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July 20, 2023

Kenya enacts tax changes under Finance Act, 2023

  • The changes will affect the imposition of income tax, value-added tax, excise tax and various fees and penalties, as well as general tax compliance requirements.
  • Income tax highlights include removal of the limitation on deductions for interest expense on local debt, a five-year carry-forward period for foreign-exchange losses for certain companies, a 15% tax on income repatriated from branches or permanent establishments, withholding taxes on rental income and sales promotion, marketing, and advertising services, a preferential tax regime for qualifying intellectual property income and new income tax exemptions.
  • Value-added tax highlights include increased rates on certain goods, exemptions for others, a zero rating for some supplies and a new deadline for remitting the tax.
  • Excise tax highlights include new deadlines for remitting certain excise duties, increased rates on certain goods, and increased and decreased rates on certain services.
  • Other highlights include a new electronic system for tax invoices and penalties for those that do not use it, a tax amnesty program for penalties and interest on outstanding principal tax due before 31 December 2022, and limits on government authority to waive penalties and interest on outstanding tax debts.

The Finance Act, 2023 (the Act) was signed into law by the President on 26 June 2023. This Tax Alert summarizes the key changes contained in the Act. Unless specifically mentioned, the changes contained in this analysis were meant to take effect on 1 July 2023. However, on 30 June 2023, the High Court of Kenya issued Conservatory Orders temporarily halting the implementation of the Finance Act, 2023. The changes highlighted in this alert will take effect upon the lifting of those orders.

Detailed discussion

Business and personal tax

Definition of winnings

The Act redefines the term “winnings” to mean the payout from a betting, gaming, lottery, prize competition, gambling or similar transaction under the Betting, Lotteries and Gaming Act. Winnings do not include the amount staked or wagered in that transaction.

With the new definition, Kenya seemingly seeks to eliminate ambiguity on the taxation of winnings.

Definition of immovable property

The Act replaced the prior definition of immovable property with a new broader definition. Immovable property now includes:

  • Land, whether covered by water or not
  • Any estate, rights, interest or easement in or over any land
  • Things attached to the earth or permanently fastened to anything attached to the earth, including a debt secured by mortgage or charge on immovable property
  • A mining right, an interest in a petroleum agreement, mining information or petroleum information.

The definition incorporates what previously only applied to the petroleum and mining sector.

Taxation of digital content monetization

The growth in social media usage over the years has led to an emergence of a digital economy with a wide array of players. Social media influencers, among others, have taken advantage of the opportunity and monetized the digital economy. Cognizant of the rise in the use of such media/channels, the Government has enacted through the Finance Act a withholding tax on income earned by resident and nonresident persons from digital content monetization. The WHT rate will be 5% for resident persons and 20% for nonresident persons. For residents persons, WHT is an advance tax, so they will be expected to file returns and pay any taxes due accordingly.

The Act defines digital content monetization as offering for payment entertainment, social, literal, artistic, educational or any other material electronically through any medium or channel, through the various forms, including social media platforms and advertisement on websites.

Amendment to turnover tax (TOT)

The Act reduces the TOT’s upper threshold from KES 50m to KES 25m. The Act also increases the TOT rate from 1% to 3%.

The threshold reduction effectively increases the medium enterprises that must pay TOT. The excluded medium enterprises must apply a 30% income tax to their taxable income. The move is aimed at expanding the tax base.

Taxation of digital assets

The Act introduces a 3% tax on income earned from the transfer or exchange of digital assets. The owner of the platform or the person facilitating the transfer or exchange of a digital asset must withhold the digital asset tax and remit it to the Commissioner within five working days after the withholding.

A digital asset includes cryptocurrencies and non-fungible tokens, among others.

In addition, the platform owner or facilitator must file a return detailing the amount of payment, tax deducted and any other details required by the Commissioner. A nonresident owner of a digital platform where digital assets are transferred or exchanged must register under the simplified tax regime.

The Government is apparently seeking to tap into this area, which has experienced rapid growth recently with the adoption of digital currencies.

Effective date: 1 September 2023

Non-deductibility of TIMS/e-TIMS non-compliant invoices

The Kenya Revenue Authority (KRA) has recently been enforcing compliance with its electronic tax invoicing system. The system was rolled out via the Tax Invoice Management System (TIMS) and most recently e-TIMS. All VAT-registered taxpayers must comply with the relevant regulations.

In an expected far-reaching change for businesses, the Act disallows, for corporate income tax purposes, deductions for any expenditure or loss where the supporting invoices of the transactions are not generated from an electronic tax invoice management system. Exceptions apply for transactions that have been exempted in accordance with the Tax Procedures Act (TPA).

The KRA has been empowered to roll out an electronic tax invoice management system, which is likely to affect all taxpayers irrespective of their VAT status, from September 2023.

