RWK Financial Compass

  Welcome to the latest edition of the RWK & ASSOCIATES CPA(K) Newsletter. In this issue, we focus on Advance Tax , a critical requirement for all commercial and public service vehicle owners. Understanding how this tax operates and how to manage it effectively can save you time and avoid unnecessary complications. Advance Tax is a mandatory prepayment needed before a commercial or public service vehicle can be registered or licensed. The tax amount is determined by the vehicle's type and capacity. For example, vans, pick-ups, trucks, and similar vehicles incur a fee of Kshs. 2,500 per ton of load capacity or kshs 5000 whichever is higher. In contrast, saloons, station wagons, mini-buses, buses, and coaches are charged Kshs. 100 per passenger capacity per month or kshs 5000 annual amount whichever is higher. It is important to note that Advance Tax is not a final tax. Taxpayers must report this payment in their annual income tax returns and settle any additional taxes that

Today, we shine a spotlight on an essential component of Kenya’s tax framework: withholding Value Added Tax (VAT).  This system, overseen by the Kenya Revenue Authority (KRA), plays a pivotal role in ensuring the accurate collection and remittance of VAT by appointing specific entities as withholding agents. By understanding how withholding VAT operates, businesses and taxpayers can navigate their tax obligations more effectively and contribute to a more transparent fiscal environment. Key Aspects of Withholding VAT  In Kenya, VAT withholding agents are mandated to deduct 2% of the total amount payable to suppliers inclusive of VAT. For instance, if a transaction amounts to Ksh 116 with VAT included, the withholding agent will deduct Ksh 2 and remit Ksh 114 to the supplier. The Ksh 2 deducted is held by the agent until it is remitted to the KRA. It’s important to note that this withholding does not relieve the supplier of their VAT liability; rather, it acts as an advance payment which

  Since the introduction of electronic billing systems in Rwanda, significant strides have been made in improving VAT compliance and revenue collection. Rwanda's Electronic Billing Machine (EBM) system, implemented in 2013, has set a benchmark for other African nations, including Kenya, which recently introduced its Electronic Tax Invoice Management System (ETIMS).  This newsletter explores the effectiveness of Rwanda’s EBM system and its implications for Kenya's ETIMS. The Success of Rwanda's EBM System Rwanda’s EBM system has revolutionized VAT compliance and revenue collection. By mandating the use of certified electronic billing machines, the Rwanda Revenue Authority (RRA) can monitor businesses' sales transactions in real-time.  This has significantly reduced under-reporting of sales, leading to a notable increase in VAT revenue—over 20% within a few years of implementation. A key factor behind this success is the incentivization of customer receipt requests, which

  The Appropriation Bill is a cornerstone of Kenya's fiscal policy, delineating how public funds are allocated across various government departments and agencies each financial year.  This newsletter delves into the intricate process of how the Appropriation Bill is formed, approved, and implemented, providing taxpayers and stakeholders with a comprehensive understanding of this critical legislative instrument. Formation of the Appropriation Bill The journey of the Appropriation Bill begins with meticulous budget preparation. The Treasury spearheads this process by drafting the national budget, which encompasses revenue estimates and proposed expenditures. Ministries, departments, and agencies (MDAs) submit their budgetary needs, which the Treasury consolidates into the Draft Estimates. These estimates are scrutinized and debated within Parliament, following the guidance provided by the Budget Policy Statement (BPS). The culmination of these efforts is the drafting of the Appropria