The Housing Scheme as Contained in the Finance Bill 2023; Simplified Explanation

The Housing Scheme as Contained in the Finance Bill 2023; Simplified Explanation

THE FINANCE BILL, 2023: DEMSTIFYING THE FACTS

The Finance Bill, 2023 seeks to amend the laws relating to various taxes and duties, and provide for matters incidental thereto. There has been misreporting on the content and implications of the proposals contained in the Bill. As the Leader of the Majority Party, I have taken the liberty to explain the provisions of the Bill as follows-

A.   ARE THERE PLANS TO LOWER THE COST OF LIVING THROUGH THE FINANCE BILL, 2023?

Yes. The Finance Bill, 2023 has several specific proposals which seeks to lower the cost of living for all Kenyans, part of which are as follows:

 

  1. AFFORDABLE
    • This Fund and shall be used to provide affordable houses for the many non-housed

 

  • The Bill provides that an employer shall pay to the National Housing Development Fund established under section 7 of the Housing Act, in respect of each employee the employer’s contribution at three (3%) per centum of the employee’s monthly basic salary; and the employee’s contribution at three (3%) per centum of the employee’s monthly basic

 

–           There is a proviso that the sum of the employer and employee contributions shall not exceed five thousand shillings a month.

 

Is the Affordable Housing levy a Tax?

There has been misconception that affordable housing levy is a tax yet it is not. The levy is a savings plan deduction with benefits accruing to the employee. It will also enhance the national saving plan.

 

What benefits will therefore be accruing to an employee?

  • According to the Bill, some of the benefits of the affordable housing plan as per the Bill are –
  • Home ownership: for employees who qualify for affordable housing the contributions by the employee shall be used to finance the purchase of a home under the affordable housing scheme.

 

For employees who are not eligible for affordable housing, upon the expiry of seven years from the date of the start of making the contributions, or after the attainment of retirement age, whichever is earlier the employee may opt to:

  • Transfer contributions to a retirement scheme or convert to pension;

 

  • Transfer contributions/benefits to another registered person of their choice;

 

  • Transfer contributions/benefits to a spouse or dependent children; or

 

  • Receive back all the contributions made in cash hence a savings plan.

IN ADDITION all contributions made by employees into the Fund shall also get returns based on the return on the Fund.

2.      LOWERED PRICES OF UNGA:

 

The Bill proposes to allow for the zero-rating of supply of maize corn flour, cassava, wheat or meslin flour and maize flour containing cassava flour under the VAT Act. This shall allow Kenyans to continue accessing Unga at affordable prices. Unga forms part of the staple food for many households.

 

3.     PROMOTION            OF     AGRICULTURE  BY       LOWERED                                  COST

    OF

 FERTILIZER:

  • The Bill proposes to provide exemptions under the VAT Act for fertilizers and inputs or raw materials locally purchased or imported by manufacturers of fertilizers. This shall lower the cost of fertilizer which will in turn lower the cost of production for This shall promote agriculture and enhance food security. The production of crops such as maize shall also lower the cost of basic commodities in particular Unga.

 

4.      LOWERED PRICE OF COOKING GAS:

  • The Bill proposes to exempt LPG from This shall lower the costs of LPG and hence ensure that many households including Kenyans in informal settlements have access to clean energy for cooking.
  • As it is presently, many Kenyans have no access to LPG due to its high

 

5.      IMPLICATION ON RENT FOR TENANTS:

  • The Bill proposes the reduction of applicable income tax rate on monthly rental Income from ten percent (10%) to seven-point five percent (7.5%).
  • The reduction shall have a trickle-down effect on the cost of rent payable by tenants as the Bill has reduced the tax payable by landlords for monthly rental income.

 

5.      COST OF MEDICAL CARE:

  • The Bill proposes exemptions under the VAT Act of various medical products and taxable goods for the direct and exclusive use in the construction and equipping of specialized

 

  • The Bill once enacted shall lower the cost of medical care by Kenyans, shall promote the development of the health infrastructure and ensure access to affordable health care by all

 

6.      CUSHIONS KENYANS FROM IMPROMPTU INCREASE ON COST OF

 BASIC COMMODITIES:

  • The Finance Bill proposes to repeal section 10 of the Excise Duty Act that gave the Commissioner General of KRA powers to adjust the specific rate of excise duty once a year to take into account
  • The Bill once enacted shall cushion taxpayers from impromptu increase on cost of basic commodities that is often occasioned by a review of the rate of excise duty due to

 

7.      CUSHIONS KENYANS AND BUSINESSES FROM PAYING

 UNNECESSARY TAX PENALTIES:

  • The Bill provides for tax amnesty on penalties and interests for tax payers. In this regard, once enacted into law, taxpayers who have paid their tax debts but have been uncertain about applications for waiver of penalties and interest shall benefit from tax amnesty on penalties and interests.
  • This shall also encourage Kenyans to review their tax compliance status and make voluntary disclosure to KRA so that they can benefit from the waiver of interest and

 

8.      EASE OF TAX OBLIGATIONS AND TAX REFUNDS:

  • The Bill seeks to allow taxpayers to offset tax overpayments against past, current and future tax Presently, a taxpayer can only apply to offset tax overpayments against future liabilities.
  • Further, the Bill provides that approved tax refunds shall be repaid to taxpayers within 6 months, rather than the current two
  • These amendments shall ease tax obligations for tax payers who have tax overpayments and further allow Kenyans to easily access tax refunds which can be invested into beneficial and income generating projects.

