2021 has been dubbed the year of recovery. Some of the key highlights in the tax space both locally and internationally have been;
- Introduction of the Voluntary Tax Disclosure Programme(VTDP) which allowed Kenyans to disclose their previously undisclosed liabilities and pay the tax due free of penalties and interest
- Digital Service Tax became effective at the beginning of this year and the finance act further exempted local business from the tax. The tax mainly targets MNEs and the supplies they make in the digital marketplace
- The Finance act introduced tax reliefs for registered family trusts, which is seen as a move to promote the use of family trusts particularly as a mode of estate planning.
- The courts declared imposition of minimum tax unconstitutional and cited it as a move that would cripple businesses that were making genuine losses especially in the face of recovering from the pandemic
- The proposed removal of the Tribunal from the direct control of the executive and taxman and transfer of key powers to the Judicial Service Commission has also been a key development this year.
- Excise duty has been a point of conflict between the taxman and local businesses. From the adjustment of specific rates for inflation to the tussle between the taxman and ?Mount Kenya Breweries on excise duty stamps that led to the closure of the latter’s Nanyuki premises.
- Excise duty on betting and gaming at the rate of 7.5% of the amount wagered or staked was also reintroduced this year
- The Finance Act, 2021 broadened the scope of VAT on the Digital economy by including and bringing to VAT charge supplies made over the internet or an electronic network.?
- The act also reintroduced the exemption?Import Declaration Fee and Railway development levy such other goods that the CS may determine their exemption is in the public interest, or to promote an investment and the value of which is five billion shillings or more.
- KRA has been successful in meeting and surpassing its revenue targets but issues have arisen as to whether this has been done at the expense of the common Mwananchi
- The EAC Gazette of 30 June 2021 approved a stay of the application of the East African Community Common External Tariff rates on originating goods imported from the COMESA region, a move to further foster a healthy business environment in the sub-Saharan region
- The VAT status of exported services from zero rated to exempt, a move contrary to the ‘destination principle’ and one that has resulted in increased cost of doing business for service providers?in Kenya
- The definition of a Permanent Establishment was extended to include a dependent agent that habitually concludes contracts on behalf of others.
- The Pandora papers leak has caused an uproar and further fueled an already existing conversation on aggressive tax planning and tax evasion schemes
- We have seen the fast tracking and imminent implementation of the minimum global tax in over 135 countries globally, a move that has been seen as a response to the rapid digitalization of the tax space and the challenges that come with it.
- Introduction of the filing requirement for the ultimate parent entity of a multinational enterprise group headquartered in Kenya, a move in congruence with the Country-by-Country Reporting requirement for multinational enterprises (“MNEs”) initiated by the OECD in the Base Erosion and Profit Shifting (BEPS) Action 13 Report
