Potential Reversion of 2023 Tax Changes Due to Nullification of the Finance Act 2023.




We hope this message finds you well. In light of recent developments concerning the Finance Act, 2023 in Kenya, we want to provide an update on the potential implications for taxpayers. As you may be aware, the High Court has temporarily halted the implementation of this Act, and we want to help you understand the key consequences of this withdrawal and how it might affect your business and tax planning strategies.

Potential Reversion of 2023 Tax Changes Due to Nullification of the Finance Act 2023

  1. Digital Asset Tax: The newly implemented tax on income from the transfer or exchange of digital assets, including cryptocurrencies, might be revoked. This could mean that income from such transactions would no longer be taxable as per the prior law.
  2. Pay As You Earn (PAYE) Tax Rates: The introduced tax bands, which increased rates to 32.5% for income between KES 500,000 and KES 800,000, and 35% for income exceeding KES 800,000, could revert to the previous lower rates if the Finance Act 2023 is nullified..
  3. Value Added Tax (VAT) on Petroleum Products: The increase of VAT on petroleum products from 8% to 16%, which significantly raised the cost of living, could be reversed, potentially reducing fuel prices.
  4. Withholding Tax on Rental Income: The reduction of the withholding tax rate on rental income from 10% to 7.5% might be annulled, restoring the rate back to 10%.
  5. Digital Content Monetization Tax: The introduction of a 5% tax for the monetization of digital content for residents and 20% for non-residents may be nullified, eliminating these tax obligations for content creators.
  6. Withholding Tax Remittance Timeline: The requirement for taxpayers to remit withholding taxes within five working days of deduction could be relaxed, reducing the administrative burden on businesses.
  7. Corporate Income Tax for Vaccine Manufacturers: The preferential corporate income tax rate of 10% for companies manufacturing human vaccines might be revoked, reverting to the standard corporate tax rate.
  8. Exemption for Non-Residents: Exemptions introduced for royalties and interest paid to non-residents involved in specific projects may be rescinded, reinstating previous tax obligations for these payments.
  9. Advance Tax Rate Reviews: Changes to the rates of advance tax for various services, which affected cash flow for businesses, could be reversed, restoring the prior tax rates and conditions.
The withdrawal of the Finance Act, 2023 will revert many tax measures to previous conditions, impacting both individual taxpayers and businesses. 

While some changes may provide immediate relief, the overall effect on government revenue and economic stability raises concerns about future fiscal health and public service funding in Kenya.



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