Kenya Insights

Tag: Kenya Revenue Authority (KRA)

  • KRA Makes Certificate of Origin Mandatory for All Kenya Imports from October 1 and What This Means

    KRA Makes Certificate of Origin Mandatory for All Kenya Imports from October 1 and What This Means

    The Kenya Revenue Authority has issued a final reminder to importers that all goods entering the country must be accompanied by a Certificate of Origin effective October 1, marking the end of a three-month transition period that began in July.

    The requirement, outlined under Section 44A of the Tax Procedures Act, CAP. 469B, will apply to all consignments imported into Kenya with only a few exceptional cases receiving provisional measures for compliance ease.

    The KRA confirmed this directive in a statement released on September 23, giving importers just seven days to ensure full compliance.

    What Changes for Importers

    The new regulation fundamentally alters Kenya’s import landscape by requiring documentary proof of goods’ country of origin before customs clearance.

    KRA said this new requirement is set to change how businesses import goods, aiming to boost transparency and tighten compliance with trade laws.

    For shipments lacking a Certificate of Origin, customs authorities will accept alternative documentation including Origin Declarations confirming goods’ source, Export Permits or Licenses from relevant authorities in exporting countries, Customs Export Declarations, or Pre-Export Verification of Conformity certificates issued by Kenya Bureau of Standards-authorized agents.

    Exemptions Provide Limited Relief

    Several categories of imports remain exempt from the Certificate of Origin requirement. Privileged persons and institutions listed in the Fifth Schedule of the East African Community Customs Management Act 2004 are excluded, as are used goods under the same schedule, including second-hand vehicles.

    Personal items such as baggage, personal effects, mailbags, postal parcels, and human remains being repatriated do not require certificates.

    Temporary imports under Section 117 of EACCMA and small medical packages with doctor’s prescriptions are also exempt.

    Individual parcels meeting weight and value limits under Regulation 119(3) of EACCMA shipped via registered couriers similarly avoid the requirement.

    Business Impact and Concerns

    From October 1, 2025, all non-compliant goods will be treated as illegal under the new law.

    This move will have widespread implications for businesses, especially small-scale importers, clearing agents, logistics firms, and international suppliers dealing with Kenyan clients.

    Failure to comply could lead to seizure or forfeiture of the goods, as spelt out in the amended Tax Procedures Act under the Finance Act, 2025.

    This enforcement mechanism represents a significant escalation in trade compliance requirements, potentially disrupting supply chains for businesses unprepared for the documentation demands.

    The timing presents particular challenges for small and medium enterprises that may lack the resources to navigate complex documentation requirements or may depend on suppliers unfamiliar with Kenya’s specific regulatory demands.

    Import-dependent sectors including retail, manufacturing, and construction face potential operational disruptions if their suppliers fail to provide proper documentation.

    Revenue Authority’s Assurance

    Despite the stringent requirements, KRA has committed to addressing implementation challenges on a case-by-case basis.

    The Authority assured importers that any difficulties encountered in meeting the Certificate of Origin requirement would be handled individually while maintaining adherence to existing legal provisions.

    This approach suggests recognition of the practical challenges businesses face in obtaining proper documentation, particularly from suppliers in countries with different trade documentation systems or less developed administrative structures.

    The Certificate of Origin mandate represents Kenya’s broader strategy to enhance trade transparency and combat illicit trade flows. By requiring verifiable proof of goods’ origin, authorities aim to close loopholes that have historically enabled trade malpractices including undervaluation, misdeclaration, and smuggling.

    The policy aligns with regional and international efforts to strengthen customs controls and ensure accurate trade statistics.

    However, its success will largely depend on the business community’s ability to adapt to the new requirements and the Authority’s capacity to implement the policy without unduly disrupting legitimate trade.

    For businesses, the October 1 deadline marks a critical compliance milestone that could determine their continued access to the Kenyan market.

    Those failing to secure proper documentation risk significant financial losses through goods seizure, while compliant importers may benefit from reduced unfair competition from non-compliant traders.

    The policy’s ultimate impact on Kenya’s trade flows, business costs, and economic competitiveness will become clearer in the months following implementation, as markets adjust to the new regulatory reality.

  • Tax Cheats: Court Orders TechSavana to Pay KRA Sh74M

    Tax Cheats: Court Orders TechSavana to Pay KRA Sh74M

    High Court ruling deals blow to software firm’s attempt to dodge VAT on outsourced developer services

    A Kenyan software development company has been dealt a devastating blow after the High Court ordered it to pay Sh74 million in unpaid Value Added Tax (VAT) to the Kenya Revenue Authority (KRA), overturning a tribunal decision that had initially favored the firm.

    TechSavana Company Limited, which provides software development services to major corporations including Safaricom PLC and KCB Bank, had been fighting a protracted battle with tax authorities over whether its outsourcing arrangement constituted a taxable service subject to VAT.

    The scheme unraveled

    The case, which spans financial records from 2016 to 2019, exposes how TechSavana attempted to structure its business model to avoid tax obligations.

    The company had entered into contracts with blue-chip clients to identify and second qualified software developers, arguing it was merely acting as an intermediary agent rather than providing taxable professional services.

    Justice Hellene Namisi, delivering the High Court ruling, rejected TechSavana’s defense and sided with KRA’s assessment that the arrangement constituted a supply of professional and technical services subject to the standard 16% VAT rate.

    “KRA was correct in assessing VAT on the services rendered by TechSavana Company Limited to its clients,” Justice Namisi ruled, ordering the company to pay Sh73.8 million in VAT plus Sh3.5 million in withholding tax.

    Failed defense strategy

    TechSavana had crafted what it believed was a bulletproof defense, claiming its role was purely administrative.

    The company argued that it merely sourced human capital based on client specifications and salary scales, with the outsourced developers falling under the direct control and management of the client companies.

    In court documents, TechSavana maintained that it received money on behalf of developers from clients and paid them in full, describing this as a transaction that involved “no value addition.”

    The firm claimed its service level agreements clearly indicated developers were entitled to gross salaries and statutory benefits including National Health Insurance Fund (NHIF) and National Social Security Fund (NSSF) contributions.

    “The staff was at all times under the direct supervision of the customer, and our work was merely facilitation,” TechSavana argued, positioning itself as a passive conduit for salary payments rather than a service provider.

    KRA’s winning arguments

    The taxman took a different view, arguing that TechSavana was providing substantive professional and technical services that attracted VAT under Kenyan law. KRA’s position proved prescient when the court examined the actual working arrangements.

    Critical to KRA’s case was evidence showing that TechSavana maintained “complete and comprehensive documents and accounts” and supplied clients with monthly payroll records and tax submission reports.

    This level of administrative responsibility, the court found, went far beyond mere facilitation.

    The ruling represents a significant victory for KRA in its ongoing efforts to close tax loopholes in Kenya’s growing technology sector.

    The case sends a clear message to companies attempting to structure arrangements to avoid VAT obligations on professional services.

    The TechSavana ruling comes amid broader changes to Kenya’s VAT regime affecting exported services and professional outsourcing.

    Since July 2022, exported services (except for business process outsourcing) have been subject to VAT at the standard rate of 16%, creating additional compliance challenges for technology companies serving international markets.

