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.

Book a Free consultancy with us here

Visit our website to learn more

Follow our pages Facebook , Twitter, Linked In , Instagram , TikTok

 


Comments

Post a Comment

Popular posts from this blog

Clarification On Taxation Of Meals Provided By Employers

Image
Background:  The Kenya Revenue Authority (KRA) issued a Technical Circular (Ref: 1005/1) in March 2017, outlining guidelines for the taxation of employment income, particularly regarding benefits provided to employees. Among these benefits, the circular stated that meals provided to employees up to a value of Kshs. 48,000 per year per employee were not subject to tax, in accordance with Section 5(4)(f) of the Income Tax Act. Clarification:  Recently, there has been confusion regarding the interpretation and application of this provision. The KRA has clarified that if an employer provides meals exceeding the value of Kshs. 48,000 per annum per employee, the entire value of the meal becomes taxable income for the employee. Essentially, any amount spent on meals beyond the specified limit is now subject to taxation under the Income Tax Act. Implications for Employers: This clarification places the responsibility on employers to ensure compliance with tax regulations regarding employee ben
Read more

Understanding Advance Tax: Essential Information for Vehicle Owners.

Image
  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
Read more

Summary Of The Key Proposed Changes In The Finance Bill 2024

Image
  Income Tax Act: • Introduction of Motor Vehicle Tax at 2.5% of the vehicle value payable upon insurance issuance. • Withholding tax on goods supplied to public entities at 3% for residents, 5% for non-residents. • Taxation of income from digital marketplaces/platforms at 20% for non-residents, 5% for residents. • Introduction of Significant Economic Presence Tax at 30% for non-residents. • Minimum top-up tax for resident entities in multinational groups. • Deductibility of SHIF, post-retirement medical funds, and the affordable housing contributions. • Investment deduction for spectrum license purchase at 10%. • An eco levy for manufacturers and importers will be introduced. • Imported motorcycles beyond a certain price will be taxed at 10% of value instead of a flat rate. • Taxation of interest income from infrastructure bonds for residents. Value-Added Tax Act: • VAT exemptions on bread will be removed. • Removal of VAT exemptions for financial services such as credit and debit car
Read more