Effective date: 1 January 2024

Changes to limitation on interest expense deductions

Currently, deductible interest expense is limited to 30% of an entity’s earnings before interest tax, depreciation, and amortization (EBITDA). Before the Act, the restriction applied to interest on foreign and local loans.

The Act removes interest expense on local debt from the restriction. Hence, the 30% EBITDA restriction will now only apply to interest on foreign debt, whether from related parties or third parties. Moreover, the Act permits any interest not allowed as a deduction due to the 30% EBITDA threshold to be deducted in the subsequent three years, provided the deduction does not surpass the 30% EBITDA restriction. The deferment of the interest expense will not apply if the interest is exempt from tax.

The changes to deductibility of interest are welcome initiatives, as applying the 30% limitation to local interest led to instances of double taxation.

Effective date: 1 January 2024

Deferment of realized foreign exchange losses

For companies that exceed the stipulated interest expense deductibility threshold of 30% of EBITDA, the Act limits the carry-forward period for foreign-exchange losses to five years from the tax period that a foreign exchange loss is realized. This provision will negatively affect taxpayers that are unable to claim the foreign exchange losses over the five-year period.

Taxation of branches/permanent establishments (PE)

The Act introduces a branch/PE repatriation tax of 15%. This is in addition to tax chargeable on the income of the branch. The Act provides a formula for computing this tax based on the branch’s net assets and profitability.

Additionally, the Act reduces the corporate income tax rate for branches to 30% (from 37.5%) beginning with the 2024 year of income.

Kenya appears to be adopting an approach that is similar to her neighbour Uganda in a bid to expand the tax base.

Effective date: 1 January 2024

Taxation of members’ clubs and trade associations

The Act revises the taxation of members’ clubs and trade associations by:

  • Deeming members’ club and trade associations to be carrying on business and their gross receipts on revenue account to be taxable income (excluding joining fees, welfare contributions and subscriptions)
  • Eliminating a provision that allowed members’ clubs and trade associations to choose whether they were considered a business chargeable to tax, which means they will automatically be considered trading entities whose income will be taxed as previously indicated

Non-refund of excess withholding tax upon audit adjustments

The Act introduces a new provision that prevents refunds of excess withholding tax paid on expenses that are disallowed on audit.

The provision will effectively result in double taxation as the restricted payment will be subject to corporate income tax and the withholding tax on the payment will neither be utilized as a credit nor refunded to the taxpayer.

Timeline for remitting withholding tax

The Act amends a provision in the Income Tax Act (ITA) requiring withholding tax to be remitted to the KRA by the 20th of the following month. Instead, the Act effectively requires withholding tax to be remitted to the KRA within five working days of being withheld.

The Finance Bill had proposed remitting withholding tax within 24 hours, making the five working days somewhat of a relief. Taxpayers will need to realign their supplier payment schedules to comply with the revised timelines.

Imposition of withholding tax on local sales promotion, marketing and advertising services

The Act introduces a 5% withholding tax on local sales promotion, marketing and advertising services offered by resident persons. In 2020, a 20% withholding tax was introduced on sales promotion, marketing and advertising services rendered by nonresident persons.

This change appears to be aimed at improving Government cashflow while also expanding the tax base.

Withholding tax on rental Income

The Act requires all recipients of rental income on behalf of an owner to withhold and remit withholding tax to the Commissioner within five working days after withholding if the Commissioner has appointed the withholder in writing as an agent. The withholder must also furnish the Commissioner with a return in writing stating the tax deducted and any other information the Commissioner may require. The Commissioner, in turn, must furnish the owner of the rental income with a certificate stating the amount of rent and the tax deducted therefrom.

This change is apparently aimed at curbing tax evasion by landlords and enhancing revenue collection from rental income.

Capital gains tax

The Act introduces the following changes to capital gains tax:

  • Capital gains realized on the sales of shares or comparable interests, including interests in a partnership or trust, will now be taxable if, at any time during the 365 days preceding the alienation, the shares or comparable interests derived more than 20% of their value directly or indirectly from immovable property situated in Kenya.
  • The gains derived from the alienation of shares of a company resident in Kenya will now be taxable if the alienator, at any time during the 365 days preceding the alienation, directly or indirectly held at least 20% of the capital of that company. Moreover, the alienator must notify the Commissioner if the transfer will change the underlying ownership of the property by more than 20%.
  • Where property is transferred in a transaction that is not subject to capital gains tax, and the property is subsequently transferred in a taxable transaction within less than five years, the adjusted cost in the subsequent transfer will be based on the original adjusted cost in the first transfer. The provision is apparently meant to curb abuse of existing capital gains tax exemptions.
  • For internal group restructurings that do not involve transfer to a third party, the group must have existed for at least 24 months to qualify for an exemption from capital gains tax.
  • Capital gains tax will now be due and payable on the earlier of:
    • The vendor’s receipt of full purchase price or,
    • Registration of the transfer

Introduction of preferential intellectual property income regime

The Act introduces a preferential tax regime for qualifying intellectual property income. This includes royalties, capital gains and any other income from the sale of an intellectual property asset.