    The decision is likely to have ripple effects across Kenya’s burgeoning technology sector, where outsourcing arrangements have become increasingly common.

    Many firms may now need to reassess their service delivery models and tax compliance strategies.

    Industry sources suggest the ruling could particularly impact companies that have adopted similar “agent” structures to minimize tax exposure.

    The court’s emphasis on substance over form indicates that KRA will likely scrutinize the actual nature of service arrangements rather than accepting contractual descriptions at face value.

    Timeline of the tax battle

    The dispute began when KRA notified TechSavana of its intention to verify company records.

    Following a comprehensive audit covering the 2016-2019 financial period, KRA issued preliminary findings on October 17, 2020.

    The Commissioner of Domestic Taxes subsequently issued the contested assessment demanding Sh73.8 million in VAT and Sh3.5 million in withholding tax.

    TechSavana objected and, after unsuccessful negotiations with KRA, took the matter to the Tax Appeals Tribunal.

    Initially, the tribunal sided with TechSavana and quashed KRA’s demand, providing temporary relief to the company.

    However, KRA’s successful High Court appeal has now reversed that decision, leaving TechSavana liable for the full assessment plus legal costs of Sh50,000.

    What this means

    The ruling establishes important precedent for how Kenyan courts will treat outsourcing arrangements for tax purposes.

    Companies can no longer rely on contractual labels or formal agency relationships to avoid VAT obligations if the substance of their activities constitutes professional service provision.

    For TechSavana, the Sh74 million liability represents a substantial financial hit that could impact its operations and future growth plans.

    The company has not indicated whether it plans to appeal the High Court decision to the Court of Appeal.

    The case also demonstrates KRA’s increasingly sophisticated approach to tax enforcement, particularly in technology and professional services sectors where complex arrangements are common.

    The authority’s success in overturning the initial tribunal decision shows its willingness to pursue cases through multiple judicial levels when substantial revenue is at stake.

    As Kenya continues developing its digital economy, the TechSavana ruling provides clarity on tax obligations while serving as a warning to companies that attempt to structure their operations primarily for tax avoidance purposes.

  • Investigation Reveals How Innocent Kenyans Are Unknowingly Trapped in Debts in Shocking KRA Tax Fraud Racket

    Investigation Reveals How Innocent Kenyans Are Unknowingly Trapped in Debts in Shocking KRA Tax Fraud Racket

    KRA investigation uncovers elaborate identity theft scheme targeting ordinary citizens, leaving victims facing millions in tax liabilities

    NAIROBI – A sophisticated tax fraud racket has emerged in Kenya, where criminal networks are stealing the identities of innocent citizens to create shell companies, leaving unsuspecting victims trapped in massive tax debts and facing arrest, a comprehensive investigation reveals.

    The Kenya Revenue Authority’s Investigation and Enforcement Unit has uncovered what officials are calling the “identity theft tax evasion scheme” – a complex fraud operation that has ensnared domestic workers, traders, and even corporate employees in a web of financial liability they never created.

    The shocking reality

    The scheme’s victims include ordinary Kenyans whose personal details – national identity cards and Personal Identification Numbers (PINs) – are being harvested by fraudsters to establish companies without their knowledge.

    These shell entities then become vehicles for elaborate tax evasion schemes, including fictitious Value Added Tax returns and money laundering operations.

    “These individuals are later pursued for tax liabilities or fraud they are unaware of – sometimes even arrested or jailed,” KRA enforcement officials revealed during the investigation.

    The investigation uncovered several heart-wrenching cases that illustrate the scheme’s devastating impact on innocent lives.

    In Mombasa, trader Joy Catherine Gashengu secretly used her domestic worker’s national identity card to register for a KRA PIN, importing second-hand clothes worth Sh349 million between 2015 and 2020.

    The domestic worker’s identity was used to declare goods while evading duties totaling Sh68 million. While Gashengu faces fraud charges, her employee initially found herself implicated in crimes she had no knowledge of.

    Perhaps the most shocking case involves a young woman who discovered her predicament in the most dramatic fashion possible.

    On September 10, 2024, she was prevented from boarding an international flight at Jomo Kenyatta International Airport due to a travel ban – only to learn she was listed as director of a company with millions in unpaid taxes.

    “Upon interrogation by KRA investigators, she said that she had no knowledge of the existence and ownership of the company,” the investigation found.

    Even more disturbing, she discovered she was the sole director of four other companies she had never heard of.

    The travel ban had been in effect since September 2018 – six years during which she remained unaware that her identity had been stolen and used to establish a business empire that owed the government substantial sums.

    The missing trader scheme

    At the heart of many cases lies what investigators call the “Missing Trader Scheme” – a sophisticated fraud mechanism that has significantly impacted Kenya’s VAT collection performance.

    In this scheme, fraudsters create fictitious invoices to simulate business transactions where no actual goods or services are supplied.

    Companies appear to meet all legal requirements for legitimate trade while using fabricated “payments” to create artificial costs of goods sold, which are then used to claim fraudulent VAT refunds.

    The scheme’s complexity allows perpetrators to hide the final economic beneficiaries of purchases, effectively shielding the real criminals while innocent victims face the consequences.

    The fraud’s scale is staggering.

    VAT collections fell by 4.3 percent to Sh304.1 billion in the first half of the most recent fiscal year – the first decline since the COVID-19 pandemic.

    This represents hundreds of millions in lost government revenue that could have funded critical public services.

    Individual cases reveal the personal toll: Safaricom employee Francisca Kathini George faced a Sh45 million tax demand for a company she insisted she had never heard of.

    Despite her protests and lack of involvement, the Tax Appeals Tribunal ruled against her, noting she couldn’t produce documents proving her innocence – an almost impossible standard for victims of identity theft.

    The scheme has also ensnared foreign nationals. Chinese citizen Cai Ronggui received a four-year jail sentence for tax evasion amounting to Sh74.6 million through Yiyuan Trading Company Limited, which generated Sh162.2 million in income.

    Ronggui maintains he never owned the company and suggests people close to him may have registered it using his stolen details.

    Systemic vulnerabilities

    The investigation reveals concerning gaps in Kenya’s business registration and tax collection systems that fraudsters are exploiting.

    The ease with which criminals can establish companies using stolen identities suggests fundamental weaknesses in verification processes.

    KRA staff have previously faced accusations of colluding with tax evaders and accepting bribes, raising questions about internal controls and oversight mechanisms designed to prevent such schemes.

    Beyond the financial implications lies a human tragedy.

    Victims describe the psychological trauma of discovering they’re wanted by authorities for crimes they never committed.

    Some have lost their livelihoods, faced imprisonment, or been unable to travel internationally due to fraudulent activities conducted in their names.

    The scheme particularly targets vulnerable populations, including domestic workers and other low-income individuals who may lack the resources or knowledge to monitor their financial and legal standing effectively.

    The Kenya Revenue Authority has launched an intensive investigation into at least four confirmed cases of identity theft tax evasion, with officials indicating the scope may be much broader.

    The enforcement unit is working to distinguish between genuine perpetrators and innocent victims caught in the fraud web.

    However, the investigation reveals that proving innocence remains challenging for victims, who must demonstrate they had no knowledge of or involvement in companies registered in their names – often without access to the documentation needed to support their claims.

