Kenya: Finance Bill, 2023 proposed tax changes
The National Treasury tabled the Finance Bill, 2023 before the National Assembly on Thursday, 04 May 2023. Some of the notable changes include the introduction of a new 35% tax rate for income above KES 500,000 per month, a limited tax-free mileage rate for employees travelling allowances, and a mandatory National Housing Development Fund deduction under the Employment Act.
These changes are expected to take effect on 1 July 2023 after assent by the President.
Changes in personal income tax rates
The Bill proposes to introduce an amendment to the Third Schedule of the Income Tax Act by proposing a graduated PAYE of 35% for all income above Kes 500,000 per month.
Mileage rate for employee traveling allowances
The Bill proposes to amend Section 5(2) of the Income Tax Act by limiting the tax-free mileage allowance for employees to the rates approved by the Automobile Association (AA) of Kenya.
Deductions into the National Housing Development Fund
The Bill proposes to amend the Employment Act, 2007 by introducing section 31B requiring an employer and employee to contribute to the National Housing Development Fund (“NDHF”) established under section 7 of the Housing Act.
The proposed employer’s contribution is 3% of the employee’s basic salary and the employee’s contribution is 3% of the employee’s monthly basic salary. Nonetheless the sum of the employer’s and employee’s contribution should not exceed five thousand shillings per month.
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