ANNOUNCEMENT 23 Jun 2017

On 23 June 2017, the Finance Act 2017 was published in the Kenya Gazette. The Act introduced several amendments that are relevant to the GTA scope. 

NUMBER OF INTERVENTIONS

5

  • 5 harmful
  • 0 neutral
  • 0 liberalising
Inception date: 01 Jan 2018 | Removal date: open ended

Tax or social insurance relief

Effective from 1 January 2018, the government of Kenya via Finance Act 2017 introduced a corporate tax reduction of 15% for newly incorporated companies carrying out local assembly of motor vehicles.

The reduced rate will initially be valid for a five-year period. Nevertheless, according to the Finance Act 2017, the tax reduction of 15% can be extended for an additional five-year period.

The additional  5-year extension will only apply if the companies carrying out the local assembly of motor vehicles achieve a local content of 50% of the ex-factory value of their vehicles.

Furthermore, as of 1 January 2018, the government of Kenya via Finance Act 2017, also for the first time exempted from Import Declaration Fees as well as Railway Development Levies, all goods which are imported for the purpose of being used in the construction of local LPG storage facilities. 

AFFECTED SECTORS

 
Inception date: 01 Jan 2018 | Removal date: open ended

FDI: Treatment and operations, nes

As of 1 January 2018, Finance Act 2017 introduced several amendments which are relevant to the GTA scope and are established with the purpose of boosting the rate of investment in the  Special Economic Zones (SEZ) of Kenya. These highlighted amendments are:

  • The government for the first time exempted from withholding tax the dividends which non-residents receive from SEZ Enterprises, Developers and Operators.
  • The government for the first time introduced withholding tax-related preferential treatment for payments made to non-residents for royalty, interest as well as management, professional and training fees (i.e. payments made to non-residents by  SEZ Enterprises, Developers and Operators). Specifically, for these highlighted payments the tax rate will be 5% (instead of the 15% - 20% withholding tax rate which generally applies to all other non-residents not associated with SEZ Kenyan zones).
 
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Inception date: 01 Jan 2018 | Removal date: open ended

Local sourcing

As of 1 January 2018, the government of Kenya via Finance Act 2017, for the first time required for all persons with an insurable interest in the marine cargo sector, to acquire marine insurance exclusively with local insurers registered in the Kenyan jurisdiction. Previously, persons with an insurable interest in the marine cargo sector were allowed to place marine insurance with insurance firms located outside of Kenya. The core scope of this amendment is to promote the local insurance sector of Kenya.

 

 

 
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Inception date: 03 Apr 2017 | Removal date: open ended

Localisation incentive

Effective from 3 April 2017, the government of Kenya under Finance Act 2017, introduced amendments to the VAT Act that are specifically relevant to the GTA scope.

Specifically, motor vehicles that are assembled locally and are exclusively used for the transportation of tourists, are as per Finance Act 2017, for the first time exempted from Value Added Tax-related obligations. Nevertheless, in order to benefit from the highlighted VAT relief the locally assembled vehicles must meet the following conditions :

  • They must  be registered under, and operated by an entity that is licensed from the Tourism Vehicle Regime;
  • They must exclusively be used for the transportation of tourists;
  • They must possess provisions for camping, rescue and first aid equipment, luggage, compartments and communication fittings; 
  • They must comply with all condition which the Commissioner may impose eventually.
 
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Inception date: 03 Apr 2017 | Removal date: open ended

Tax or social insurance relief

 

Lastly, effective from 3 April 2017, the government of Kenya via the Finance Act 2017, for the first time exempted from excise duty goods that are imported and are exclusively designated for the use of the manufacture of locally produced sanitary towels.

 
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