    This investigation exposes critical vulnerabilities in Kenya’s tax and business registration systems that require immediate attention.

    The ongoing cases represent just the tip of what appears to be a much larger criminal enterprise that threatens both government revenue and individual citizens’ financial security.

  • Privacy Outcry: KRA Boss Defends Finance Bill 2025 Powers to Spy on Bank Accounts

    Privacy Outcry: KRA Boss Defends Finance Bill 2025 Powers to Spy on Bank Accounts

    Commissioner General defends controversial data access clause as lawmakers raise alarm over citizen rights

    Kenya Revenue Authority Commissioner General Humphrey Wattanga found himself under intense scrutiny this week as lawmakers questioned the agency’s support for a contentious provision in the Finance Bill 2025 that would grant KRA sweeping access to citizens’ personal data and trade secrets without requiring court orders.

    The heated parliamentary session saw Finance Committee Chairman Kuria Kimani directly challenge Wattanga over what he termed a “huge data privacy breach,” demanding accountability for the agency’s handling of taxpayer information.

    “Chair, don’t you think that is a huge data privacy breach? Someone is clearly not doing their job. You have to own up that this is a breach and someone is not doing their job,” Kimani pressed during the committee hearing.

    The controversial clause has sparked widespread opposition, with at least ten entities, including the influential Law Society of Kenya, formally opposing the provision. Critics argue it represents an unprecedented intrusion into citizen privacy rights and could set a dangerous precedent for government data collection.

    **Existing Privacy Breaches Exposed**

    Beyond the proposed legislation, KRA is also facing accusations of current data privacy violations through its iTax business registration platform. Lawmakers revealed that the system allows access to sensitive personal information using only a taxpayer’s PIN number, exposing details including contact information, email addresses, residential locations, and employment details.

    “Why is KRA infringing on data privacy? For instance, application for manufacturers’ authorization on iTax requires the user to provide manufacturers’ details including phone numbers and residential address,” Kimani highlighted, pointing to specific examples of potential overreach.

    The revelation suggests that privacy concerns extend beyond proposed future legislation to current operational practices within the tax authority.

    **KRA’s Defense and Justification**

    Despite mounting criticism, Wattanga defended the controversial provision as necessary for improving tax compliance and meeting revenue targets. The authority has set an ambitious revenue target of Ksh2.9 trillion for the 2025/2026 financial year, and officials argue that enhanced data access is crucial for achieving these goals.

    “We admit that’s a serious matter and we will address it,” Wattanga acknowledged during the parliamentary session, though he maintained the agency’s position that the provision would boost tax compliance efforts.

    The Commissioner General also dismissed claims that high tax obligations are driving foreign corporations to relocate to neighboring countries, insisting that various incentives have been introduced to support businesses operating in Kenya.

    **Broader Constitutional Questions**

    The debate raises fundamental questions about the balance between government revenue collection and constitutional privacy rights. Legal experts have expressed concern that automatic access to personal data without judicial oversight could violate constitutional protections and establish a troubling precedent for other government agencies.

    The timing of the controversy is particularly sensitive, coming as Kenya grapples with economic challenges that have necessitated aggressive revenue collection strategies. However, critics argue that fiscal pressures cannot justify compromising fundamental rights protections.

    **Parliamentary Pressure Mounts**

    The Finance Committee’s tough questioning signals growing parliamentary resistance to the provision. Lawmakers appear increasingly concerned about the implications of granting such broad powers to any government agency without adequate oversight mechanisms.

    The committee’s demand for accountability extends beyond the proposed legislation to current practices, with members calling for immediate reforms to existing data handling procedures within KRA systems.

    **Next Steps**

    As the Finance Bill 2025 continues through the legislative process, the data privacy provision faces an uncertain future. The strong opposition from civil society organizations, legal bodies, and now parliamentary committees suggests the government may need to reconsider or significantly modify the clause.

    The KRA’s acknowledgment that current data handling practices need addressing may also prompt immediate reforms to existing systems, regardless of the bill’s ultimate fate.

    The controversy highlights the ongoing tension between Kenya’s revenue mobilization efforts and citizen privacy rights, a balance that will likely require careful navigation as the country seeks to strengthen its fiscal position while maintaining democratic principles and constitutional protections.​​​​​​​​​​​​​​​​

  • EXCLUSIVE: British American Tobacco Kenya Exposed Over Missing Sh9.6 Billion in Tax Evasion

    EXCLUSIVE: British American Tobacco Kenya Exposed Over Missing Sh9.6 Billion in Tax Evasion

    A damning report by the University of Bath’s Tobacco Control Research Group (TCRG) and Tax Justice Network Africa has uncovered a $93 million (KES 9.6 billion) discrepancy in the financial disclosures of British American Tobacco Kenya (BATK) for 2017 and 2018.

    The findings, which suggest potential tax avoidance or evasion, have raised urgent questions about the company’s financial practices and prompted calls for a thorough investigation by Kenyan authorities.

    The report, published in collaboration with The Investigative Desk, analyzed six years of BATK’s annual reports, production data submitted to the Kenya Revenue Authority (KRA), government documents, and cigarette consumption and pricing data. It revealed glaring inconsistencies, including millions of unaccounted cigarette packs, which could translate into significant unpaid taxes.

    Unanswered Questions and Calls for Accountability

    Tax and audit experts who reviewed the findings have called for immediate action. Leopoldo Parada, Reader in Tax Law at King’s College London, stated, “In the absence of a convincing explanation, this looks like tax avoidance and potentially evasion.” Kennedy Waituika, Director of Audit and Assurance at TradeMark Africa, echoed this sentiment, urging the KRA to conduct a comprehensive tax review of BATK.

    Despite the mounting evidence, BAT Kenya has denied any wrongdoing. In a statement, a company spokesperson said, “BAT Kenya firmly rejects all the allegations made regarding the discrepancy between its published financial disclosures and data. The company pays all taxes in line with applicable laws.” However, the report’s authors have criticized the company for failing to provide a credible explanation for the discrepancies.

    Despite multiple inquiries,BATK refused to disclose additional financial records, citing “commercial confidentiality.” 

    The Kenya Revenue Authority has yet to respond to requests for comment on whether it will investigate the matter. This silence has fueled concerns about the effectiveness of tax enforcement in Kenya, particularly in relation to multinational corporations.

    A Pattern of Exploitation?

    The investigation reveals BATK operates within a highly convoluted corporate structure, with financial flows passing through opaque subsidiaries in Kenya, the Netherlands, and the UK. This intricate web appears designed to minimize tax liabilities.

    For instance, the Dutch entity Molensteegh Invest BV—which owns 60% of BATK—funnels millions of dollars in dividends to BAT’s UK headquarters while reporting minimal local profits. This model, according to experts, is a textbook case of aggressive tax planning, allowing the company to reduce its taxable income in Kenya.

    Such strategies are not unique to Kenya. BAT has been found guilty of tax evasion in the Netherlands, where courts ruled that the company deliberately excluded 1.8 billion EUR in profits from tax authorities. Similarly, in South Africa, the company faced a 152 million USD tax dispute, which was settled under undisclosed terms.

    Andy Rowell of TCRG highlighted the colonial legacy of profiting from African markets while evading responsibilities. “If this is happening in Kenya, it begs the question of whether similar practices are occurring in other jurisdictions, including the UK and the US,” he said.

