Wednesday, 8 June 2011

The Kenyan 2011-2012 National Budget-Tax Issues

The Minister for Finance read his ministerial statement (read budget) on Wednesday 8th June 2011,as did all the other EAC countries. This year´s budget termed as ´Building Resilience and Sustaining Inclusive Growth for a Prosperous Kenya´, stood at Kshs.1.155 Trillion but the bulk of it was on net recurrent expenditure standing at Kshs.474.2 9 Billion, Consolidated Fund Services recurrent expenditure amounts to Ksh.209.5 Billion; while development is pegged at Kshs.398.6Billion. As any other budget, this year`s budget had the following tax implications and proposals;
Tax Proposals
  • Aseptic plastic bags shall be granted duty remission and imported at the rate of 10% instead of a Common External Tariff (CET) rate of 25% ;
  • Imports duty on animal and poultry feeds zero rated (0%);
  • Duty remission on inputs for the production of solar panels ;
  • Battery operated vehicles will be duty exempt ;
  • Exempt from paying import duty apron buses used at the airside ;
  • Vehicles and equipment imported by Kenya police shall be exempt from import duty, security equipment such as hand held metal detectors, CCTV cameras, bomb detectors, under carriage walk through metal detectors and under carriage mirrors will also enjoy duty exemption ;
  • Law amendment to make it mandatory for issuers of simcards to ensure registration before activation for use by their subscribers ;
  • Amendment of the Banking Act to require the Central Bank to formulate guidelines to allow banks to enter into arrangements with banks outside Kenya to offer limited banking services to Kenyans while abroad ;
  • Amend both the Banking and Microfinance Acts to allow for credit information sharing by institutions licensed under the two Acts ;
  • Amend the Microfinance Act to prohibit institutions which obtain approval from the Registrar of Companies to use the words “Deposit Taking Microfinance” in their business name from commencing deposit taking business before being issued with a deposit taking license by the Central Bank ;
  • Amend the law to remove the requirement for appointing fund managers by schemes that invest all their funds in guaranteed fund ;
  • Amend the Capital Markets Act to facilitate introduction of an Over the Counter Market for bonds ;
  • Amend the Capital Markets Act to allow for the introduction of a regulated commodity futures market ;
  • Amend the Insurance Act to empower the Insurance Regulatory Authority to assume control over the assets of a financially troubled insurer ;
  • Amend the Insurance Act to adopt a mortality table reflective of the Kenya experience ;
  • Excise duty on kerosene removed;
  • Stay of CET application to allow the importation of all types of rice at the rate of 35% instead of 75% for a period of one year ;
  • Importation of wheat grain under the duty remission by gazetted millers at the rate of 0%, instead of 10%;
  • Grant remission of duty for a period of six months on maize grain imported by gazetted maize millers at a duty rate of 0% instead of 50% as per the EAC CET ;
  • Reduce import duty on food supplements from 25% to 10% ;
  • Remove import duty on motor cycle ambulances ;
  • Amend the PAYE rules to provide that an employee shall only qualify for one personal relief ;
  • amend the Income Tax Act to exempt Real Estate Investment Trusts (REITs) from corporation tax in addition to exempting investors who receive dividends from REITs from payment of withholding tax ;
  • Increase the withholding tax in respect of payments made to such professionals from 5% to 10% ;
  • Harmonize the excise duty regime for cigarettes at Ksh.1,200 per mille or 35 percent of the retail selling price (RSP), whichever is higher ;
  • Amendment of the law to allow the Government to enter into Tax Information Exchange Agreements ;
  • Filing of returns by employees who have no other income and their PAYE has been paid to the exchequer by their employers abolished;
  • Amend the Income Tax Act to give the Commissioner express powers to register such taxpayers.
If you want the budget speech, click here.

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