The Tax Laws (Amendment) (No. 2) Act, 2020

INTRODUCTION

During the September 2020 COVID-19 conference, the President engaged the National Treasury to review the tax cushions put in place in April of 2020 to protect Kenyans and the economy against the adverse effects of COVID-19.

On 4th December 2020, Hon. (AMB.) Ukur Yatani, EGH, Cabinet Secretary for National Treasury and Planning issued a public notice underlining proposed amendments to some of the tax reliefs granted by the Government earlier in April 2020.

Subsequently, on the 23rd of December 2020, the President of the Republic of Kenya assented to the Tax Laws (Amendment) (No. 2) Act, 2020 (The Act) which put into law the tax amendments proposed by the Cabinet Secretary for National Treasury and Planning.

OUR OBJECTIVE

The purpose of this issue of our tax watch is to highlight tax changes contained in the Tax Laws (Amendment) (No. 2) Act, 2020 (herein referred to as the Act) and the impact on taxpayers. We have also summarized other tax legislation coming into effect from 1st January 2021.

KEY CHANGES IN THE FINANCE ACT, 2020

The Act reverses some amendments done in April 2020 in relation to personal income tax and corporate income tax, it also reinstates VAT rate to pre- April 2020 rate. The notable amendments include the following: –

  • Reinstatement of the corporate tax rate to 30%
  • Revision of personal tax band rates
  • Improvement of corporate minimum tax regulations
  • Reinstatement of the VAT rate to 16%
  • The amendments are effective as of 1st January 2021.

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