The provision appears to be aimed at encouraging retention of intellectual property in Kenya. However, the Act does not specify the preferential tax rate that would apply to the qualifying intellectual property income.

Effective date: 1 January 2024

Indirect transfers of interest in licensee or contractor

The Act requires a licensee or contractor to notify the Commissioner when its underlying ownership changes by 20% or more.

Previously, the Commissioner had to be notified of a 10% or greater change in the ownership of the licensee or contractor.

Review of exemptions

The Act introduces income tax exemptions for the following:

  • Royalties paid to a non-resident person by a company undertaking manufacture of human vaccines
  • Interest paid to a resident person or non-resident company undertaking manufacture of human vaccines
  • Investment income from post-retirement medical funds
  • Income earned by a non-resident contractor, sub-contractor, consultant or employee who is in Kenya and involved solely for the implementation of a project that is financed 100% through a grant under an agreement between the Government and the development partner, to the extent provided for in the agreement
  • Gains on transfer of property by a SEZ enterprise, developer or operator
  • Royalties, interest, management fees, professional fees, training fees, consultancy fees, agency or contractual fees paid to a non-resident person by a SEZ developer, operator or enterprise in the first 10 years of its establishment

The provisions appear geared towards promoting investment in the manufacture of human vaccines and medical access by retirees, among other objectives. The Act also eliminates an income tax exemption for companies undertaking the manufacture of human vaccines.

Changes on investment allowances

The Act introduces a 10% straight-line investment allowance for industrial buildings and docks under the Second Schedule to the ITA.

The Act also defines the term “industrial building” to include a building used for the purpose of transport, as a bridge, as a tunnel, for inland water navigation, and for electricity or hydraulic power undertaking.

The Act defines “dock” to include a container terminal berth, harbour, wharf, pier, jetty, storage yard, or other works in or at which vessels load or unload merchandise but does not include a pier or jetty used for recreation.

The changes are welcome move as they will encourage investment in the blue economy.

The Act broadens the definition of “telecommunication equipment” under the Second Schedule to the ITA to include civil works deemed as part of the telecommunication equipment or civil works that contribute to the use of the telecommunication equipment.

The expanded definition is a welcome change that will encourage players in the telecommunication sector.

Effective date: 1 January 2024

Residential rental income tax

The Act reduces the rate of tax on residential rental income earned by resident persons from immovable property from 10% to 7.5%.

This is a welcome move and may boost compliance from a segment that has been difficult to bring into the ambit of taxation.

Effective date: 1 January 2024

Rates of tax

For a company that assembles motor vehicles locally, a lower corporate income tax rate of 15% currently applies for the first five years upon commencement of operations. The 15% rate applied for another five years if the company’s local content was equivalent to 50% of the ex-factory value of the motor vehicles.

According to the Act, local content means “parts designed and manufactured in Kenya by an original equipment manufacturer operating in Kenya.

The definition of local content clarifies the application of the new provision.

Effective date: 1 July 2023

For manufacturers human vaccines, the Act introduces a 10% corporate tax rate. This follows the elimination of the income tax exemption for these companies under the Finance Act, 2022.

The Act increases the advance tax on vans, pick-ups, trucks, prime movers, trailers and lorries from KES 1,500 per ton of loading capacity to KES 2,500 per ton of loading capacity or KES 5,000 per year, whichever is higher.

Further, the advance tax for saloons, station wagons, minibuses, buses and coaches increases from KES 60 per passenger capacity per month or KES 2,400 per year to KES 100 per passenger or KES 5,000 per year, whichever is higher.

Effective date: 1 January 2024

Shares issued to employees by eligible start-ups

The Act allows deferred taxation of shares that eligible start-ups issue to their employees. The benefit is taxed within 30 days of the earlier of:

  • The expiration of five years from the end of the year in which the shares were awarded
  • The disposal of the shares by the employee
  • The date the employee ceases to be an employee of the eligible start-up

This provision does not apply to cash emoluments or other benefits in-kind offered to an employee by virtue of the employment. The taxable value equals the fair market value of the shares; if the fair market value is not available, the Commissioner determines the value of the shares based on the last-issued financial statements.

Effective date: 1 January 2024

Increased rate for personal tax

The Act introduces two more tax rates and tax bands for individuals. The tax rate for individuals earning income between KES 500,000 to KES 800,000 per month is 32.5%, while those earning above KES 800,000 per month are taxed at 35%.

Effective date: 1 July 2023

National Housing Development Fund

The Act introduces a mandatory housing levy to be contributed by both the employer and employee. For each employee, the employer must remit:

  • Its contribution of 1.5% of the employee’s monthly gross salary
  • The employee’s contribution of 1.5% of the employee’s monthly gross salary

The employer is responsible for remitting the levy by the 9th day of the following month.

