changes for the 2022 tax season
3 January 2022
Good Morning and Happy new year.
The first week of the year is usually dedicated to goal setting and adjusting to write the date correctly.
However, This week’s newsletter is dedicated to informing you of major changes in the law that will affect businesses in 2022.
Tax law amendments taking effect in 2022
The Finance Act 2021 has some key provisions that took effect on the 1st of January:
Kenya Revenue Authority will no longer pay tax refunds
As from 1 January, KRA (Kenya Revenue Authority) stopped paying tax refunds but will instead offset the overpaid taxes against future tax obligations. This is a relief to many taxpayers who have failed to get refunds from KRA.
KRA has for years delayed making tax refunds to businesses and individuals citing audit delays of the claims made & inadequate cash from the Treasury.
According to data by KRA for year ended June 2021, the taxman received more than 2,000 applications for withholding VAT refunds but only cleared 1,041 businesses and paid Sh6.6 billion worth of refunds.
Businesses to get tax reliefs for hiring graduates
Firms / businesses employing at least 10 fresh graduates from universities, technical and vocational institutions will enjoy a tax relief equivalent to half of the trainees’ salaries.
The particulars are that the employers have to hire at least 10 graduates for between six months to a year.
The aim of this provision is to remedy Kenya’s high youth unemployment rate.
Note: Data from the Economic Survey 2021 shows that the economy shed 187,300 formal jobs in the year ended June 2020.
Firms investing at least Ksh250 million annually outside Nairobi and Mombasa will pay less tax
This is because of the re-introduction of 100% investment deduction when calculating corporate income taxes. This will allow firms to recover the worth of their spending on buildings and machinery from taxes.
Last year, the investment deduction was 50% (companies were allowed to deduct 50% of the expenses from their profit)
What is happening in the world of Omicron
Dubai has indefinitely suspended flights from Kenya, Ethiopia, Uganda and Tanzania
In a notice given on 26 December 2021, Dubai indefinitely suspended flights from Kenya, Ethiopia and Tanzania due to risk of the Omicron variant spreading.
However, outbound flights from Dubai to the same countries will remain unaffected by the new extension.
Until further notice, flights to and from Ethiopia, Kenya, Nigeria, Tanzania and Uganda are suspended. Passengers who have been in or transited through these countries in the last 14 days will not be allowed to enter or transit through Dubai -
Emirates airline
The United States lifts Omicron-related travel restrictions to South African Countries.
The US lifted Omicron-related travel restrictions on 8 southern African countries as from the 31st of December 2021.
The restrictions covered South Africa, Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi.
Is Omicron less severe ?
A new study revealed that people infected with Omicron in South Africa were 80% less likely to be hospitalised than those infected with other Covid strains,
Other data from Scotland showed that the risk of hospitalization from Omicron was two-thirds lower than from Delta.
However, Researchers cautioned that Omicron could still lead to overwhelmed hospitals just by the sheer number of people it infects.
Reduced isolation time for those testing positive for Covid-19
Last year, the British Health Minister announced that People who test positive for Covid in the UK could leave quarantine in seven days as opposed to the previously required 10.
The United States also slashed the isolation period to 5 days.
TAX
Huduma Namba to replace the KRA pin
The Huduma Namba Bill, 2021 amends the Tax Procedures act to make biometric ID the key number for identifying tax payers.
The Huduma Namba assigned shall serve as a pin for the purpose of tax law - Huduma Namba Bill
what this means
If the bill becomes law, The Kenya Revenue Authority (KRA) will have access to records of all adults.
This is because all persons above 18 years will be required to have the Huduma Namba for tax purposes. Moreover, Children offered the Huduma Namba ID will automatically be listed as taxpayers once they attain 18 years and will be required to file returns annually irrespective of their income status.
COMMUNICATION
Lower call rates
The Communications Authority of Kenya announced that callers across networks would enjoy lower call rates effective 1 January 2022.
What rates have changed ?- The Mobile Termination Rates (MRT’S) and Fixed Termination Rates (FTR’s) have been capped at Ksh 0.12 per minute. (down from Ksh 0.99 per minute).
MRT’s and FTR’s are costs that mobile operators charge each other to allow customers communicate across networks.looking forward:
Safaricom has filed an appeal at the Communications and Multimedia Appeals Tribunal challenging the decision to cap MTR’s at Ksh 0.12. Safaricom argues that the charges should instead rise to reflect the true cost of doing business.
INSURANCE
Higher premiums for vehicle insurance
Some car insurance providers have revised their insurance premiums for 2022 and raised them by as much as 50%.
Why ? - The companies argue that the surge in insurance costs is as a result of the increased number of claims which outstrip the amount of premiums paid.
Word of advise: check with your insurance provider to ascertain what your car insurance premium is.
CAPITAL MARKETS
Kenya to issue 2 new Euro bonds by June to help finance the 2022/2023 budget
In a statement to the International Monetary Fund, Kenya’s Treasury secretary announced that Kenya planned to issue 2 Eurobonds by June to finance the 2022/2023 budget.
The first Eurobond was expected to be issued before the end of 2021.
Treasury to borrow up to Sh41.8 billion from the dollar reserves of the Central Bank of Kenya
Treasury announced that it would borrow upto Ksh 41.8 billion from the dollar reserves the Central Bank of Kenya (CBK) received from the IMF (International Monetary Fund).
The amount to be borrowed is half the amount of dollar reserves received by the CBK from the IMF. additional details
The government will borrow money in the form of special drawing rights.
Part of the funds are to be utilised locally hence the government will borrow in local currency (Kenya shillings).
The repayment period will be 30 years.
CORPORATE
The Mergers and Acquisitions activity in 2021
Fueled by the Covid-19 pandemic, the corporate sector in 2021 was characterised by Mergers and Acquisitions.
Here’s a summary of major M&A’s last year.
UNGA group sold its baking business (Ennsvalley bakery) to BigCold - Unga group sold the baking business due to high cost ff production with low demand of bread & the rising competition in the baking business from Supermarket chains whose cost of bread is lower.
KCB group acquired Rwandese lender Banque Populaire du Rwanda -This acquisition gives KCB a larger retail banking market in Rwanda.
Private Equity firm Actis bought Fairview Hotel, Town Lodge and City Lodge Two rivers - The private equity firm acquired the hotels at Ksh 1 billion.
Allianz (German Insurer) purchased 66% stake in Jubilee General Insurance Limited
Must Know ConversationStarters
Kenya stops its bid to fully nationalise Kenya Airways - The state dropped its plan to nationalise the airline but will offer Kenya Airways a further Ksh 146.9 billion bailout.
The Treasury secretary announced that the state would take over Ksh 93.4 billion of Kenya Airways’ debt owed to suppliers and the government will additionally give the airline Ksh 53.4 billion in direct budget support.
The East African Community welcomes a new member state - The Democratic Republic of Congo has been admitted to the East Africa Community. This is after the East African heads of state approved the admission of DRC into the EAC.
Charges for the Transfer of money from bank accounts to mobile money wallets - Currently, the transfer of money from bank accounts to Mobile money wallets attract no charges.
However, This might change soon because Banks are set to lobby the Central Bank of Kenya to reinstate these charges.
The Central Bank of Kenya introduced waivers for transaction charges between mobile banking and bank wallets in march 2020 to boost digital transactions.
Communications Authority of Kenya to cancel FM broadcasting license offer to 60 radio broadcasters - The Communications Authority of Kenya issued a notice of revocation of FM broadcasting licenses & cancellation of license offers to listed 60 radio broadcasters following their failure to comply with licence offer conditions.
Enjoyed the first issue of 2022?