Government proposes new tax with focus on high income earners

National Treasury CS Henry Rotich (PHOTO: FILE)

NAIROBI, KENYA: Kenya’s top earners will at least take home 35 percent less their income and remit the rest to the government if a new bill is approved.

According to the Income Tax Bill 2018, Kenya Revenue Authority (KRA) will deduct 10 percent on the first Sh147,580 and 15 percent on the next Sh139,043 from your payslip.

Individuals with higher income of over Sh9 million per year will part ways with 35 percent of their income to the taxman and those earning over Sh564,709 up to Sh9 million will remit 30 per cent of their income to KRA.

The Bill, which promises significant overhaul of the Income Tax Act, also targets large corporations who will pay the top tax rate for taxable income of more than Sh500 million.  

The proposed law states that a company newly listed on any securities exchange approved under the Capital Markets Act which has at least forty percent of its issued share capital listed, will pay twenty-five percent for the period of five years commencing immediately after the year of income following the date of such listing.

An export processing zone enterprise which does not engage in any commercial activities shall be subject to corporate rate of tax of ten percent for the first ten years from date of first operation and thereafter fifteen percent for another ten years.

The rate of tax for repatriated income of a non-resident company having a permanent establishment in Kenya shall be ten per cent.

Also in the draft bill, a company that develops at least one hundred low cost residential units annually with prior approval by the Cabinet Secretary responsible for housing shall attract fifteen per cent for that year of income in respect of gains or profits from the development of such units.

On the other hand a company whose business is local assembling of motor vehicles shall remit fifteen per cent for the first five years from the year of commencement of its operations.

“Provided that the rate of fifteen per cent shall be extended for a further period of five years if the company achieves a local content equivalent to fifty per cent of the ex-factory value of the motor vehicles.”