Effective date: 1 July 2023

Exemption of travel allowance

The Act exempts from personal income tax travel allowances paid to an employee performing official duties if the allowance is based on the standard mileage rate approved by the Automobile Association of Kenya.

Effective date: 1 July 2023

Club entrance and subscription fees exemption

The Act taxes club entrance and subscription fees paid by an employer on behalf of its employees if the employer deducts those fees when determining taxable income.

Effective date: 1 July 2023

Post-retirement medical fund relief

The Act introduces relief for resident individuals contributing to post-retirement medical funds. The amount of post-retirement medical fund relief equals 15% of the contribution paid or KES 60,000 per annum, whichever is lower.

Effective date: 1 January 2024

Income of a married woman

The Act repeals Section 15 (7) € (iii), which considers a wife’s income a separate source of income.

Section 45 of the Income Tax Act has also been repealed so the income of a married woman living with her husband can no longer be deemed to be income of the husband for income tax purposes.

Effective date: 1 July 2023

Value-added tax

Clarification on the place of supply

The Act amends Section 8(2) of the VAT Act by replacing the words “not registered person” with “a registered or unregistered” person. This amendment apparently seeks to clarify that a non-resident supplier is deemed to provide services in Kenya, whether the services are provided to a registered or unregistered person.

Clarification on the time of supply of goods and services

The Act adds subsection 12 (1A) to Section 12 of the VAT Act. New subsection 12(1A) considers the time of supply by a national carrier to be the date on which the goods are delivered or services performed.

This implies that the tax point for government-operated carriers is the date on which the goods/services are delivered/performed.

Clarification on claim of input VAT

The Act amends Section 17(2) of the VAT Act to clarify that input tax will only be claimed if a taxpayer meets the following conditions:

  • The taxpayer has the relevant documentation
  • The supplier declares the sales invoice in the return

This amendment seemingly seeks to align the implementation of the TIMS/eTIMS to the general VAT Act, 2013 provisions, to allow the purchaser to confirm that the supplier has declared the supplies before the purchaser claims the attendant input tax.

Expanding the scope of taxable supplies to include compensation for loss

The Act amends Section 17 by adding a new subsection 17(9), which treats compensation from loss of taxable supplies as a taxable supply. The resultant VAT should be declared as follows:

  • Compensation that includes VAT must be declared, with the corresponding VAT remitted to the Commissioner.
  • Compensation that does not include VAT must be declared and subjected to VAT, with the tax remitted to the Commissioner.

The standard VAT rate will apply to insurance compensation if it relates to taxable supplies whose the bona fide owner deducted input tax on purchase of the lost supplies.

Note: The Act does not provide guidance on who is responsible for the declaration and accounting for the VAT on the compensation. However, our considered view from principles of VAT is that the registered person who initially claimed input tax on the insured goods that were compensated should be responsible for declaring the VAT on the compensation received from the insurance company. If no input tax was claimed on the purchase of the taxable supplies being compensated, then there is no requirement to declare and pay output VAT on the compensation received.

Conditions for claim of VAT refunds on bad debts

The Act replaces provisions of the VAT Act (Section 31 (1)) that provided for refunds of bad debts with a new provision.

Under the new provision, a registered person may apply to the Commissioner for a VAT refund if:

  • The registered person has made a supply, accounted for VAT on that supply but has not received any payment from the purchaser within three years from the date of the supply


  • The purchaser has been placed under statutory management through the appointment of an administrator, receiver, or liquidator

An application for refund must be made before the end of 10 years from the date of supply. This is an increase from the current four-year period.

The Act also requires the refund application to comply with provisions of the TPA (Section 47 (5)), which requires the Commissioner to apply the overpayment in the following order: (i) payment of any other tax owed by the taxpayer under specific tax law, (ii) any other tax owed by the taxpayer under any other tax law and (iii) any remainder refunded to the taxpayer.

The Act also allows the refund to be credited to the taxpayers’ record for use against future VAT liabilities.

Further, the Act now requires the taxpayers repay any tax refunds received from the Commissioner 60 days if they subsequently recover the tax refunded from the recipient of the supplies. Previously, the payback period was 30 days.

This amendment appears aimed at clarifying the claim of tax refunds on bad debts.

Clarifying VAT registration threshold for suppliers of imported digital services

The Act repeals Section 34 of the VAT Act to clarify that a supplier of digital services through the internet, electronic network or a digital marketplace must register for VAT, irrespective of whether its turnover meets the KES 5 million VAT registration threshold.

Keeping of records

The Act amends Section 43 of the VAT Act to allow taxpayers to keep records such as invoices outside Kenya. This is a welcome move as it removes the requirement to keep records within Kenya.

