Yatani hands tax relief to Sh328b Japanese projects

Japanese workers and companies will be laughing all the way to the bank after the government exempted them from paying income tax for projects valued at Sh328 billion.

In a legal notice, National Treasury Cabinet Secretary Ukur Yatani directed that the income that these businesses and workers earned from 15 projects will be exempted from income tax.

Mr Yatani said this was according to Section 13(2) of the Income Tax. “Cabinet Secretary for National Treasury and Planning directs that the income which accrued in or was derived from Kenya by Japanese companies, Japanese consultants and Japanese employees involved in the projects…. shall be exempt from income tax...” read part of the notice that was issued by Yatani on February 26, 2021.

Section 13 (2) of the Income Tax reads: “The Minister may, by notice in the Gazette, provide... that any income or class of income which accrued in or was derived from Kenya shall be exempt from tax to the extent specified in such notice.” The exemption, said Yatani, was given under the financing agreements that contractors signed with Kenya.

The exemption comes at a time when the government has insisted it would roll back most of the tax holidays as most of them had outlived their usefulness.

The taxman did a study that showed tax expenditures amounted to at least Sh500 billion, with much of the tax relief not helping the country to increase investment and create jobs.

Some of the projects that were subjected to the tax exemptions include Olkaria V Geothermal Power Development Project which cost Sh66.9 billion.

Other Japanese projects that have benefited from the tax relief include the first phase of the Sh38.2 billion Mombasa Special Economic Zone Development Project, the first and second phases of the Mombasa Port Area Road Development Project which cost Sh29 billion, the first phase of the Mombasa Port Development Project (Sh22 billion).

The Sh18.2 billion power transmission line from Lessos to Kisumu will also see the Japanese workers and firms benefit from the tax relief. Mwea Irrigation Development Project is the other candidate for tax exemption, with the country having spent Sh13.2 billion on the farming project.

Japan is one of the country’s major financiers and had for long been Kenya’s leading bilateral partner until it was dislodged by China with the building of the Standard Gauge Railway in 2013.

In Kenya, all the income of a person, whether resident or non-resident, which is accrued in, or derived locally is subject to income tax. It is charged at 30 per cent for firms and highly paid employees.

It is levied on gains or profits from a business for whatever period carried on.