    Dr. Rob Branston, also from TCRG, emphasized the need for stronger regulation and enforcement. “Transnational corporations like BAT Kenya have a duty to pay their fair share of taxes, especially in countries where they profit significantly. This is a stark reminder of the need to prevent companies from exploiting tax systems to the detriment of public resources and development,” he said.

    A History of Controversy

    This report builds on earlier investigations, including the 2020 publication Big Tobacco, Big Avoidance, which exposed widespread tax avoidance practices by transnational tobacco companies. Marcel Metze of The Investigative Desk, who has spent years investigating the tax practices of major tobacco corporations, noted, “We keep finding lack of transparency, opaque fiscal structures, and consistent tax planning practices which can be labelled as ‘aggressive.’ The results of our study raise serious doubt about the correctness of the company’s financial reporting.”

    The allegations against BAT Kenya are not isolated. In 2017, the UK’s Serious Fraud Office (SFO) launched an investigation into BAT over allegations of bribery and corruption in Africa. Although the investigation was closed in 2021, Bob Blackman MP, Co-Chair of the All-Party Parliamentary Group on Smoking and Health, has called for the SFO to reopen its probe in light of the new evidence. “This newly published research raises serious questions about British American Tobacco’s activities in Kenya,” he said.

    Implications for Kenya and Beyond

    The $93 million discrepancy represents a significant loss of revenue for Kenya, a country where public resources are already stretched thin. Tax evasion by multinational corporations not only undermines government budgets but also exacerbates inequality and hampers development efforts.

    The report’s authors and experts are urging Kenyan authorities to take swift action. They also hope the findings will prompt similar investigations in other countries where BAT and other tobacco companies operate. As Marcel Metze put it, “The results of our study warrant further investigation by financial authorities.”

    For now, the spotlight remains on BAT Kenya and the KRA. Will the company provide a credible explanation for the discrepancies? Will the KRA step up to hold a powerful multinational accountable? The answers to these questions could have far-reaching implications for tax justice in Kenya and beyond.

    [pdf-embedder url=”https://cms.kenyainsights.com/wp-content/uploads/2025/02/Missing_millions_report_tobacco_control_research_group_Feb_2025.pdf”]

  • Traders Who Don’t Pay Housing Levy Face Account Freezes as KRA Embarks on Non-Compliance Crackdown in the Informal Sector

    Traders Who Don’t Pay Housing Levy Face Account Freezes as KRA Embarks on Non-Compliance Crackdown in the Informal Sector

    Traders in Kenya’s informal sector who fail to comply with the mandatory 1.5 percent housing levy could soon face punitive measures, including frozen bank accounts and blocked tax PINs, as the government intensifies efforts to enforce the controversial deduction.

    The Kenya Revenue Authority (KRA), in collaboration with the Affordable Housing Board, is set to launch a crackdown on defaulters, particularly in the largely unregulated informal sector. Many businesses, including bars, salons, and small retail shops, have been accused of failing to remit the levy from their employees’ wages.

    The housing levy, which requires workers—both formal and informal—to contribute 1.5 percent of their gross salaries, was introduced in July last year to finance the construction of affordable housing units for low-income earners. While salaried employees have had deductions made directly by their employers, compliance within the informal sector has remained low due to the self-declaration nature of the levy.

    Affordable Housing Board’s acting chief executive, Sheila Waweru, acknowledged that contributions from informal workers have been slow but insisted that enforcement will be necessary to ensure compliance.

    “There are people in the informal sector who are already contributing, but we don’t have everybody on board because it is based on self-declaration,” said Waweru. “If you are not truthful about your business, income, and employees, enforcement measures will apply.”

    The KRA plans to deploy revenue service assistants to conduct background checks and on-site inspections of businesses. According to the agency, informal traders are expected to calculate their contributions based on total revenue minus the cost of goods sold, while employers in the sector must deduct and match employees’ contributions before remitting them to KRA.

    Under Section 42 of the Tax Procedures Act, KRA has the authority to deactivate tax PINs, impose travel bans, and seize funds from defaulters’ bank accounts. These measures will now be applied to enforce compliance with the housing levy.

    The Affordable Housing Act 2024, signed into law by President William Ruto in March, mandates that all workers contribute to the fund, a move that followed a court ruling declaring the initial levy unconstitutional for discriminating against informal workers. However, the levy has sparked widespread opposition, with critics arguing it adds to an already heavy tax burden.

    The Ruto administration aims to build 250,000 affordable housing units annually using proceeds from the levy. Currently, 4,888 units are up for sale across the country. One key requirement for accessing these units is a tax compliance certificate, effectively tying homeownership opportunities to tax and levy contributions.

    Despite missing its initial revenue target of Sh54.58 billion by a narrow margin, collecting Sh54.16 billion in the first year, the government remains determined to boost compliance. With informal sector contributions still unclear, authorities hope that stringent enforcement measures will encourage more traders to comply.

    For informal workers, the crackdown signals an urgent need to regularize their contributions—or risk facing severe financial and legal consequences.

  • KRA Misses Tax Target By Sh163B In Six Months

    KRA Misses Tax Target By Sh163B In Six Months

    The taxman collected Sh1.07 trillion between July and December 2024, falling short of the Sh1.23 trillion required to stay on course to meet the full-year target of Sh2.47 trillion.

    Kenya Revenue Authority (KRA) has reported a shortfall in its revenue collection for the first half of the Financial Year 2024-2025, missing its target by a staggering Sh163.46 billion.

    The taxman collected Sh1.07 trillion between July and December 2024, falling short of the Sh1.23 trillion required to stay on course to meet the full-year target of Sh2.47 trillion.

    The shortfall comes at a time when the government has been grappling with the consequences of the Finance Bill, 2024’s rejection.

    The bill, which included a series of proposed tax increases, was dropped under pressure from widespread protests earlier in the year.

    This rejection has led to concerns over the government’s ability to raise the necessary funds to finance its budget.

    However, despite missing the target, KRA’s collections were still higher by Sh23.15 billion compared to the same period last year.

    This represents a slight improvement and is seen as a positive sign, even though it wasn’t enough to close the gap in the target.

    The government has faced increasing pressure on tax matters, particularly with the rejection of the Finance Bill, which was a response to protests that escalated in June.

    The decision to abandon the bill came after intense protests across the country, which led to President William Ruto bowing to public pressure.

    The rejection of the bill has had a direct impact on the government’s tax revenues, with a growing reliance on traditional sources of revenue collection instead of new tax policies.

    Tax administration

    The Parliamentary Budget Office (PBO) has weighed in on the situation, noting that rather than seeking new taxes, the government could improve tax revenues by enhancing tax administration.

    In its latest review, the PBO suggests that improving enforcement of existing tax policies, utilising data analytics, and adopting more technology-driven solutions could be key to boosting revenue without burdening Kenyans with new taxes.

    “Rather than relying on the introduction of new tax policies that are likely to create new tax burdens on Kenyans, the government may focus on improving tax administration through better enforcement of current tax policies, enhanced data analytics, and increased use of technology to simplify tax processes and improve tax compliance,” the PBO states.

    In the face of these challenges, the National Treasury had previously warned that the rejection of the Finance Bill would have adverse effects on the country’s tax revenue target.

