38. Finance Act No. 4 of 2023

The Finance Act 2023 provides for the taxation measures for the financial year 2023-2024.

Quick link: https://new.kenyalaw.org/akn/ke/act/2023/4/eng@2023-08-18

· The Finance Act No. 4 of 2023 was assented to on 26th June 2023 makes the following tax changes:

• Amends Head B of the Third Schedule to the Income Tax Act by reducing the Rental Income tax rate from 10% to 7.5% effective from 1st January 2024.

• The Finance Act has also introduced tax at the rate of 15% on the repatriation of income for non-resident persons conducting business in Kenya through a permanent establishment at a rate of 15%.

· This coupled with the 15% corporate tax rate will result in reduced returns and is likely to discourage foreign investment into the affordable housing sector.

• Amends the Fourth Schedule to the the Income Tax Act by including mortgage refinance companies licensed under the Central Bank of Kenya Act. This exempts interest income generated by mortgage refinance companies from withholding tax.

• The Finance Act also amends the Income Tax Act allowing individual to claim mortgage interest expense to a maximum of Kshs 300,000 per year incurred on money borrowed from a co-operative society such as a Savings & Credit Co-operatives (SACCOs).