 

9.      TAX RELIEFS TO RETIREES ON POST-RETIREMENT MEDICAL

 SCHEMES:

  • The Bill proposes to provide tax reliefs to persons who contribute to post-retirement medical
  • This is to encourage retirees to enroll to post-retirement medical schemes hence guaranteeing their access to medical care postretirement.

 

10.          MEASURES TO INCREASE TAX COLLECTION TO PROVIDE

 SERVICES:

  • The Bill proposes to target high income earners who earn above Kshs. 500,000 per month to pay individual tax rates that is PAYE of 35% up from the current 30%.
  • This shall increase the tax collected by government which shall in turn be used to provide services to all Kenyans including affordable healthcare.
  • The proposals are also designed to reduce inequality in society by cushioning low income earners from tax

 

 

B.    ARE THERE PLANS IN THE FINANCE BILL, 2023 TO PROTECT LOCAL BUSINESSES, BOOST OUR MANUFACTURING SECTOR AND CREATE EMPLOYMENT OPPORTUNITIES FOR THE YOUTH?

Yes, the Bill has several proposals which seek to protect and promote local businesses, boost our manufacturing sector and create employment opportunities for the youth. Some of them are:

 

  1. PROMOTION OF LOCAL BUSINESSES AND JOBS:
    • The Bill proposes to impose additional levies on imported products such as steel, paper, plastics and paints among other

 

  • This shall protect local manufacturers from unfair competition and further protect the job market created by local

 

2.      PROMOTION OF THE MANUFACTURING SECTOR:

  • The Bill proposes to provide for export and investment promotion levy, on all goods specified in the Third Schedule of the Miscellaneous Fees and Levies Act, 2016 imported into the country for home
  • The purpose of the levy shall be to provide funds to boost manufacturing, increase exports, create jobs, save on foreign exchange and promote

 

3.      PROMOTION OF THE JUA KALI SECTOR:

  • The Bill also seeks to impose excise duty for imported furniture excluding furniture from the
  • This shall protect and promote local production, including our jua kali sector engaged in the manufacture of

 

4.      PROMOTION OF THE LOCAL FISHING SECTOR:

  • The Bill imposes excise duty on imported fish and hence seeks to protect the local fishing industry which provide a source of living for many Kenyans.

5.      KENYAN BUSINESSES TO ENJOY VAT EXEMPTIONS:

  • As it is presently, VAT is payable by transfer of business as a going concern. These tax obligations have hindered business growth through
  • The Finance Bill once enacted shall provide for VAT exemption for transfer of business as going
  • This shall spur business restructuring and encourage Mergers and Acquisitions.

 

6.      REDUCTION OF IMPORT FEES TO SPUR BUSINESSES:

  • The Bill has proposed the reduction of the rate of Import Declaration Fee from 3.5% to 2.5% of the customs value of imported
  • Further, the Bill proposes a reduction of the rate of the Railway Development Levy from 2% to 1.5%. This shall in turn reduce the cost of importation of goods and hence shall spur businesses engaged in the sale of imported

 

7.      LOCAL BORROWING INTEREST RESTRICTION:

  • The Bill proposes to exempt the interest accrued from local borrowing from the interest restrictions rules.
  • Consequently, when computing the restricted interest a person will only consider interest paid to non-resident persons in excess of 30% of earnings before interest, taxes, depreciation and The proposal shall encourage companies to borrow from local financial institutions and this shall promote the growth of our local financial sector.

 

8.      INCENTIVES FOR LOCAL CONTENT FOR MOTOR VEHICLE

 ASSEMBLERS:

  • As it is presently, the Income Tax Act provides a reduced rate of corporation tax of 15% for 5 years from the commencement of motor vehicle assembly
  • The Finance Bill proposes a further extension of the reduced rate to a company which achieves a local content of 50% of the ex-factory price value.
  • The Finance Bill defines the local content to mean parts designed and manufactured in Kenya by an original equipment manufacturer operating in
  • This will encourage motor vehicle assemblers to utilize local content and benefit from the preferential corporate tax

9.      PROMOTION OF THE TOURISM INDUSTRY:

  • The exemption of aircraft, spacecraft and parts thereof from VAT shall ensure the revival of the airline industry which shall in turn expand the tourism
  • The tourism industry is one of the country’s key economic drivers and contributes to over 8% of the country’s GDP and is also a source of livelihood for many Kenyans through employment in the hospitality

 

10.      INCENTIVES FOR START-UP BUSINESSES:

  • The Bill proposes to defer tax on shares received by employees in lieu of cash emoluments from an eligible start The amendment seeks to encourage start-ups to allow employees to benefit from the growth of the company by issuing employees with shares.
  • This shall encourage the development and growth of start-ups which have been one of the engines of growth and innovation in many economies around the
  • Start-up businesses shall also address issues of unemployment in the country as the incentives shall encourage the youth to start-up small

 

11.      EASE OF DOING BUSINESS:

  • The Bill provides that the Commissioner-General of KRA may establish a data management and reporting system for the submission of electronic documents including detailed transactional data relating to those

 

  • This shall enhance the ease of doing business as it shall allow persons to submit documents on various transactions electronically and ease the administration of our