Excise, mobile transactions, VAT, capital gains: 5 taxes on Kenyans, businesses in 2023

These measures come at a time when inflation has already driven up the cost of living to a five-year high.

President William Ruto has been under pressure to reduce the cost of living and fulfil his election pledges as well as run the country on very scarce revenues from KRA.

President William Ruto addressing regional and county commissioners at State House, Nairobi Pulse Live Kenya

20% Excise Tax

First among the taxes is the 20% Excise Tax on transactions between mobile wallets and banks.

Banks have already started charging the tax in addition to the reintroduction of fees on mobile-to-bank transactions and vice versa.

Only a few banks have informed their customers on the excise tax.

"Dear Customer, we wish to advise that following the lifting of Covid-19 relief measures on mobile transaction fees by the CBK, effective 1 January 2023, the usual mobile money transfer fees will apply on transfers from account to Mpesa/Airtel Money. The charges range from Sh11 - Sh70 for transactions above Sh100 plus 20% excise duty,” read a text message from a local bank.

16% Value Added Tax

Multinational tech companies have also announced that they will begin applying a standard 16% Value Added Tax (VAT) on electronically supplied services such as streaming movies on Netflix or listening to music on Spotify, as the government looks to tap into the growing digital market in the country.

Other online services that will now be subject to VAT include e-books and videoconferencing.

1% gross turnover minimum tax

The Kenya Revenue Authority (KRA) has appealed to the Supreme Court to overturn a lower court ruling that blocked the implementation of a mandatory 1% gross turnover minimum tax.

The minimum tax is a flat tax that applies to companies that have a turnover of less than Sh5 million per year.

KRA Commissioner General James Githii Mburu Pulse Live Kenya

The minimum tax was proposed to ensure that all companies contribute to the country's tax base, even if they are not profitable or have low profits.

15% Capital Gains Tax

The Finance Act of 2022 amended the Income Tax Act (ITA), by increasing the rate of capital gains tax (CGT) from 5% to 15%. The tax took effect from 1 January 2023.

The Capital Gains Tax (CGT) is a tax that applies to the sale or transfer of property located in Kenya that was acquired on or after January 2015.

This tax is charged not only when property is sold for money, but also when it is exchanged, conveyed, given away, or disposed of in any other way, including through destruction, abandonment, surrender, cancellation, or forfeiture.

In other words, the CGT is levied on any change of ownership of a Kenyan property, regardless of whether or not any money is exchanged in the process.

15% withholding tax

Foreign traders who benefit from local-based derivative contracts will be subject to a 15% withholding tax starting in 2023. This tax will be imposed on any profits made from these contracts.

A derivative is a financial instrument that derives its value from an underlying asset, such as a currency, commodity, or security. Derivatives can be used to hedge risk, speculate on price movements, or generate income.

A local-based derivative contract is a contract that is based on an underlying asset that is located or traded within the same country.

For example, if a foreign trader enters into a derivative contract with a Kenyan company to speculate on the price of a commodity that is produced and traded within Kenya, the derivative contract would be considered local-based.

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