Key Amendments to Employment Benefits, Mortgage Interest Deduction, and Investment Incentives

 


We are pleased to share important updates on recent amendments to taxation laws affecting employment benefits, mortgage interest deductions, and investment incentives. 

These changes aim to ease financial burdens on employees and businesses while promoting investment growth.

1. Revisions to Taxation of Employment Benefits

Recent amendments have increased the threshold for non-taxable employment benefits, ensuring better support for employees. Key changes include:

·         The tax-free limit for employer-provided meals in a cafeteria or canteen has been raised from KES 48,000 to KES 60,000 per year. Specific guidelines will be provided by the Kenya Revenue Authority (KRA).

·         The cap on other non-taxable benefits has been increased from KES 36,000 to KES 60,000 per year.

·         The maximum allowable employer contributions to registered pension schemes have risen from KES 240,000 to KES 360,000 annually (KES 30,000 per month from the previous KES 20,000).

Implication: These changes recognize the rising cost of living and enhance employee welfare. The increase in pension contributions is expected to encourage greater retirement savings among employees.

2. Increased Mortgage Interest Deduction

The deductible interest on loans for purchasing or improving a residential home has been raised from KES 300,000 to KES 360,000 per year.

Implication: This amendment encourages home ownership by allowing individuals to deduct up to KES 360,000 annually (KES 30,000 monthly) from taxable income, reducing their overall tax liability.

3. Taxation of Export Processing Zone (EPZ) Enterprises

The amendment removes the penalty previously imposed on EPZ enterprises for failing to submit annual returns.

Implication: This change aligns with existing provisions under the Tax Procedures Act, eliminating redundancy in compliance requirements.

4. Lowering the Investment Value Threshold for Deductions

The minimum investment required to qualify for investment deductions has been reduced from KES 2 billion to KES 1 billion.

Implication: This revision broadens access to investment deductions, making it easier for businesses in manufacturing and hotel construction to qualify for incentives of up to 150%, subject to the applicable conditions. The change is expected to stimulate further investment in these key sectors.

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