Digital tax gets a makeover

Kenya's tax landscape is set for significant changes as the government introduces new proposals affecting individuals, businesses, and the digital economy. These reforms aim to modernize the tax system while addressing various economic challenges facing the country.

Here’s what you need to know:

At the forefront of these changes is the introduction of a 6% Significant Economic Presence Tax, replacing the current Digital Service Tax. This new framework extends to digital marketplaces, including ride-hailing services, food delivery platforms, and freelance work. Large multinational corporations generating over Ksh 5 million annually will face a new minimum top-up tax, ensuring fair contribution from major international players.

Individual taxpayers will see notable changes in their financial planning. SHIF and Housing Levy contributions are becoming tax deductible, offering some relief to employees concerned about mandatory deductions. The pension system is undergoing substantial reforms, with payouts becoming tax-exempt and the age requirement for tax-free access dropping from 65 to 38 years, provided members maintain their accounts for 20 years. Monthly deductible pension contributions have increased to Ksh30,000, with the annual limit now at Ksh360,000.

As Kenya navigates these tax reforms, both individuals and businesses need to prepare for the changes ahead. While some measures offer relief and flexibility, others introduce new obligations. Understanding and adapting to these changes will be crucial for financial success in the evolving economic landscape.