    Despite the shortfall, the first-half collection allowed the government to spend more on critical development projects and pension payments.

    During the first half of the financial year, Sh129.82 billion was allocated to development projects, marking an 84.4 per cent increase from the previous year’s Sh70.4 billion.

    This jump in development spending is seen as a significant effort to improve infrastructure and support national growth, especially as previous years saw constrained spending due to high debt servicing.

    Additionally, pension payments to retired civil servants rose by 44 per cent, reaching Sh82.8 billion compared to Sh59 billion during the same period last year.

    The increased spending in both these areas reflects the government’s continued commitment to development and the welfare of senior citizens, despite the challenges in meeting its revenue targets.

    While KRA’s revenue collections for the first half of the year show some progress, the ongoing tax shortfall highlights the difficulties the government faces in balancing revenue generation with the financial demands of the country.

    Moving forward, authorities will likely need to explore other avenues for enhancing tax compliance and revenue collection without further inflaming public discontent.

  • Chinese National On The Spot Over Multi-million Tax Evasion

    Chinese National On The Spot Over Multi-million Tax Evasion

    A Chinese Engineer is on the spot for allegedly failing to pay his tax as required by the law.

    Mr. Dong Chen Pang who resides and operates a company in Nairobi, Kenya has completely ignored paying tax to the Kenya Revenue Authority.

    “Yes we are tired of him , he wants to continue operating without paying tx.” She said.

    A senior source within KRA whispered to this publication that Dong Chen Pang is yet to clear over Sh4.1M.

    Two years, Dong Chen Pang testified in court that he was beaten up by his two other chinese national in a gumbling gone wrong.

    Xiong and Jin Ping, were charged before Kibera senior principal magistrate Boaz Ombewa with seriously injuring Dong Chen Pang whom they allegedly beat up on May 16 at Kingston Apartments along Ng’ong Road.

    The offence was committed at night according to the charge sheet tabled in court.

    The matter was reported to police after the fight and Pang was taken to hospital. He was later treated at Coptic Hospital after the eye developed complications

  • How Tax Evasion by Big Corporations Continues to Hurt the Weakened Kenyan Economy

    How Tax Evasion by Big Corporations Continues to Hurt the Weakened Kenyan Economy

    In Kenya, a nation grappling with economic challenges, tax evasion by large corporations has become a critical issue exacerbating the fiscal strain on the government. This practice not only deprives the state of much-needed revenue but also distorts competition, undermines investment in public services, and deepens economic disparities. A notable example is the case of Transsion Holdings, the parent company of popular smartphone brands like Tecno, Infinix, and Itel.

    The Kenyan economy, already under pressure from global economic downturns, local political instability, and high national debt, finds itself further weakened by the sophisticated tax evasion strategies employed by multinational corporations. According to recent investigations, Transsion Holdings is accused of evading taxes amounting to approximately Ksh. 400 billion (over USD 3 billion).

    This staggering figure comes from allegations of under-reporting profits, manipulating financials through transfer pricing, and possibly colluding with corrupt officials within the Kenya Revenue Authority (KRA). The impact of such evasion is profound, considering that this lost revenue could have funded numerous public projects, from healthcare to infrastructure development.

    The mechanism of tax evasion often involves complex legal and financial maneuvers. For instance, multinational companies like Transsion might report losses in Kenya while declaring profits in jurisdictions with lower tax rates or tax havens. This practice, known as transfer pricing, allows profits to be shifted to countries where they are taxed less or not at all, significantly reducing the tax burden in Kenya.

    Furthermore, the use of cash payments to avoid leaving a paper trail and the alleged non-remittance of Pay As You Earn (PAYE) deductions are tactics that further illustrate the depth of the problem.

    The consequences of such tax evasion extend beyond immediate revenue loss. Firstly, it places an unfair burden on smaller businesses and individual taxpayers who cannot avail themselves of similar evasion tactics. This creates an uneven playing field, where local enterprises struggle to compete with multinationals who can lower their operational costs through tax avoidance. The result is often a stymied growth for local businesses, which are the backbone of the Kenyan economy.

    Moreover, the Kenyan government’s ability to fund public services is severely compromised. Education, health, and infrastructure, sectors critical for socio-economic development, suffer from underfunding due to the shortfall in tax collection. For instance, the government’s budget for these services could have been significantly bolstered by the Ksh. 400 billion allegedly evaded by Transsion alone. Instead, the government must either cut services, increase borrowing (further inflating public debt), or raise taxes on the populace, none of which are sustainable solutions.

    The narrative of tax evasion in Kenya isn’t limited to Transsion. Other big corporations have also been implicated in tax evasion scandals. For example, previous reports have highlighted how companies in the energy sector, particularly those dealing in petroleum, have engaged in practices like under-declaration of imports to evade customs duties.

    Similarly, the telecommunications industry has seen its share of scrutiny with allegations of profit shifting and tax avoidance through intricate corporate structures.

    The Kenya Revenue Authority has attempted to combat these issues through technological interventions like the implementation of the iTax system for better tax filing and compliance monitoring, alongside special investigations into high-profile cases.

    KRA had launched an online web-based reporting solution dubbed iWhistle, that provides a framework for KRA Staff and members of the public to report bribery, concealment, conflict of interest, evasion, tax fraud, abuse of office, diversion of goods, tax evasion, manufacturing of counterfeit goods and other tax related crimes, upon seeing, hearing or suspecting the aforesaid.

    However, the agility and resources of these corporations often outmatch the capabilities of the tax authority, which is sometimes plagued by corruption or lacks the sophisticated tools needed to catch up with global tax evasion strategies.

    From a broader perspective, tax evasion by big corporations also affects Kenya’s attractiveness as an investment destination. While the country aims to attract foreign direct investment to spur economic growth, the presence of widespread tax evasion can signal to potential investors about governance and legal risks, deterring investment or pushing companies towards similar unethical practices to remain competitive.

    To address this, there is a clear need for legislative reform, international cooperation, and enhanced enforcement mechanisms. Kenya could benefit from adopting global standards like the OECD’s Base Erosion and Profit Shifting (BEPS) project, which aims to curb tax avoidance strategies by multinationals.

    Additionally, fostering transparency, strengthening anti-corruption measures within KRA, and possibly leveraging whistleblower protection could enhance the government’s ability to tackle tax evasion.

    In conclusion, tax evasion by companies like Transsion not only starves the Kenyan economy of vital resources but also undermines the principle of fair taxation, which is crucial for equitable economic development. The ongoing challenge for Kenya is not just to catch up with these corporations in terms of tax enforcement but to create a system where evasion is less attractive and more risky, ensuring that the economic burden is shared more equitably across all sectors of society.

  • Tourists Coming To Kenya Will Be Required To Provide IMEI Numbers For Their Mobile Phones, KRA Says

    Tourists Coming To Kenya Will Be Required To Provide IMEI Numbers For Their Mobile Phones, KRA Says

    All passengers entering Kenya starting January 1, 2025, will be required to declare and register their mobile devices’ International Mobile Equipment Identity (IMEI) numbers at the port of entry.

    The Kenya Revenue Authority (KRA) has announced that each mobile device intended for use in the country must be listed, along with its IMEI number, on the F88 passenger declaration form.

