Kenya’s Finance Act, 2018 assented into Law on 21 September 2018

On 21 September 2018, Kenya’s President assented to the Finance Act, 2018.

The Act introduces amendments to existing provisions in the different tax laws. The Act also streamlines and clarifies various provisions as set forth in the Finance Bill, 2018.

The following sections are of importance to employers and employees:

Section 25 of the Finance Act, effective 1 July 2018:

  1. Amendment to the Tax Procedures Act, 2015 with the repeal of section 25 and replacement with a new section which provides for changes to the application for extension of time to submit a return.
  • Monthly returns: 15 days before the return is due
  • Annual returns: 30 days before the return is due.
  • The Commissioner will now be obliged to respond to applications within reasonable time and at least 5 days before the return is due. The current provisions do not provide timelines for the application and response by the Commissioner

Section 67 of the Finance Act, effective 1 October 2018:

  1. Amendment to the Retirement Benefits Act, 1997, with the insertion of a new section giving power to the Authority to act upon the non-remittance of contributions.
  • Employers who fail to remit an employee’s contributions to the respective schemes will be required to pay contributions and interest accrued to the scheme within a specified period.
  • Non-compliant employers will be liable to a penalty equivalent to the higher of 5% of the unremitted contributions or KES 20,000. This amount will be payable within 7 days from the receipt of the notice.
  • Non-compliant employers will also be required to cease deductions from employees’ emoluments and notify them of the cessation which will be applicable until the RBA lifts the cessation order.
  • The Retirement Benefits Act will also be able to take further action where an employer does not regularize non-compliance, including initiating the process of the winding up of the scheme and facilitating the members to join individual schemes where their contributions shall be remitted.

Section 68 of the Finance Act, effective 1 January 2019:

  1. Amendment of the Employment Act with the insertion of a new section in respect of Contributions of the National Housing Development Fund (NHDF).
  • Section 31 of the Employment Act has been amended to introduce contributions to the NHDF.
  • Under the new provision, all employers and employees will each be required to contribute 0.5% of the employee’s gross monthly earnings subject to a maximum limit of KES 5,000 to the NHDF.

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