Kenya – Budget Makes Adjustments to Tax Bands, Personal Relief

Kenya – Budget Makes Adjustments to Tax Bands, Personal

This GMS Flash Alert reports that Kenya’s government is planning to expand the five individual income tax bands and increase the resident person relief.

Related content

Flash Alert 2016-082

Kenya’s government is planning to expand the five individual income tax bands and increase the resident person relief.  These measures were announced recently in the budget speech.1   

WHY THIS MATTERS

Companies with international assignees subject to Kenyan tax law may see changes in their international assignment-related (and their employment-related) costs as a result of these measures.  The changes will marginally affect tax equalization models.  

Cost projections and budgeting for assignments to Kenya and for assignees outside Kenya still subject to Kenyan taxation should reflect these changes once they come into force.  Where appropriate, adjustments by payroll administrators to withholdings will also have to be made. 

Expansion of Income Tax Bands and Increase in Personal Relief

In Kenya, individuals are taxed based on graduated tax rates.  In the budget proposals for the financial year 2016/2017, the government has proposed to expand the individual tax bands and personal relief by 10 percent effectively.

The amendments are due to take effect 1 January 2017.

The table below features the current and the proposed new tax bands.

Tax Rate Proposed Tax Band Per Annum (KES) Current Tax Band Per Annum (KES)
10% on the first  134,164 121,968
15% on the next 126,403 114,912
20% on the next 126,403 114,912
25% on the next 126,403 114,912
30% on all income over 513,373 466,704

Resident Personal Relief

The government is proposing to increase the resident personal relief from KES 13,944 to KES 15,360 per annum. 

KPMG NOTE

Next Steps

The proposals are contained in a Finance Bill which will be enacted as the Finance Act, thereby confirming (or, in the interim, dropping) the new changes.  However, should the Finance Bill not be enacted into the Finance Act by 1 January 2017, the changes are expected to take effect automatically on 1 January 2017.

FOOTNOTE

1  For the budget speech and related documentation, go to the National Treasury website:  http://www.treasury.go.ke/

 

KES 1 = EUR 0.0090 

KES 1 = USD 0.00987 

KES 1 = GBP 0.0075 

CONTACTS

For additional information or assistance, please contact your local GMS or People Services professionals or one of the following professionals with the KPMG International member firm in Kenya.

 

Richard Ndung’u

Director and Head of Tax

+ 254 (0) 20 2806000

rndungu@kpmg.com

 

John Mngoda

Manager – Global Mobility Services

+ 254 (0) 20 2806000

jmngoda@kpmg.co.ke

 

Tom Kilonzo

Manager – Global Mobility Services

+ 254 (0) 20 2806000

tkilonzo@kpmg.co.ke

The information contained in this newsletter was submitted by the KPMG International member firm in Kenya.

© 2016 KPMG Kenya, a registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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