    The new measure, implemented in collaboration with the Communications Authority of Kenya (CA), seeks to improve the monitoring of imported devices and ensure tax compliance.

    According to KRA, both tourists and returning residents must declare any mobile devices they plan to use within Kenya’s borders, making the F88 declaration a necessary step upon entry.

    “Passengers entering the territory of Kenya will declare the details and the respective IMEI numbers for their mobile devices intended for use, during the stay in the country at the Port of entry on the F88 passenger declaration form,” KRA said in a notice.

    Additionally, all Importers of Mobile Devices will be required to submit detailed import entries for all mobile devices with accurate quantities, proper model descriptions/specifications, and their respective IMEI numbers in the Customs system.

    The Authority added that device assemblers and manufacturers must register on the Customs portal and submit a report of all devices assembled for the local market and their respective IMEI numbers.

    Privacy concerns

    While the directive has raised concerns about privacy issues, the CA emphasised the importance of the initiative, noting that it is “mandatory for the registration of devices in the National Master Database on Tax-Compliant Devices.”

    The authority reiterated that the database would help verify each device’s tax compliance status, contributing to a secure and regulated telecommunications environment within Kenya.

    Mobile network operators will be required to connect devices only after verifying their compliance through a whitelist database maintained by the CA.

    “The authority will provide means by which tax compliance status of mobile devices can be verified before purchase by retailers or end-users,” the CA added.

    The Authority warned that devices not meeting these requirements will be subject to restrictions, including grey-listing, which provides time for compliance, or blacklisting if compliance is not achieved.

    “The new requirement will only apply to all devices imported or assembled in the country from November 1, 2024. All existing devices that will be on the mobile networks by October 31, 2024, will not be affected. This initiative aims to ensure the integrity and tax compliance of mobile devices within Kenya,” the authority clarified.

    KRA said additional guidance on the registration process for incoming travellers and further details on compliance steps will be communicated before the January 2025 enforcement date.

    “The Public is therefore notified of this requirement, which will be implemented effective January 1, 2025. Specific guidelines on the system process and how to capture the devices and IMEI numbers for different users will be shared in due course,” KRA said.

  • Inside KRA’s Plan To Spy On Crypto Transactions To Nab Tax Cheats And Expand Revenue Base

    Inside KRA’s Plan To Spy On Crypto Transactions To Nab Tax Cheats And Expand Revenue Base

    The Kenya Revenue Authority (KRA) is gearing up to introduce a new tax system that will allow real-time tracking of cryptocurrency transactions. This move aims to identify tax evaders and monitor potential criminal activities in Kenya’s growing crypto space—an area that has previously flown under the radar.

    Cryptocurrency refers to digital money secured through cryptographic techniques, running on decentralized blockchain networks. This structure makes it highly resistant to counterfeiting or double-spending. Bitcoin, launched in 2009, is the pioneering cryptocurrency and remains the largest by market cap.

    Unlike traditional currencies, cryptos are typically not issued by central banks, making them immune to direct government control. While digital currencies are not yet as mainstream in Kenya as other financial technologies like mobile money, KRA sees significant potential in the market, which, according to UNCTAD, involves around four million users.

    KRA estimates that the Kenyan crypto market processed transactions worth about Ksh.2.4 trillion between 2021 and 2022—almost 20% of the country’s gross domestic product (GDP).

    “Even though the sector is unregulated by entities like the Central Bank of Kenya and the Capital Markets Authority, income from crypto trading is still subject to taxation under Section 3 of the Income Tax Act. The absence of a robust system for collecting taxes on crypto transactions has led to substantial revenue loss for the government,” the authority explained.

    The proposed system aims to connect with crypto exchanges and marketplaces, enabling KRA to track and record transaction details, such as the date, time, type, and value of each transaction.

    Cryptocurrencies are often used in Kenya for savings, international payments, and remittances. Unlike traditional banking systems and credit cards, crypto allows for direct, peer-to-peer transactions across borders, without the need for intermediaries. This means users don’t have to purchase foreign currencies or pay fees for services like Western Union.

    However, the decentralized nature of digital currencies has made them attractive for illegal activities like fraud, theft, and money laundering. Additionally, the extreme price volatility of these digital assets means that investors must keep a close eye on market trends. For example, Bitcoin’s price skyrocketed to nearly $65,000 in November 2021 before plunging below $20,000 at the beginning of 2023. It has since rebounded to over $60,000 (about Ksh.7.8 million).

    In a bid to tighten oversight of the sector, a new bill was introduced in the Kenyan Parliament last year, aimed at taxing crypto transactions and digital wallets. The Capital Markets (Amendment) Bill, 2023, proposed by Mosop MP Abraham Kirwa, seeks to amend the Capital Markets Act, Cap. 485A, to include digital currencies within the definition of securities. If approved, this would empower KRA to collect capital gains tax on crypto exchanges and levy excise duty on transactions. The bill has received approval from the National Assembly finance committee and is currently under review in Parliament.

  • Rocking KRA From Within: Board Chair Anthony Mwaura Accused Of Abuse Of Office And Awarding Himself Sh380M In Tax Waivers

    Rocking KRA From Within: Board Chair Anthony Mwaura Accused Of Abuse Of Office And Awarding Himself Sh380M In Tax Waivers

    A senior Manager at the Kenya Revenue Authority has revealed how she was sacked after she refused to grant preferential treatment to children of Chairman Antony Mwaura during an auction of cars at the Port of Mombasa.

    Ms Rosemary Njeri Mureithi, a former Chief Manager of Kilindini Port in Mombasa, alleges that she was fired in August last year after refusing to implement an order by Mwaura to allocate auction cars and tyres to his children through a private treaty.

    In the petition filed at the Employment and Labour Relations Court at Milimani, the former Manager alleges that turning down this request later proved costly to her.

    “I told them the request was not reasonable and procedural as the auction was governed by a legal and regulatory framework as established by the East African Customs Management Act 2010…contravening the foregoing would trigger legal consequences against the respondent (KRA),” she says in an affidavit filed in court.

    Ms Mureithi has sued KRA demanding compensation for illegal sacking, accrued gross income of Sh6.9 million and gratuity of 9.4 million.

    The KRA has denied the claims stating that Ms Mureithi will be put to strict proof of the same,’’ KRA says in response.

    The taxman says her sacking was done lawfully and that Ms Mureithi consented to the said terms and conditions of service, which she signed on September 22, 2022.

    She said she was barely seven months into her new role as Chief Manager of Kilindini Port in Mombasa when, on May 31 2023 her employer terminated her contract without any prior indication that she had breached any of her contractual obligations.

    Her lawyer, Kubo Mwakichako, says she wrote to KRA about a month later appealing the decision to terminate her employment but the employer wrote back confirming and upholding the sacking on August 11, 2023.

    Mr Mwakichako said before that, Ms Mureithi rights to access the KRA operating system were deactivated on February 23, 2023 and was subsequently placed on a three months compulsory leave.

    He said Ms Mureithi further recalled being visited by Mr Mwaura’s two children and another person. She allegedly explained to them the procedures of an auction.

    The children allegedly sought to be given preferential treatment by not participating in the auction, so that they could purchase the cars and tyres through private treaty.

