The impact of COA ruling on Finance Act 2023

The impact of COA ruling on Finance Act 2023

The Court of Appeal has declared the 2023 Finance Act unconstitutional mainly due to:

• Clauses sneaked in after the end of public participation.
• Failure by the national assembly to explain to the members of the public why their views were accepted or rejected.

In the event that the Government does not appeal to the Supreme court, how does the ruling affect you in brief?

• The ruling does not affect housing levy. Housing levy was enacted afresh in March 2024 through AH Act. Housing levy remains intact.
• Withholding Tax (WHT) on digital content monetization and resident sales & marketing   is gone.
• 30% of EBTDA restriction on local loans is back.
• Taxation of repatriated income is gone.
• Maximum Threshold for TOT back to 50m sales, the current threshold is 25m
• Digital Asset Tax gone
• Mandatory e-tims for expenses deductibility gone.
• Capital allowances for industrial building and docks gone
• Rent income Tax back to 10%, the current rate is 7.5%
• Old rates on advance tax back. Minimum rate back to KES 2,400 from the current 5,000
• Confusion about CGT payment date is back
• Tax amnesty gone- I think it has been overtaken by events since the same ended in June 2024
• Tax penalties waivers by KRA back
• WHT/WVAT deadlines back to 20th  of the following month , current deadline is  5 working days
• The clause permitting the offsetting of overpaid taxes to future tax liabilities gone.
• VAT on fuel back to 8% , current rate is 16%.l
• VAT on LPG back to 8%, current rate is 0%,
• Exportation of taxable services back to 16% VAT Rate, currently zero rated. The exportation of taxable services in respect of business process outsourcing remains zero rated.. Multinationals will suffer
• The requirement that VAT input can only be claimed if the same has been declared by the seller gone. This was a bad provision.
• VAT on insurance compensation gone.
• VAT refund on bad debts claim window back to 3-4 years , current window is 3-10 years . A good provision has been lost.
• Annual excise duty inflationary adjustments back.
• Requirement for alcohol manufacturers and betting companies to pay excise duty in 24 hours gone.
• Excise duty on airtime, internet back to 20%, current rate 15%. More expensive airtime and internet is on the way
• Excise duty on money transfer services back to 20%, current rate 15%. More expensive bank charges.
• Excise duty on betting back to 7.5%,current rate is 12.5%.
• Excise duty on MPESA charges back to 12% ,current rate is 15%
• IDF rate back to 3.5%, current rate is 2.5%. Imports cost will slightly go up.
• IDF for manufacturers back to 1.5%. Will benefit manufacturing sector.
• IDF and RDL on LPG is back.
• export and investment promotion levy gone
• RDL back to 2.5%, current rate is 1.5%
• Older rates of PAYE back. Individuals with an income of KES 6,000,000 and above per year to  benefit
• Relief on post medical fund  gone.

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