This archive report was first published on 23 April 2020.
Kenyan employees are set to benefit from one of the biggest tax reliefs in over a decade, courtesy of President Uhuru Kenyatta's new tax measures. The changes, contained in the Tax Laws (Amendment) Bill passed by MPs on Wednesday, will see a significant increase in net salaries for many Kenyans.
According to the new tax rates, those earning Sh24,000 and below per month will have their salaries untouched by the Kenya Revenue Authority (KRA). This is a significant increase from the previous tax exemption threshold of Sh13,486 per month.
For those earning above Sh24,000, the new tax rates will result in significant savings. For instance, those earning Sh30,000 will save about Sh2,000, while those earning Sh40,000 will save about Sh2,400 in taxes. The savings will increase as income levels rise, with those earning Sh100,000 expected to save Sh5,800 and those earning Sh1 million saving Sh50,000.
Additionally, the tax relief has also grown by 70 per cent, from Sh1,408 to Sh2,400. This means that on top of the drop in PAYE, individuals will also save an additional Sh2,400 in taxes in personal reliefs.
“The above changes will increase the taxpayer’s disposable income. Previously only income below Sh13,486 was exempt from tax, with the changes effectively doubling the tax-exempt income,” notes a report by KPMG tax experts.
President Kenyatta said the move would put more money in the pockets of Kenyans and cushion them against the negative impact of the coronavirus pandemic. The new tax rates will be applied once the president signs the bill.