    According to the former Manager, the Commissioner, Customs and Border Control Department acknowledged the conduct of the auction after it fetched substantial revenue for the KRA.

    But a few days later, Mr Mwaura allegedly visited her office at the Mombasa Port where he complained that the auctions being conducted by the staff including myself were a sham and he allegedly threatened to take relevant action “From the foregoing, it’s clear that my termination by the respondent was occasioned by strict adherence to rules and procedures governing a public auction that was under my control,’’ she said, maintaining that she believed that she lost her job for refusing to grant the favours sought.

  • MPs Send Away KRA Boss Over Sh62B Tax Evasion Dossier

    MPs Send Away KRA Boss Over Sh62B Tax Evasion Dossier

    Kenya Revenue Authority (KRA) Commissioner-General Humphrey Wattanga was Thursday afternoon thrown out of a meeting with Members of Parliament (MPs) for failing to produce documents on time in the investigations into the alleged loss of Sh62 billion in a tax evasion scandal involving two companies.

    Mr Wattanga had appeared before the National Assembly’s Finance and National Planning Committee to explain whether Louis Dreyfus Company (LDC) Asia PTA limited and Louis Dreyfus Company Kenya (LDC) limited evaded paying taxes by misdeclaring palm oil cargoes shipped into the country.

    The committee, chaired by Molo MP Kimani Kuria, was taken aback after the Commissioner-General failed to send advance copies of the required documents and instead bombarded MPs with voluminous documents on the morning he appeared before the committee.

    “You cannot expect us to go through these voluminous documents in this session and have a meaningful engagement with you. It is not possible. We need more time,” Mr Kuria said.

    Mr Kuria was speaking as committee members questioned whether the KRA management was trying to buy more time “on a serious allegation of tax evasion at a time when the country is struggling to raise revenue to meet its obligations”.

    “The tradition in this house is that companies appearing before committees must submit their documents at least 24 hours before the start of a committee meeting,” said Eldas MP Adan Keynan.

    In a letter to the Commissioner General dated August 29, 2024, the documents were to be submitted to Parliament by September 6, 2024.

    “It is in your interest that the information reaches us on time. As a parliamentary committee, we have a right to receive information in good time. This issue of creating a time crisis has been resolved by the current constitution,” said the Eldas MP.

    Mr Wattanga was due to appear before the Committee on September 10, 2024, but requested more time and was granted September 24, 2024.

    The Committee had requested KRA to provide details of the total cargo volume of palm oil imported by LDC Asia PTA through the Port of Mombasa from February 23, 2023 to June 26, 2024.

    The Committee wanted the details to include the volumes of RBD palm stearin, crude palm kernel oil, crude palm olein, crude palm oil and crude palm fatty acid distillate.

    The Committee also wanted Mr Wattanga to provide details of the total taxes and duties paid by LDC Asia PTA on the import of the palm oil cargo from February 23, 2023 to June 26, 2024.

    Copies of all import declaration documents, including but not limited to port health reports, Kenya Bureau of Standards (Kebs) reports, bills of lading and cargo manifests for all 120 cargoes of palm oil imported by the company between February 23, 2023 and June 26, 2024 are also required.

    The committee also wants a list of consignees for all palm oil cargoes imported by the company during the period.

    The committee also sought details of the cargo volumes of RBD palm stearin, crude palm kernel oil, crude palm olein, crude palm oil and crude palm fatty acid distillate imported by LDC-Kenya Limited, Acee Limited, Mazeras Oil Limited and Vipingo Industries Limited through the port of Mombasa.

    Mr Wattanga was also required to provide details of the taxes and fees paid by LDC- Kenya limited, Acee limited, Mazeras Oil limited and Vipingo Industries limited on the importation of the palm oil products.

    Copies of all import declaration documents for palm oil cargoes by LDC-Kenya limited, Acee limited, Mazeras Oil limited and Vipingo Industries limited through the port of Mombasa were also requested.

    The copies, the committee said, should not be limited to port health reports, Kebs, SGS reports, bills of lading and cargo manifests.

    Documents before the committee show that the product imported by LDC companies for use in Kenya and the other East African countries using the port of Mombasa for imports is misdeclared in two ways.

    Firstly, the product arrives as a blend of 60 per cent crude palm oil and 40 per cent refined palm oil, which is then declared as crude palm oil.

    Alternatively, the product is imported largely in refined form but declared as crude palm oil at the port of Mombasa to avoid the 35 per cent import duty or $500 per tonne.

    The product also attracts an Import Declaration Fee (IDF) of 2.5 per cent, a Railway Development Levy of 1.5 per cent and Value Added Tax (VAT) of 16 per cent.

    Kenya imposes a 35 per cent duty on imported refined palm oil and a 10 per cent duty on semi-refined palm oil.

    Palm oil imported from Malaysia and Indonesia, the world’s two leading exporters of palm oil products, accounting for 85 per cent of production, comes in six types – RBD palm olein, RBD palm stearin, crude palm kernel oil, crude palm olein, crude palm oil and palm fatty acid distillate.

    Palm oil stearin is a by-product of palm oil refining and is used in the manufacture of soaps and edible fats. RBD palm olein is refined palm oil, while crude palm kernel oil is a by-product used in the manufacture of soap.

    Crude palm olein is palm oil that has been semi-processed, i.e. it has only been fractionated to separate the liquid portion from the solid portion of the oil, and is subject to an import duty of 10 per cent.

    Crude palm oil is unprocessed oil that requires full processing.

    Palm fatty acid distillate is a by-product of palm oil refining and is used to make brown soaps.

    This means that if the product were imported in its crude form, the country would benefit as the by-products of the refined oil would help in the production of soap, among other things.

    Documents tabled in Parliament show that the government lost Sh16.5 billion in revenue in 2022 from the 233,000 metric tonnes that were misdeclared as crude palm oil and Sh32.54 billion in 2023 from the 387,868 metric tonnes that were misdeclared.

    In 2024, the government has already lost Sh13.83 billion in revenue from the 163,567 tonnes imported so far.

    LDC-Kenya limited, based in Mombasa, is one of the country’s leading vegetable oil traders with a growing presence across East Africa.

    It’s a major importer of palm oil products for millers and refiners in East Africa and operates one of the largest oilseed storage facilities in the region.

  • Finance Bill: Govt To Take 20pc Of Betting Stakes

    Finance Bill: Govt To Take 20pc Of Betting Stakes

    Gamblers will pay the government Sh20 for every Sh100 staked after the National Treasury proposed to increase excise tax on betting stakes to 20 percent, in the latest State onslaught to lower the appeal of betting.

    The proposal is contained in the draft Finance Bill, 2024 and if adopted by Parliament will increase the tax from the current 12.5 percent.

    The Bill is expected to be adopted by Cabinet and tabled in Parliament for debate and approval before the end of June. Currently, the government takes Sh12.50 from every Sh100 similar amount to be wagered.

    “The first schedule to the excise duty Act is amended by deleting the words twelve-point five percent and substituting thereof the words twenty percent,” the National Treasury says in the draft Bill.

    This is meant to lower the appeal of betting to millions of Kenyans, especially the youth and unemployed who have turned to gambling as a source of income.

