Relief for Kenyans as they start paying lower VAT

Written By: Betty Kiptum/Claire Wanja
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President Uhuru Kenyatta on March 25, 2020, directed the National Treasury to reduce the Value Added Tax (VAT) from 16% to 14%, with the directive to take effect on April 1.

Kenyans have started paying a lower Value Added Tax rate of 14 percent that was implemented Wednesday.

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This follows President Uhuru Kenyatta directive that the National Treasury  reduce the VAT from 16% to 14%, with the directive to take effect on April 1.

The law allows National Treasury Cabinet Secretary to effect tax changes of up to 25 percent without approval from parliament.

Other tax measures such as lower income tax announced in March are expected to be ratified by the national assembly during a special sitting slated for next week.

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The cost of commodities and services have slightly reduced following implementation of the 14 percent VAT on Wednesday, down from the previous rate of 16 percent.

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The aim of the lower VAT was to give Kenyans a stronger financial capability to counter a slow economy.

Companies have started informing customers of the change in pricing. For instance pay television company DStv and GOtv have informed customers of lower pricing effective today (Wednesday).

Safaricom has also told customers that airtime purchase will earn the customer two percent extra airtime.

In the event that a customer tops up with Ksh 100 for example, they will be entitled to receiving Ksh 102 airtime.

Unlike the VAT however, other tax measures such as abolishing the 30 percent tax band will have to wait for the national assembly’s nod for implementation.

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Already national assembly majority leader Aden Duale has written to the speaker to recall the house for a special sitting next Wednesday to consider among others the new tax measures.

That the National Treasury was also directed to implement the following immediate reliefs and increase disposable income to the people of Kenya, through:

I. 100 % Tax Relief for persons earning gross monthly income of up to Ksh. 24,000.

II. Reduction of Income Tax Rate (Pay-As-You-Earn) from 30% to 25%.
III. Reduction of Resident Income Tax (Corporation Tax) from 30% to 25%;

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IV. Reduction of the turnover tax rate from the current 3% to 1% for all Micro, Small and Medium Enterprises (MSMEs);

V. Appropriation of an additional Ksh. 10 Billion to the elderly, orphans and other vulnerable members of our society through cash-transfers by the Ministry of Labour and Social Protection, to cushion them from the adverse economic effects of the COVID-19 pandemic;

VI. Temporary suspension of the listing with Credit Reference Bureaus (CRB) of any person, Micro, Small and Medium Enterprises (MSMES) and corporate entities whose loan account fall overdue or is in arrears, effective 1st April, 2020.

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