Global Tax Alert | 25 November 2013
Kenya enacts Finance Bill 2013
On 24 October 2013, Kenya's Finance Bill 2013 was enacted into an Act of Parliament (Finance Act 2013) following the assent by the President. This Alert summarizes the key changes introduced via the Finance Act.
All the amendments relating to Income Tax take effect on 1 January 2014.
Appeal on Commissioner's refusal to accept a notice of tax objection
A person who disputes an additional tax assessment issued by the Commissioner has a right to object to the assessment within thirty days after the date of service of the notice of assessment. An objection lodged after the stipulated period is considered invalid and thus inadmissible. However, a late notice of tax objection can be admitted if the Commissioner is satisfied that the lateness was due to absence from Kenya, sickness or other reasonable cause, and there has been no unreasonable delay on the taxpayer's part.
A person aggrieved by the Commissioner's refusal to admit a notice of tax objection can appeal to the Local Committee upon paying the undisputed part of the tax assessed and paying 30% of the disputed tax and any interest due. The decision of the Local Committee shall be final. The appeal should be determined within six months from the date the appeal is lodged. If the appeal is determined in favor of the taxpayer, the 30% of the tax in dispute paid should be refunded to the taxpayer within 90 days from the date of determination of the appeal.
Taxation of oil companies formed pursuant to assignment of rights
With effect from 9 January 2013, consideration relating to the sale of property or shares in respect of oil companies, mining companies or mineral prospecting companies was brought under tax charge. The tax rate applicable on residents is 10% of the gross amount payable. Prior to the amendment vide Finance Act 2013, this tax was accounted for through a withholding tax system as the final tax. With the amendment, the withholding tax deducted will not be the final tax for resident oil companies formed pursuant to assignment of rights.
Compounding of offenses by the Commissioner
In an attempt to achieve an expeditious dispute resolution, the Commissioner has discretionary power to compound offenses to enhance settlement of disputes outside court. This power can however only be exercised if the taxpayer confirms in writing that he has committed the offense and requests the Commissioner to address the offense under this provision.
Corporate officers to pay for offenses by corporate bodies
Directors and senior officers of corporate bodies may be held personally liable for tax offenses committed by a body corporate. The court has the discretion to order such persons to make payment to the Commissioner of the whole or such part as remains unpaid of the tax assessed by the Commissioner.
Customs and Excise
Refusal to grant license for manufacturing of excisable goods
The Commissioner is obligated to furnish the applicant with reasons for refusal to grant a license for manufacturing of excisable goods. In addition, the Commissioner is henceforth required to give reasons for refusal to grant a license in respect to the following:
- • Transfer of manufacturing license to another person;
- • Transfer of factory to another place;
- • Manufacturing of another class of excisable goods in the same factory upon ceasing to manufacture the class of excisable goods specified in the license.
The effective date is 18 June 2013.
Excise on locally manufactured excisable goods payable upon exit from stock room
The duty on locally manufactured excisable goods other than spirits is now payable at the time when the goods liable to duty are delivered from the stock room of the licensee. Previously, such duty was payable by the 20th day of the following month.
The effective date is 1 February 2013.
Railway Development Levy
A levy known as Railway Development Levy is now applicable on all goods imported into the country for home use, at the rate of 1.5% of the customs value of the goods. The levy, payable by the importer at the time of entering the goods into the country, is aimed at funding the construction of a
standard gauge railway network in order to facilitate the transportation of the goods.
The effective date is 1 July 2013.
Excise duty on fees charged by financial institutions
A clarification has been issued to the effect that the 10% excise duty is applicable on fees charged by financial institutions as opposed to financial services fees. Consequently, excise duty would be liable on any fee charged by a financial institution regardless of the nature of the service provided. Financial institutions are obligated to collect and pay the duty by the 20th day of the following month.
Additionally, the amendment clarifies that the fees upon which excise duty is applicable excludes interest. This is in spite of the fact that the charging Act (i.e., Customs and Excise Act) has not defined the term “interest.” Based on the foregoing, the contention as to what constitutes interest is still a questionable issue and is expected to continue presenting implementation challenges.
The effective date is 18 June 2013.
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Kenya), Nairobi
- • Geoffrey Karuu
+254 020 2728305
- • Catherine Mbogo
+254 020 2715300
Ernst & Young (China) Advisory Services Limited, Pan African Tax Desk, Beijing
- • Rendani Neluvhalani
+86 10 5815 2831
Ernst & Young LLP, Pan African Tax Desk, New York
- • Dele Olaogun
+1 212 773 2546
- • Mzukisi Ndzipo
+1 212 773 9917
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
- • Leon Steenkamp
+44 20 7951 1976
EYG no. CM3985