New Levy Imposed on Government Contractors and Suppliers.

 


Effective September 1, 2024, the Kenyan government has introduced a new levy that directly impacts contractors and suppliers providing goods and services to both national and county governments. This levy is part of a broader strategy to enhance compliance and streamline public procurement processes. In this newsletter, we will outline the key details of the levy, its applicability, and the obligations for both suppliers and procuring entities.

The new levy applies to all procurement contracts signed from September 1, 2024, between suppliers and procuring entities, covering goods and services. Notably, the levy includes any contract extensions, renewals, and variations that take effect from this date. The amount payable by suppliers is set at 0.03% of the contract value, excluding taxes. For instance, a contractor engaged in a project valued at KSh 1 billion will be required to pay a levy of KSh 300,000.

This levy is applicable across various contract types, including agreements with part payments, instalment-based payments, milestone-based payments, Local Purchase Orders (LPOs), and Local Service Orders (LSOs). Procuring entities have the responsibility to deduct the levy from the contract payments and remit it to the Public Procurement Regulatory Authority (PPRA) via the eCitizen platform. Remittance must be completed by the 20th day of the following month.

Failure to make timely payments will result in a 5% penalty per month for every month the levy remains unpaid, adding a significant cost burden for non-compliance.

The introduction of this levy emphasizes the government's commitment to improving transparency and accountability within public procurement. Contractors and suppliers working with national or county governments must ensure compliance with the levy requirements to avoid penalties. RWK & Associates is available to assist with any queries or compliance-related matters regarding this new levy. Stay informed and compliant to maintain smooth operations in your procurement engagements.

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