CRS News Flash 14 July 2020 – KENYA – The Finance Act 2020 assented

JULY 2020 – KENYA

THE FINANCE ACT 2020 ASSENTED

It is important that employers note the following:

Kenya Finance Act 2020 assented

The Finance Act 2020 was assented to by President Uhuru Kenyatta on 30 June 2020.

The amendments relevant to payroll under the Act are outlined below:

Allowable expenses

Effective from 1 January 2021, the following items will be deleted from the list of allowable deductions:

Any entrance fee or annual subscription paid during that year of income to a trade association;
Club subscriptions paid by an employer on behalf of an employee.

Home Ownership Savings Plans (HOSP)

Effective from 1 January 2021, the Act has deleted the provisions on Home Ownership Savings Plan (HOSP)
Effective 30 June 2020, the following exemptions have been deleted:
- Exemptions previously granted on incomes accruing to a registered HOSP;
- Contributions by individuals to a HOSP will not qualify as an allowable deduction when determining the taxable income;
- Interest income earned on deposits in a HOSP will also be subject to tax, as opposed to previously where the initial KES 3 million was exempt from tax.

Income Tax Exemptions

Effective 30 June 2020, the following tax exemptions have been removed:

Income from employment paid in the form of bonuses, overtime and retirement benefits to employees whose taxable employment income before bonus and overtime allowances does not exceed the lowest tax band;
Payment of a lump sum pension to persons of 65 years or older will be subject to tax;

Only monthly pensions paid to persons of 65 years or older will be exempted.

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