Kenyans face more financial strain as the government prepares to increase deductions starting in February.
This comes after President William Ruto signed the Tax Amendment Act and the Tax Procedures Act on December 11, 2024, which will bring significant changes to the country’s tax system.
The amendments, which took effect from December 27, 2024, will revise key tax laws, including the Income Tax Act, VAT Act, Excise Duty Act, Miscellaneous Fees and Levies Act, and the Tax Procedures Act.
These changes are expected to lead to higher taxes, particularly VAT and excise duties, which will result in increased costs for everyday consumer goods and businesses.
Popular products such as sugar, alcohol, and plastics will see higher excise duties, directly affecting the prices that consumers will have to pay.
Retirees will also feel the impact of these changes, as the 15% tax relief on contributions to post-retirement medical funds has been abolished.
This means that retirees will no longer enjoy the Ksh.60,000 annual cap on contributions and will be forced to cover the full cost themselves.
Kevin Chege, the Manager of Tax and Transfer Pricing at PKF, pointed out that changes in indirect taxes, particularly the VAT Act and Excise Duty Act, will significantly affect the economy.
For example, excise duties have sharply increased for certain services.
Furthermore, the railways development levy on imported goods has been raised from 1.5% to 2%, which will likely increase the cost of living.
Salaried Kenyans are also in for a shock, as the National Social Security Fund (NSSF) contributions are set to double in February 2025.
This follows a gradual increase that began in 2023 when the contribution stood at Ksh.1,080.
In February 2024, it rose to Ksh.2,160, and now, in 2025, it will increase again to Ksh.4,320, according to the NSSF Act of 2013.
The digital sector will not be spared either. The digital service tax has been replaced with the significant economic presence tax, which will rise from 1.5% to 3% of turnover.
Additionally, a 5% withholding tax on digital platforms will reduce earnings for those operating in the sector.
Experts are advising Kenyans to take advantage of tax amnesties to ensure they remain compliant, as they warn that the country faces tough economic times ahead due to these changes.
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