Tough July as Ruto taxes take effect

The Finance Bill 2023 contains new taxes with three start dates: 1 July 2023, 1 September 2023, and 1 January 2024.
However, the Kenya Kwanza administration has delayed the start of most taxes until next month in order to raise money for the Ksh3.68 trillion budget.
From July, small enterprises with yearly sales revenues between Ksh1 million and Ksh25 million will pay a 3% turnover tax, an increase from the current Ksh1 million–Ksh50 million turnover tax of 1%.
Social media influencers, including those advertising companies, will now be required to reserve 5% of their gross earnings related to the creation of digital content.
The value-added tax on petroleum will double in July from 8% to 16%, setting a record high for the cost of gasoline, fuel, and kerosene at the pump.
Given that diesel and petrol represent a cost of production and transportation to the market, the planned increase in VAT on fuel will have an impact on the economy and cause prices of items to increase.
This might prevent inflation from reaching the desired range of 2.5% to 7.5%. If the plan to create two new tax bands with a 32.5% and 35% rate is approved by Parliament this week, high earners will likewise pay more in taxes on their gross salaries starting in July.
The present tax bracket, which taxes income beyond Ksh32,333 at a maximum of 30%, is what the government wants to change. Since income beyond Ksh 800,000 is subject to a 35% tax, income between Ksh 500,000 and Ksh 800,000 will now be taxed at 32.5%.
Beginning in July, a 1.5% monthly tax would be withdrawn from gross monthly pay, making payslips more painful. At the same time, the government is considering another 2.75% deduction from gross pay for the National Health Insurance Fund, up from the existing range of between Ksh150 and Ksh1,700.
Additionally, the Kenya Revenue Authority will begin taxing mileage reimbursements in this month that exceed the tax-free mileage allowance set by the Automobile Association of Kenya.
As the government works to raise the excise duty rate on betting, gaming, prize competitions, and lotteries from the present rate of 7.5% to 12.5%, July will also get harder for gamblers.
The sole saving grace for gamblers will be that instead of the full payout as it is currently the case, the 5% withholding tax will be applied to the difference between the payout and the amount risked.
A 15% withholding tax on fees collected for advertisements for alcoholic beverages, wagering, gaming, lotteries, and prize competitions in media, including television and newspapers, would be implemented by the State in the same month.
Fish importers will begin paying 10% excise duty or Ksh100,000 per metric ton in the same month, whichever is higher. Even though the action is intended to preserve the local fish market, price increases may result unless local supply is increased.
Increased customs taxes will apply to importers of commodities made of timber, including sugar, powdered juice, furniture, plastic and rubber products, paper and paper products, safety matches, particle boards, and plywood.
The elimination of the 8% VAT and other fees on cooking gas will be one of the few benefits for homeowners starting next month. This should lower the price of cooking gas.
Additionally, in July, the excise tax rate for mobile money transfers will decrease from 12% to 10%, while it will decrease from 20% to 15% for transfers made through banks, money transfer services, and other financial services.
As the government plans to begin deducting membership fees and subscriptions when computing the income subject to tax, members’ clubs and trade associations will be among those benefiting in July.
Next month, the monthly residential rental income tax rate will also be reduced from 10% of gross rental revenues to 7.5%, providing relief for landlords who will now have to pay less tax on rental income.
However, the tax must be paid by the landlords within five working days after collection. The State wants to cut the amount of time needed to account for withholding tax and capital gains from 20 days to just 5 working days following the transaction.
Additionally, starting in July, the KRA commissioner would no longer have the authority to change excise tax rates annually for inflation. A three percent tax on the value of digital assets, such as cryptocurrencies, that are transferred or exchanged will go into effect in September.
Despite criticism from some industry participants, the contentious 10% export and investment promotion charge on imported clinker, steel, and paper products will also go into effect in September.
The rate of advance tax for vans, pickups, trucks, prime movers, trailers, and lorries will increase in January next year from Ksh1,500 per ton of load capacity per year or Ksh2400 per year to Ksh3,000 per ton of load capacity per year or Ksh5,000; whichever is higher.
Additionally, the tax rate for sedans, station wagons, minibuses, buses, and coaches will increase from Ksh60 per passenger capacity per month or Ksh2,400 annually to Ksh100 per passenger capacity or Ksh5,000 annually.
But individuals who are saving for post-retirement medical fund relief will experience some comfort because their monthly savings will allow them to get a 15% contribution reduction or Ksh60,000 per year, whichever is smaller.