A. Update
In light of the implementation of the Social Health Insurance Act, the Kenya Revenue Authority (KRA) aims to clarify the applicability of tax relief for contributions made to the Social Health Insurance Fund (SHIF).
Under the current Income Tax Act, insurance relief applies to health policies starting on or after January 1, 2007, or for contributions to the NHIF. However, this relief is limited to the NHIF under the National Health Insurance Fund Act, which has since been repealed by the Social Health Insurance Act. Consequently, the current law does not extend this relief to SHIF contributions under the new Act.
The Tax Laws (Amendment) Bill, 2024, proposes an amendment to allow SHIF contributions to be deducted from taxable income.
SHA believes that SHIF contributions should qualify for insurance relief, pending approval from the KRA. However, due to a legislative gap in Section 31(1)(v) of the Income Tax Act, we do not expect the KRA to allow taxpayers to claim relief on SHIF contributions at this time. We are awaiting further guidance from the KRA but based on the current legislative gap and KRA's advice, we believe SHIF contributions do not qualify for the relief.
B. Statutory Compliance Release Date: November 08, 2024
C. Effective Date: November 08, 2024
A. Update
The Republic of Kenya Parliament has proposed the Finance Bill 2024. Key proposals impacting payroll are as follows:
- Insurance relief on National Hospital Insurance Fund (NHIF) contributions not to be applicable
- Relief Provided on Affordable Housing Levy (AHL) to be removed
- Allowable Pension / Provident fund to be increased
- Relief on Post-Retirement Medical Fund to be repealed
- Per diem/Non-Taxable limit to be increased
- Exemption on Meals provided to Employee to be increased
- Tax exempt threshold for non-cash benefits to be increased
- Owner occupier mortgage interest deduction can be expected to be increased.
These changes are currently in proposal stage. Once there is further clarity and the proposals are enacted, we will update on this portal.
B. Statutory Compliance Release Date: May 13, 2024
C. Effective Date: July 01, 2024
Finance Bill,2024.pdf
A. Update
Following are the recent updates in Social Security System:
Affordable housing levy (AHL):
The Affordable Housing Levy provisions of “Employment Act, 2007” has been released as part of the amended Affordable Housing Act, 2024. As per Sections 4 and 5 of this amended Act, employers are obliged to deduct AHL contribution of 1.5% from employee’s gross salary and remit it to Kenya Revenue Authority’s by 9th of the following month without any change. However, employers should also grant their employees an affordable housing relief at 15% of the employee’s contribution to AHL, subject to a maximum of KES 108,000 per annum (KES 9,000 per month) effective March 19, 2024.
Social Health Insurance Fund (SHIF):
The existing National Health Insurance Fund (NHIF) contribution has now been renamed as Social Health Insurance Fund (SHIF) and Gazetted on March 08, 2024 to provide universal Health coverage to individuals while the payment of contributions and access to healthcare services under this Act shall commence from July 01, 2024. The key provisions are:
- 1. Every person resident in Kenya (including existing members of NHIF) are required to apply for fresh registration as a member of the SHIF not later than June 30, 2024
- 2. The new contribution rate of 2.75% per month by employer shall take effect from July 01, 2024, subject to a minimum contribution of KES 300 per month.
- 3. Employers are obliged to remit the contributions deducted by 9th of the following month.
Until June 30, 2024, employees should continue to deduct and remit a flat amount as prescribed earlier under the NHIF Act.
B. Statutory Compliance Release Date: March 21, 2024, and March 08, 2024
C. Effective Date: March 19, 2024, and July 01, 2024
A. Update
National Social Security Fund have mandated to implement NSSF Act, 2013 and Article 43 of the Kenya constitution on economic and social rights.
In accordance with the changes, NSSF Contribution rates for the second year is applicable as mentioned below:
| Particulars | Minimum Salary (KES) | Maximum Salary (KES) | Employer Contribution (KES) | Employee Contribution (KES) |
|---|---|---|---|---|
| Tier 1 | 0 | 7,000 | 420 | 420 |
| Tier 2 | 7,000.01 | 36,000 | 1,740 | 1,740 |
Employers shall remit the contribution to the fund by the 9th of each subsequent month.
B. Statutory Compliance Release Date: January 11 ,2024
C. Effective Date: February 01 ,2024
NSSF Notice.pdf
A. Update
The National Treasury tabled the Finance Bill, 2023 (‘the Bill’) before the National Assembly on May 04, 2023. The proposals have now been tabled before the Parliament for approval and will be gazetted once approved. The salient proposals of Finance Bill 2023 related to Individual compliances includes:
1. Revision of PAYE tax rate:
The Bill proposes to introduce a new PAYE tax band with a tax rate of 35% on employment income above KES 6,000,000 per annum. The proposal emphasis on equity where the high-income earners pay their fair share of tax.