Taxpayers may keep records in their respective jurisdictions but must provide them to the Commissioner upon request.

Amendment of status of various supplies

The Act amends the VAT status of the following products to the standard rate (16%):


Previous rate or status



Petroleum products (i.e. petrol, kerosene, aviation fuel, jet fuel, etc.)



Fetal Doppler-Pocket (Wgd-002) Pc and pulse oximeter-finger held (Gima brand) Pc of tariff number 9018.19.00, upon approval by the Cabinet Secretary for Health



The Act amends the VAT status of the following products from taxable (16%) to exempt:


Taxable services imported or locally purchased by a company that is both:

(a) Engaged in business under a special operating framework arrangement with the Government

(b) Incorporated for purposes of undertaking the manufacture of human vaccines or other manufacturing activities including refining and whose capital investment is at least KES 10 billion, subject to approval of the Cabinet Secretary for the National Treasury, on recommendation of the Cabinet Secretary for Health

All goods and parts under Chapter 88

Plant and machinery of chapter 84 and 85 imported or locally purchased by manufacturers of pharmaceutical products or investors in the manufacture of pharmaceutical products, upon the recommendation of the Cabinet Secretary responsible for Health

Taxable supplies made to or by a school-feeding program recognized by the Cabinet Secretary for Education

Taxable goods, inputs and raw materials imported or locally purchased by a company that is-

(a) Engaged in business under a special operating framework arrangement with the Government

(b) Incorporated for purposes of undertaking the manufacture of human vaccines or other manufacturing activities including refining; and whose capital investment is at least KES 10 billion, subject to approval of the Cabinet Secretary for the National Treasury, on recommendation of the Cabinet Secretary for Health

The exemption of these services implies that suppliers may not claim input tax. Also, suppliers that exclusively deal in these services will need to consider VAT deregistration, as persons dealing wholly in exempt supplies are not required to register for VAT.

The Act amends the VAT status of the following supplies to a zero rating:


Previous rate or status


Liquefied petroleum gas



Bioethanol vapor (BEV) stoves classified under HS Code 7321.11.00 (cooking appliances and plate warmers for liquid fuel)



Exportation of taxable services



Inbound international sea freight offered by a registered person



All tea and coffee locally purchased for the purpose of value addition before exportation, subject to approval by the Commissioner-General.



The supply of locally assembled and manufactured mobile phones.



The supply of motorcycles of tariff heading 8711.60.00



The supply of electric bicycles.



The supply of solar and lithium-ion batteries.



The supply of electric buses of tariff heading 87.02.



Inputs or raw materials locally purchased or imported for the manufacture of animal feeds.



 * Currently, unprocessed green tea is exempt while supply of tea for export to tea auction centres is zero-rated.

Zero-rating” all tea and coffee locally purchased for the purpose of value addition before exportation” is a welcome move as it aligns with the VAT status of exported goods.

Excise Duty Act

Adjustment of the specific rate of excise duty

The Act repeals Section 10 of the Excise Duty Act, which allowed the Commissioner to adjust specific rates of excise duty annually for inflation. Going forward, the rates can only be changed by a Finance Act or the Treasury Cabinet Secretary through the Kenya Gazette, which must be presented to the National Assembly within seven days for approval.

Suspension of licenses

Subsection 5 of Section 20 is amended to give a licensee whose license has been suspended by the Commissioner, a 14-day window to appeal the Commissioner's decision.

Excise stamps and markings

The Act adds new subsections to Section 28 of the Excise Duty Act, which outlines regulations on excise stamps and markings. The new subsections make it an offense for a person to (i) deface or print over an excise stamp affixed on any excisable goods or package, (ii) acquire or attempt to acquire an excise stamp without the Commissioner's authorization, and (iii) print, counterfeit, make or create an excise stamp without the Commissioner's authorization, among other related offenses. Anyone convicted of these offenses may face a fine of up to KES 5m or imprisonment for a term not exceeding three years or both.

Remittance of excise duty

The Act amends Section 36 of the Excise Duty Act by inserting a new subsection 1A after subsection (1). The new subsection requires licensed manufacturers of alcoholic beverages to pay excise duty to the Commissioner within 24 hours upon removal of the goods from the stockroom.

A new section, 36A, has also been added, specifying that excise duty on betting and gaming offered through a platform or other medium must be remitted to the Commissioner by a bookmaker within 24 hours from the close of transactions for the day. The Commissioner may also, by notice in the Gazette, require taxpayers in any sector to remit excise duty collected on certain excisable services within 24 hours from the close of transactions for the day.

Changes to tax rates

Changes in Part I of the First Schedule (Excisable Goods)

Deletions from First Schedule to the Excise Duty Act, 2015

  • Tariff Number 2709.00.10 - Condensates per 1000l @Kes. 6,225. Tariff number does not exist in the East African Community External Tariff (EAC CET) 2022. This is a clean-up of the schedule.


