Overview Of The Bills Currently Under Consideration And Key Tax Changes 2024

 

The National Treasury has proposed several bills aimed at enhancing revenue generation and improving financial governance. This newsletter provides an overview of the bills currently under consideration and highlights key tax changes that could impact individuals and businesses alike.

Bills Under Consideration

  1. Public Finance Management (Amendment) (No. 3) Bill, 2024
    • This bill aims to amend the Public Finance Management Act to enhance accountability and transparency in public financial management.
  2. Public Finance Management (Amendment) (No. 4) Bill, 2024
    • Seeks to clarify national government borrowing provisions and introduce frameworks for accrual accounting and risk management.
  3. Public Procurement and Disposal (Amendment) Bill, 2024
    • Intended to streamline procurement processes and increase transparency within public procurement.
  4. Business Laws (Amendment) Bill, 2024
    • Proposes amendments to various business-related laws to create a more conducive environment for business operations.
  5. Tax Procedures (Amendment) Bill, 2024
    • Aims to revise procedures related to tax collection, compliance, and enforcement.
  6. Tax Laws (Amendment) Bill, 2024
    • Focuses on revising existing tax laws to enhance revenue collection mechanisms.

Key Tax Changes Proposed

  1. New Taxes and Increased Rates:
    • Railway Development Levy: Increase from 1.5% to 2.5%, raising import costs.
    • VAT Reclassification: Expands VAT at 16% on goods and services currently exempt.
    • Software-Related Payments: Redefined as "royalties" and subject to withholding tax.
    • Infrastructure Bonds: Currently tax-exempt, will attract a 5% tax (excluding bonds listed before the law's effective date).
    • Digital Taxation:
      • Payments via digital platforms classified as income and taxed.
      • Replacement of Digital Service Tax with Significant Economic Presence Tax at 3% gross turnover for non-residents.
    • Withholding Tax on Goods Supplied to Public Entities:
      • Non-residents: 5%
      • Residents: 0.5%
  2. Reintroduced Taxes:
    • Minimum top-up tax.
    • Tax on income or capital gains for registered family trusts.
  3. Reliefs for Taxpayers:
    • Meals & Non-Cash Benefits: Tax-free limit raised to Sh60,000/year (up from Sh48,000).
    • Fringe Benefits: Exemption limit increased to Sh60,000/year (up from Sh36,000).
    • Pension Exemptions: Gratuity tax-exempt limit increased to Sh360,000 (up from Sh240,000).
    • Personal Reliefs: Expanded to include contributions to the Affordable Housing Levy, Social Health Insurance Fund, and post-retirement medical funds (up to Sh15,000).

Revenue Goals

The National Treasury aims to raise approximately Sh174 billion through these tax law amendments.

These proposed changes reflect a significant shift in the government’s approach to public finance management and taxation. As stakeholders in this evolving landscape, it is essential for businesses and individuals alike to stay informed about these developments.

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