of gains and profits from a preferential tax regime
- Inflation adjustment
✅ Key Changes to Income Tax
Gains from financial derivatives for Non-resident persons to be taxed @ 15% of the gains.
Exemption of non-residents with permanent establishments in Kenya from provisions of the Digital Service Tax.
All donations made to charitable organizations whose incomes are exempted from tax now allowable.
Microfinance Institutions, holding companies regulated Capital Markets Act and companies that have invested over 5bn outside Nairobi and Mombasa allowed to make deductions from taxable income gross interest paid or payable to 3rd parties even if it exceeds the 30% limit set by the law.
Capital Gains Tax increased from 5% to 15% of the Gains.
Changes introduced to enhance transparency of multinational corporations operating in multiple jurisdictions.
Definitions introduced for “Fair Market Value”, “Financial Derivative” and “Permanent Home”
✅ Change on Investment Deductions under the Income Tax Act
Investment Deductions shall be 150% where the cumulative Investment value for the preceding 4 Years from the date of this provision comes into force or the cumulative Investment for the succeeding 3 years outside of Nairobi City County or Mombasa City County is at least 2 billion.
The Act has extended the period for claiming investment deduction to 31st December 2023 on capital expenditure incurred on the construction of bulk storage and handling of facilities for supporting the SGR operations.
✅ Changes to the VAT Act 2013
Taxable goods for the exclusive use for the construction and equipment of a specialized hospital with a bed capacity of over 50 to be no longer VAT exempt.
Supply of maize flour, cassava flour, and wheat flour among others to be removed from the exemption and zero-rated list.
Plant and machinery imported for the manufacture of pharmaceutical products to be VAT exempt.
Medical oxygen supplied to registered hospitals, urine bags, adult diapers, artificial breasts, colostomy or ileostomy bags for medicinal use to be VAT exempted.
Inputs and raw materials used in the manufacture of passenger Motor Vehicles and locally manufactured passenger motor vehicles to be exempted from VAT.
✅ Changes to the excise duty act
Introduced Excise duty on liquid nicotine at a specified rate of Lsh. 70 per ml rather than per kg.
An excise duty of 15% to be applied to fees charged on advertisements of alcohol, gambling, and gaming activities on various media.
Gambling taxes; Betting tax will not be applicable to horse racing.
Fertilized eggs from hatcheries, neutral spirits for pharmaceuticals, and locally manufactured passenger Motor vehicles to be exempted from Excise duty.
Excise duty increased for various items such as fruit juice, bottled water, alcoholic products, tobacco products, and confectioneries, among others.
Excise duty on imported ready-to-use sim cards introduced at Ksh.50 per sim card.
Excise duty introduced on fees charged by digital lenders and importation of cellular phones at 20% and 10% respectively.
Excise duty charged on imported furniture of any kind used in offices, kitchens, bedrooms, and other furniture from 25% to exempt.
Gambling taxes; Betting tax will not be applicable to horse racing.
Fertilized eggs from hatcheries, neutral spirits for pharmaceuticals, and locally manufactured passenger Motor vehicles to be exempted from Excise duty.
Excise duty increased for various items such as fruit juice, bottled water, alcoholic products, tobacco products, and confectioneries, among others.
Excise duty on imported ready-to-use sim cards introduced at Ksh.50 per sim card.
Excise duty introduced on fees charged by digital lenders and importation of cellular phones at 20% and 10% respectively.
Excise duty charged on imported furniture of any kind used in offices, kitchens, bedrooms, and other furniture from 25% to exempt.
✅ Changes to the Tax Procedures Act
An amendment seeking to provide for a specified period of 6 months allowable for deduction of input tax after the end of the tax period in which the supply or importation occurred.
Amendment to provide for the security of property for unpaid tax.
✅ Changes to the Miscellaneous Fees and Levies Act
Reduction of the export levy on raw hides and skins from 80 percent or USD 0.5 per kilogram to 50% or 0.32 per kilogram.
Inputs and raw materials imported by manufacturers of pharmaceutical products to be exempted from payment of Import Declaration fees and Railway Development Levy.
✅ Change to the Stamp Duty Act
Exemption of stamp duty on instruments executed in favor of a mortgage refinance company
✅ Changes to the Special Economic Zones Act
No tax on dividends paid by Special Economic Zone enterprises, developers, and operators licenses under the Special Economic Zones Act.
No tax on dividends paid by special
No tax on dividends paid by special
Economic Zone Enterprises, developers, and operators to any non-resident persons.
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