  • The Tariff description “Imported White chocolate including chocolate in blocks, slabs or bars of tariff nos. 1806.31.00, 1806.32.00, and 1806.90.00” has been replaced with “Imported white chocolate of heading 1704; Imported chocolate and other food preparations containing cocoa of tariff nos. 1806.31.00, 1806.32.00 and 1806.90.00.” This corrects the error in prior wording since chocolate preparations of tariff number 1806.90.00 are not in blocks, slabs, or bars. This also addresses challenges in implementation since white chocolate fell under a different tariff heading (17.04) from other chocolates (1806). In addition, it was contended that only chocolate in blocks, slabs or bars should be subject to excise duty, but it is now clarified that even other chocolate preparations fall under tariff heading 1806.
  • The word “Imported” has been inserted immediately before the tariff description “Articles of plastic of tariff heading 3923.30.00 and 3923.90.90,” meaning excise tax will only apply to imported goods under those tariff numbers. This corrects an error in Finance Act, 2022, which implied that locally manufactured articles listed in the tariff headings were subject to excise duty and were imported.
  • The description “Motorcycles of tariff 87.11 other than motorcycle ambulances and locally assembled motorcycles” has been replaced with a new description “Motorcycles of tariff 87.11 other than motorcycle ambulances, locally assembled motorcycles and electric motorcycles.” This means that, in addition to motorcycle ambulances and locally assembled motorcycles, both imported and locally assembled electric motorcycles under tariff number 8711.60.00 are exempt from excise duty.

Increase in Excise Duty rates


Tariff No.


Previous Rate

New Rate



Imported Emulsion-Styrene Acrylic





Imported Homopolymers





Imported Emulsion VAM





Imported Emulsion B.A.M





Imported Alkyd





Imported Unsaturated Polyester





Imported Glass Bottles (excluding imported glass bottles for packaging pharmaceutical products)



New additions





Imported fish



Powdered juice

Kes. 25 per kg


Imported sugar, excluding imported sugar purchased by a registered pharmaceutical manufacturer

Kes. 5 per kg


Imported cement under tariff numbers 2523.10.00, 2523.21.00, 2523.29.00, 2523.30.00, and 2523.90.00

10% of Value or Kes. 1.5/kg whichever is higher


Imported furniture under tariff heading 9403, excluding those originating from EAC



Imported cellular phones



Imported paints, varnishes and lacquers under heading 3208, 3209 and 3210



Imported non-virgin test liner under heading 4805.24.00



Imported non-virgin fluting medium under heading 4805.19.00



Imported cartons, boxes and cases of corrugated paper or paper board, and imported folding cartons, boxes and case of non-corrugated paper or paper board, and imported skillets, free-hinge lid packets under tariff heading 4819.10.00, 4819.20.10 and 4819.20.90



Imported plates under plastic of tariff heading 3919.90.90, 3920.10.90, 3920.43.90, 3920.62.90 and 3921.19.90



Imported paper or paper board, labels of all kinds, whether printed or not, under tariff heading 4821.10.00 and 4821.90.00


Changes in Part II of the First Schedule (services subject to excise tax)

The following are some notable changes to the excise tax rates:

Excisable service

Previous rate

New rate

Telephone and internet data services



Fees charged for money transfer services by cellular phone service providers



Fees charged for money transfer by payment service providers licensed under the National Payments Act, 2011



Money transfer services by banks, money transfer agencies and other financial service providers



Betting, gaming and prize competition



Lottery (excluding charitable lotteries)



Fees charged for advertising on television, in print media, on billboards and radio stations, on alcoholic beverages, and in betting, gaming, lotteries and prize competitions



The Act amends the definition of “amount wagered or staked” in Part III (Interpretation of Schedule) to read “the amount of money placed by a person for an outcome in a betting or gaming transaction.”

The Second Schedule of the Excise Duty Act (Exempt Excisable Goods and Services) is also amended to include disassembled or unassembled kits for local assembly or manufacture of mobile phones.

Miscellaneous Fees and Levies Act

Reduction of import declaration fee (IDF)

The Act reduces IDF from 3.5 % to 2.5 % of the customs value on all imported goods for home use, including the following goods for which the current IDF is 1.5%:

  • Raw materials and intermediate products imported by approved manufacturers, as well as inputs used
  • Inputs in the construction of houses under an approved affordable housing scheme
  • Goods imported under the East Africa Community Duty Remission Scheme

This means that the preferential IDF rate is repealed.

Reduction of railway development levy (RDL)

The Act reduces the RDL rate from 2% to 1.5% of the customs value of goods imported into the country. The preferential RDL rate for manufacturers is thus repealed.

