More money for salaried Kenyans as Parliament passes Uhuru’s tax relief proposals

The National Assembly.

Hours after the Kenya Revenue Authority (KRA) spelt doom for Kenyan workers regarding tax relief by President Uhuru Kenyatta, Parliament has ratified the proposals contained in the Tax Laws Amendment Bill 2020.

MPs passed the bill on Wednesday night.

This means that employees will have a bigger chunk of their salaries for April while corporates will enjoy reduced tax. The bill now awaits the president’s assent.

President Uhuru Kenyatta in March exempted workers earning Ksh24,000 and below from taxation whilst also reducing the minimum income tax popularly known as Pay-As-You-Earn (PAYE) from 30 percent to 25 percent.

Uhuru also ordered for the reduction of Value Added Tax (VAT) from 16 percent to 14 percent.

In Uhuru’s tax relief, corporation tax had also been reduced from 30 percent to 25 percent while small-scale traders and medium enterprises were required to pay one percent turnover of their total income. It came down from three percent in January.

Uhuru had said that the move was geared towards cushioning Kenyans from the economic shocks caused by COVID-19 pandemic

Uhuru raised the zero-tax bracket which was initially capped at Ksh13,286. 

Statutory deductions will not attract any taxes going forward meaning salaried Kenyans have more on their wallet. 

Audit firm, KPMG in its assessment of the tax relief said that the relief will increase the taxpayer’s disposable income.

 “The above changes will increase the taxpayer’s disposable income. Previously only income below Sh13,486 was exempt from tax, with the changes effectively doubling the tax-exempt income,” KPMG said in an assessment report.

“For a person earning a monthly income of Sh40,000, the change will result in additional take-home pay of approximately Sh2,600,” the KPMG report adds.