Coronavirus: New tax reliefs to last four months
News
By
Frankline Sunday
| Apr 03, 2020
The new tax reliefs announced by President Uhuru Kenyatta on Income Tax and Value Added Tax will be in place until August this year.
This is as the country continues to assess the economic impact of the Covid-19 pandemic.
According to the draft Tax Laws Amendment Bill 2020 published yesterday by the National Treasury, companies putting up hotels, hospitals, petroleum or gas storage facilities and manufacturing premises will now be allowed to claim up to 50 per cent of their investment as tax allowances for the first year of operations.
The bill spells out a wide array of tax relief measures affecting individuals and corporations. Those putting up commercial buildings and educational premises including student hostels can also claim up to 10 per cent of their investment annually on reducing balance.
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These are part of the incentives headed to Parliament in the coming days that are expected to reduce the weight of economic constraints on individuals and businesses in Kenya impacted by the spread of the Covid 19 pandemic.
If passed, the draft Tax Laws Amendment Bill 2020 will also see individuals and businesses pay new taxes on some income streams previously exempted as Treasury seeks to balance tax reliefs and safeguard revenue collections.
Also, legal fees accrued by companies looking to list shares or securities at the Nairobi Securities Exchange will now attract income tax.
The same applies to club subscriptions fees paid by employers on behalf of staff that were previously exempted from income tax.
And while in the past, businesses could deduct bad debts from their income alongside other expenditure, this provision has been deleted in the proposed amendments.
This means businesses and banks cannot claim income tax relief on account of non-performing loans.
This comes even as many businesses report a decline in operations and sales, with banks negotiating new payment plans and credit restructuring for those adversely affected.
Last week the World Bank recommended low-income countries to increase the number of people receiving State welfare disbursements to cushion the country’s poorest from the impact of the coronavirus pandemic.
The World Bank says a combination of direct income stimulus to the poorest households as well as bailouts to essential firms in sectors like tourism and hospitality.
“Right now, the goal cannot be to stimulate demand and increase economic activity before the virus is under control. Instead, we need redistributive actions to smooth the shock,” stated World Bank lead economist Stéphane Hallegatte and advisor Stephen Hammer in a joint statement.
According to the proposed bill, non-residents citizens of Kenya operating sales promotion, marketing, advertising services, and transportation of goods will now have to pay income tax at applicable rates.
The proposed amendments also make it mandatory for everyone transacting any business to keep a record of each transaction for at least five years.
This is a provision that was previously mandated for only registered businesses.