Exemption from IDF and RDL

The Act exempts the following from IDF and RDL:

  • Goods imported for official use by international and regional organizations with bilateral and multilateral agreements with Kenya
  • Goods imported for official use by international and regional organizations with bilateral or multilateral agreements with Kenya
  • Goods under Chapter 88, such as aircraft, spacecraft, and parts
  • Liquefied petroleum gas

Export levy rates

The Act decreases the export levy rates on various raw hides and skins under tariff headings 4101.20.00 to 4302.20.00 from 80% or USD 0.55/kg to 50% or USD 0.32/kg. It also introduces a 20% export levy on the following items:

  • Bismuth and articles thereof, including waste and scrap under heading 8106.10.00
  • Other bismuth and articles thereof, including waste and scrap under heading 8106.90.00
  • Cobalt mattes and other intermediate products of cobalt metallurgy; cobalt and articles thereof, including waste and scrap
  • Waste and scrap of zirconium containing less than 1 part hafnium to 500 parts zirconium under heading 8109.31.00
  • Molasses resulting from the extraction or refining of sugar under heading 1703      

Export and Investment Promotion Levy

The Act amends the Miscellaneous Fees and Levies Act, 2016 by introducing a new Section 7A on export and investment promotion levy, which applies to all goods specified in the Third Schedule, when imported into the country for home use. The levy is payable by the importer at the time the goods enter the country for home use but does not apply to goods that originate from EAC partner states and meet the EAC rules of origin. It is apparently aimed at providing funds to boost manufacturing, increase exports, create jobs, save on foreign exchange and promote investments.

The levy applies to the following goods:


Tariff number





Cement clinkers




Semi-finished products of iron or non-alloy steel containing, by weight, <0.25% of carbon: of rectangular (including square) cross-section, with a width measuring less than twice the thickness




Bars and rods of iron or non-alloy steel, hot rolled, in irregularly wound coils with a circular cross-section measuring less than 14mm in diameter, and measuring less than 8mm




Uncoated and unbleached kraft paper and paperboard, in rolls or sheets; Kraft liner;




Unbleached sack kraft paper




Other unbleached kraft paper and paperboard weighing 150 g/m2 or less




Sacks and bags, having a base with a width of 40 cm or more




Other sacks and bags, including cones


Tax Appeals Tribunal Act

Documents to be filed with the Tax Appeals Tribunal

The Act amends the Tax Appeals Tribunal Act to require submission of additional documents when appealing to the Tax Appeals Tribunal. The Tribunal may also request additional documents for decision-making, which may enhance appellate judgements.

The Act also limits matters that may be appealed to the Tribunal under section 3(1) of the TPA to “an objection decision and any other decision made under a tax law other than (a) a tax decision; or (b) a decision made in the course of making a tax decision.”

Requirement for security when filing an appeal

Finance Bill, 2023 proposed requiring taxpayers to deposit with the Commissioner 20% of the disputed tax (or equivalent security) before filing an appeal in the High Court. This proposal was not included in the Act.

Tax Procedures Act

Tax refund decision removed from the definition of “tax decision”

The Act removes a tax refund decision from the definition of tax decision. Because taxpayers cannot dispute tax refund decisions through the TPA’s objection processes, they must appeal disputes on refunds directly to the Tribunal. 

Electronic tax invoices

The Act authorizes the Commissioner to establish an electronic system through which electronic tax invoices and records of stocks may be issued. All tax invoices will be required to be generated through this system. The system is expected to be operationalized from September 2023.

This section apparently aims to incorporate the VAT Act’s electronic tax invoice system into the TPA.

However, certain expenses such as emoluments, imports, investment allowances, interest, air tickets and similar payments are excluded from the tax-invoice requirement. The Commissioner is also authorized to exempt a person from issuing an electronic tax invoice, by notice in the Gazette. 

Penalty for failing to comply with electronic tax system

The Act revises the penalties associated with non-compliance with the electronic tax system.

If a taxpayer fails to comply with tax laws requiring electronic tax system, the Commissioner will issue a written notice requesting an explanation for the non-compliance. If the Commissioner deems the provided reasons unsatisfactory, the taxpayer will face a penalty of either KES 1 million or 10 times the tax due, whichever is higher.

Recognition of tax collection and recovery under international tax agreements

The Act now recognizes enforcement of mutual administrative assistance in the collection of taxes under any multilateral agreement or treaty.

Record-keeping requirement for trustees

A resident trustee administering a trust in or outside Kenya must now maintain documents and make them available to the Commissioner, upon request, whether the income generated is subject to tax in Kenya or not.

Mutual administrative assistance in the recovery or collection tax claims

The Act authorizes the Commissioner to assist foreign states in collecting uncontested tax claims under an international tax agreement. Under this law, the competent authority of the requesting state must make a request to the Commissioner, who will then issue a notice to the person liable. The counterparty will be required to admit or contest the liability within a specified period. If the person fails to comply with the notice, the Commissioner may initiate recovery proceedings. Persons disputing the taxes may seek redress in Kenya through the tax dispute resolution processes.