    The government has in recent years publicly pushed for increased taxes in a bid to curb the betting craze that has made Kenya home to the highest number of youthful gamblers at 76 percent, placing the country ahead of Nigeria and South Africa.

    Adoption of the new tax rate will lower the amount that gamblers stake, in turn reducing the possible pay-out from a winning bet.

    The 20 percent rate will be in addition to a similar rate charged as withholding tax on every winning bet that the State takes.

    Betting firms are under law required to deduct the withholding tax and remit it to the Kenya Revenue Authority (KRA) by the 20th of the following month.

    Besides gamblers, the State has also set its eyes on the betting firms and last year proposed two new taxes through the Gambling Control Bill, 2023 that has since been debated in Parliament.

    These were the gambling tax which will be charged at the rate of 15 percent of a betting firm’s gross gaming revenue and a further one percent monthly levy on the same revenue.

    But the National Assembly committee on Sports proposed reduction of gambling tax to 13 percent from 15 percent and removal of the one percent gambling tax in its report tabled before the House in December last year.

    Increased taxation on the betting industry is bearing the desired impact at least in the eyes of the government. BCLB data shows that betting firms made Sh60 billion in revenue for the 2021/22 year, an 80 percent drop from Sh299 billion posted in the year to June 2019.

    Data from the Betting Control and Licensing Board (BCLB) released last year shows that gamblers spend an average of Sh2,500 to bet every month with 80 percent of the winning punters earning less than Sh30,000 per month.

    The Treasury has previously failed in bids to tax betting stakes at the rate of 20 per cent, after Parliament gave in to pressure from gaming firms and lowered the rate. The first time the Treasury proposed the 20 percent rate was in 2019.

    Excise tax on betting stake was increased to the current 12.5 percent from 7.5 percent in July last year as the State raided the industry in a bid to take away the shine from the betting craze.

  • Finance Bill: Vehicle Owners To Pay Annual Tax

    Finance Bill: Vehicle Owners To Pay Annual Tax

    Vehicle owners will start paying an annual tax of up to Sh100,000 depending on the value of their cars if Parliament endorses the proposal that looks set to increase motoring costs amid costly fuel and spare parts.

    The Finance Bill 2024 proposes the introduction of a 2.5 per cent annual tax on the value of vehicles, with the deduction set at a minimum of Sh5,000 and a maximum of Sh100,000.

    The deduction, called motor vehicle tax, will be paid on each vehicle at the time of issuing an insurance cover.

    This means second-hand cars like the Toyota Harrier and Mercedes Benz C-Class that were in February averaging between Sh4 million and Sh4.4 million in many yards in Nairobi will attract the maximum tax of Sh100,000, with the value only falling if valuation declines in subsequent years.

    “The rate of tax in respect of motor vehicle tax charged under section 12H (which introduces the tax) shall be 2.5 per cent of the value of the motor vehicle,” reads the bill in part.

    Engine capacity

    “The value of a motor vehicle shall be determined on the basis of the make, model, engine capacity in cubic centimetres and year of manufacture of the motor vehicle.”

    The only exemption from the 2.5 per cent tax includes ambulances, or motor vehicles owned by the national government, county government, Kenya Defence Forces, National Police Service, National Intelligence Service or a person exempt from tax under the Privileges and Immunities Act.

    Insurance cover

    The tax looks set to increase the cost of operating motor vehicles in Kenya, in addition to insurance cover, fuel and servicing costs. The State had last year mulled introducing a congestion charge —a fee charged on cars and motor vehicles being driven within zones marked as heavy traffic areas. The proposed tax in the Bill has not made it clear if this is linked to environmental protection.

    There are global efforts to introduce special taxes on vehicles running on diesel or diesel due to their pollution.

    Official data shows Kenya has witnessed a nearly doubling of registered motor vehicles in the past five years to 2.19 million in 2022 compared with 1.27 million in 2013. The number of newly registered motor vehicles in the same period hit 512,779, translating to an average of 102,556 every year.

    The Finance Bill makes insurers the agents of the Kenya Revenue Authority (KRA) and they will be required to collect and remit the tax within five working days after issuing a motor vehicle insurance cover.

    Escape the tax

    The Insurance Act makes it mandatory for every car on the Kenyan public road to have a minimum of a third-party motor insurance cover in place.

    Tying the motor vehicle tax with insurance means it is going to be difficult to escape the tax.

    The bill proposes a penalty of 50 per cent of the uncollected tax on insurers who fail to collect and remit the motor vehicle tax to KRA. They will then be required to remit the actual amount of the uncollected tax.

    The planned tax is in line with last year’s proposal to introduce an annual wealth tax for car owners, depending on the engine capacity and also roll out a gradual rise in the excise duty on cars running on fuel.

    The Treasury had said it was going to assess the viability of introducing the motor vehicle circulation tax as a form of wealth tax. It had indicated that this was going to be paid at the point of acquiring an insurance cover.

  • KRA Mounts Pressure On Landlords To Increase Rents

    KRA Mounts Pressure On Landlords To Increase Rents

    The Kenya Revenue Authority (KRA)  is pressuring landlords to raise rents for their properties, which is likely to add another financial burden to already financially struggling tenants.

    Last month, the Authority sent out notices to property owners expressing concerns over the constant figures declared as rental income, asking them to adjust the amount to reflect market changes.

    “The commissioner has noted that your rental income has been a constant figure or has slightly declined for the period filed,” read one of the notices.

    “We understand that rent is an appreciating commodity with economic times, and we expect your declarations for the current month will reflect that. If needed, previous return declarations can be amended. Filing Nil or a decline in rental income is highly discouraged.”

    Many landlords were shocked by the notices, especially considering that declines in declared rental income often coincide with vacancies, presenting a challenging situation for property owners as their tenants are likely to move to cheaper houses as soon as rents are raised.

    Property owners were expected to pay monthly rental income tax at the rate of 7.5% of the gross rent they collect from tenants starting in January. This rate is slightly lower than the previous 10%.

    The rental income tax is applicable for landlords earning annual rental income between Sh280,000 and Sh15 million, equivalent to at least Sh23,333 per month.

    Real estate analysts have criticised the directive, stating that raising rents for residential houses is challenging due to the absence of binding tenancy agreements in most leases, and many tenants may quickly move houses when rents are hiked.

    “What happens is that rental income in a residential area increases when you have a vacancy,” Johnson Denge, a real estate expert, told the Business Daily.

    This was corroborated by a landlord, who stated that he is only able to raise rents when somebody new moves into his house.

    “The rental income goes up when I get a new tenant, but not when they have been there for a long time. Getting a constant tenant is not easy, so I do not raise their rents,” said the unnamed property owner.

    “In the estate where I have my flats, there is a glut of flats, so rent is a constant figure. If you are the only landlord raising rent, you will automatically transfer your tenants to other properties.”

    Meanwhile, KRA has also issued notices to property owners asking them to pay a 1.5% levy on the rent received as an affordable housing levy. In the advisory issued earlier this week, the KRA clarified that property owners will pay 1.5% of the rent received and not the net of the landlord’s incomes after deducting expenses like mortgages and property management fees.

    Small businesses, whose annual sales range between Sh1 million and Sh25 million, are also required to pay the levy from their gross sales and not operating profits – a move that is likely to pile pressure on microenterprises such as barbershops and beauty salons.