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PAYE relief for Kenyans yet to be approved by parliament

By Chebet Birir | April 22nd 2020

Kenyans will not be getting the PAYE tax relief that was proposed by President Uhuru Kenyatta until it is approved by the National Assembly.

According to a tweet by Kenya Revenue Authority (KRA) on Wednesday morning, the proposal is a bill that has not yet been approved by the lawmakers, and will therefore not take effect this month. 

“Please note that the PAYE rate is now a bill that is yet to be assented to by parliament. Use the old rates until such a time as when parliament will pass the bill to law,” the tweet reads.

Clive Akora, a partner, Tax and Regulatory Services at KPMG Kenya, also echoed KRA’s tweet saying that the President’s proposals could only be implemented after obtaining approval from the National Assembly.

 “The approval must be done through deliberation by members of the National Assembly as per requirements of the Kenyan Constitution,” he said. 

President Uhuru Kenyatta on March 25 outlined various tax interventions the government intends to cushion the country against the economic effects of Covid-19.

These proposals mainly target low-income earners and included a 100 per cent tax relief of Pay As You Earn (PAYE) for those earning less than Sh24,000 per month. Employees earning more than Sh24,000 are to get a reduction from 30 per cent to 25 per cent on the same.

According to Akora, the President was not clear on whether persons earning between Sh24,000 and the top tax rate threshold of KSh 47,059 will get tax relief on their income. 

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“In our view, the best way to provide the tax incentive would be to apply the 5 per cent PAYE rate reduction across all the PAYE tax bands,” he weighed in. 

Other relief options included value-added tax (VAT), turnover tax (TOT) and corporate tax. The President proposed a reduction of TOT from 3 per cent to 1 per cent. The tax was introduced in January this year for businesses whose annual gross sales are below Sh5 million. He also proposed a reduction in VAT from 16 per cent to 14 per cent. The relief is expected to reflect in the prices of commodities such as toilet paper, juice and shoes. 

The proposed measures were to take effect on April 1, implying that Treasury and Parliament were supposed to move quickly to effect them, but it appears the process has been slow.

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