The Commissioner will deposit the recovered tax claim into a dedicated account at the Central Bank of Kenya and remit it to an account specified by the requesting state. This provision appears to be aimed at domesticating and enforcing tax agreements between Kenya and other countries on the collection and recovery of taxes.

Repeal of provisions for relief from tax payment resulting from doubt or difficulty in recovery of tax

The Act repeals the powers granted to the Commissioner and Cabinet Secretary regarding abandonment of tax. The Act repeals section 37, which allowed the Commissioner to refrain from assessing or recovering unpaid tax due to difficulties in collecting or the inability to collect that tax. This may pose a challenge, as it means that uncollectible taxes will continue to accrue penalties and interests into perpetuity, despite the impossibility of enforcement.

Tax amnesty

The Act introduces a tax amnesty program for penalties and interest on outstanding principal tax due before 31 December 2022. If the taxpayer paid the principal on or before 31 December 2022, the Commissioner may not recover the related penalties and interest. 

Taxpayers that have not paid the principal tax may apply for a waiver of the interest and penalties if they pay the outstanding principal on or before 30 June 2024.

Effective date: 1 September 2023

Power to collect tax from person owing money to the taxpayer (agency notice)

The Act expands the scope under which the Commissioner can issue agency notices to include instances of:

  • Default in paying a tax under an installment agreement between the Commissioner and the taxpayer, where the taxpayer previously requested an extension of time to pay tax due
  • Failure to respond to an assessment within the prescribed period
  • Failure to appeal an objection decision by the prescribed deadline
  • Taxpayers making a self-assessment and submitting a return without paying the taxes
  • Failure to appeal a decision of the Tribunal or court

Paying withheld VAT within five days

The Act replaces subsection (4B) of Section 42A of the TPA with a new subsection requiring withheld VAT to be remitted to the Commissioner within five days after the deduction.

Before this change, appointed VAT withholding agents had to remit the tax on or before the 20th day of the following month. This change is likely to increase the compliance burden on appointed VAT agents.

Appointment of rental income tax agents

The Act authorizes the Commissioner under the TPA to appoint rent agents to collect and remit rental income tax. The Commissioner may also revoke appointments at any time. Before this change, KRA appointed these agents via iTax based on the provisions of Section 35 of the ITA. The amendment apparently seeks to administer appointment of rental income agents under the TPA, instead of Section 35 of the ITA.

Offset of overpaid taxes against existing liability

The Act amends Section 47 of the TPA to enable taxpayers to offset overpaid taxes against both outstanding tax debts and future tax liabilities. This is a positive change, as currently taxpayers may only offset future tax liabilities.

The amendment also requires refunds for overpaid taxes to be issued within six months once the overpayment is ascertained, compared to the current two-year timeframe. In addition, the amendment also introduces a 120-day timeframe for determining applications for overpaid tax offsets and refunds that are subject to audit.

Objection to tax decision

If a notice of objection is deemed invalid, the Commissioner must notify the taxpayer to submit the required information within seven days.

Extension of ADR timeline

The Act amends Section 55 of the TPA to extend the time allowable for concluding alternative dispute resolution (ADR) processes from 90 to 120 days. This will be helpful in providing parties with more time to resolve disputes through ADR.

Producing records

The Act provides for the development of a comprehensive data management and reporting system designed to facilitate the submission of electronic documents and transactional data. 

The system will enable the electronic submission of various types of transactional data, such as payments for goods and services, business acquisitions, and royalty payments, among other commercial or financial transactions designated by the Commissioner.

Penalty for failing to comply with electronic tax system

The Act replaces Section 86 of the TPA with a new penalty structure for noncompliance with electronic tax invoice issuance, electronic tax return submission, and electronic tax payment. The penalty equals to two times the tax due. This change apparently aims to ensure use of the electronic tax system and enhance tax compliance.

Repeal of penalty and interest remission

The Act repeals Sections 89(6)(7)(8) of the TPA, as well as the waiver application provision that allowed taxpayers to apply for a remission or forgiveness of penalties or interest imposed by the tax authority.

This means that neither the Commissioner nor the Cabinet Secretary for the National Treasury is authorized to waive penalties and interest.

Impersonating tax officers

The Act adds fraud provisions for individuals impersonating authorized officers, with a maximum imprisonment term of three years if found guilty. 

Sanctions for offenses

The Act allows courts and tribunals to choose between two alternative sanctions: a KES 1 million fine or imprisonment for up to three years. This change departs from the prior requirement to apply both penalties.


A taxpayer has petitioned for an injunction halting the implementation of Finance Act, 2023. The Act will not be effective until the taxpayer’s petition is decided.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Kenya), Nairobi

Ernst & Young Société d’Avocats, Pan African Tax — Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York

Published by NTD’s Tax Technical Knowledge Services group; Maureen Sanelli, legal editor


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