A comparison of the current and proposed resident individual income tax rate is as follows:
| Income per annum (KES) | Current Tax Rate (%) | Proposed Tax Rate (%) |
|---|---|---|
| On the first KES 288,000 | 10 | 10 |
| On the next KES 100,000 | 25 | 25 |
| On the next KES 5,612,000 | 30 | 30 |
| On all income over KES 6,000,000 | 30 | 35 |
Effective Date: July 01, 2023
2. Mandatory National Housing Development Fund:
The Bill proposes to introduce mandatory contributions by both the employer and employee to the National Housing Development Fund at a rate of 3% of the employees’ basic salary provided that the sum of the employer and employee contributions do not exceed KES 5,000 a month.
Effective Date: July 01, 2023
3. Relief for contributions to a post-retirement medical fund:
The Bill proposes to introduce a relief on contributions made by a resident person towards a post- retirement medical fund. The value of the proposed relief is 15% of contribution, capped at KES 60,000 per annum.
Effective Date: January 01, 2024
4. Exemption of Travelling allowance:
The Bill proposes to provide exemption on travel and mileage claims that are incurred during the performance of official duties up to the value as per the approved rates cards from the Automobile Associate of Kenya.
Effective Date: July 01, 2023
5. Language used for insurance relief made gender-neutral:
The Bill proposes to amend Section 31(1)(b) of the Income Tax Act (’the Act’) which is about insurance relief by deleting the word “his” and replaces it with the word “the individual’s”. The Bill also proposes to amend Section 31(1)(c) of the Act by replacing the words “he, as well as his employer” with “the individual and the individual’s employer. These amendments focuses on providing a more gender-neutral provision that allows all taxpayers to claim insurance relief.
Effective Date: July 01, 2023
6. Change in definition of market value:
The Bill amends the definition of market value in relation to share granted to an employee. Presently, market value for listed shares is determined on the date when the shares were granted by the employer. The proposal is the market value is determined on the date of exercise of the option by the employee.
Effective Date: January 01, 2024
7. Taxability of club entrance and subscriptions fees:
The Bill proposes to include club joining and subscription fees paid by the employer as a benefit taxable in the hands of the employee.
Effective Date: July 01, 2023
B. Statutory Compliance Release Date: May 04, 2023
C. Effective Date: As provided.
A. Update
The Court of Appeals has provided the consent to the full implementation of National Social Security Fund Act No.45 of 2013 (‘the Act’). NSSF has welcomed the decision and released a Press Release issued by NSSF assuring their committed on working with all stakeholders for smooth and seamless implementation of the Act. It has been further mentioned that the implementation will provide members the opportunity to enhance their savings, secure their financial future and retire with dignity.
This Act provides social security benefits to Kenyan citizens including retirement benefits, survivor benefits, and Invalidity benefits. Section 20(1) the Act specifies the mandatory contributions to the fund. The contribution has been divided into 2 tiers and the details of the contributions are as follows:
| Particulars | Minimum Salary (Ksh) | Maximum Salary (Ksh) | Contribution | |
|---|---|---|---|---|
| Employer | Employee | |||
| Tier 1 | 0 | 6,000 | 6% | 6% |
| Tier 2 | 6,000.01 | 18,000 | 6% | 6% |
The due date of new NSSF contribution remains the same as the old NSSF contribution which is 9 th of the following month.
B. Statutory Compliance Release Date: February 7, 2023
C. Effective Date: February 3, 2023
A. Update
The Industrial Training (Amendment) Act, 2022 has been enacted by the Parliament of Kenya. Alongside, Part II of the First Schedule to the Kenya Revenue Authority Act has also been amended by inserting a new paragraph 10A.
As per the above amendment, the Kenya Revenue Authority (KRA) shall now be responsible for collection of NITA training levies from employers on or before fifth day of the following month, and the training levies will not to be remitted to NITA.
The NITA contribution made to KRA should be reported in the monthly P10 return on or before ninth day of the following month. It also includes the stipulation that the training levy is not to be deducted from employee’s remuneration.
B. Statutory Compliance Release Date: April 20, 2022
C. Effective Date: April 22, 2022
A. Update
The Kenya Finance Act 2021 got assented by the President on June 29, 2021. As one of the important amendments from withholding tax perspective under section 31 of Income Tax Act, resident Individuals who contributes to the National Hospital Insurance Fund (“NHIF”) will now be eligible for a tax relief equal to 15% of their contributions made subject to the existing insurance relief limit of KES 5,000 per month.
B. Statutory Compliance Release Date: June 29, 2021
C. Effective Date: January 1, 2022
TheFinanceBill_2021
