KRA updates iTax system to net new hefty taxes as it implements Finance Act
Taxpayers are assisted by the Kenya Revenue Authority staff to file their tax returns at the iTax Support Centre in Nairobi on June 30.
The Kenya Revenue Authority (KRA) on August 1, 2023, updated the iTax portal with the new tax rates. This follows the lifting of conservatory orders barring the implementation of the Finance Act 2023.
On Friday, the Court of Appeal lifted orders barring the implementation of the Act, paving the way for KRA to begin collecting new taxes targeting to raise an additional Sh211 billion in the 2023/2024 financial year.
“The system is being updated today (on Tuesday),” KRA said in response to queries from the Nation regarding the updating of iTax in line with the Act.
Three Kenyans, including Busia Senator Okiya Omtatah, have since filed a notice of appeal with the intention to challenge the Court of Appeal’s decision at the Supreme Court.
Among the key changes now reflected are the new Pay As You Earn (PAYE) rates after the Act introduced two new income tax bands and rates at 32.5 per cent for persons earning between Sh500,000 and Sh800,000 monthly, and 35 per cent for persons earning more than Sh800,000.
Persons with a gross salary of Sh600,000 per month will have their take-home pay reduce by Sh11,473 owing to the changes brought about by the new tax rate of 32.5 per cent as well as the introduction of a housing tax at 1.5 per cent.
Kenyans who earn Sh800,000 per month will see their take-home pay reduce from Sh565,416 to Sh548,988.
Another major update on iTax is the incorporation of the housing tax at 1.5 per cent of the employees’ gross salary, matched by another 1.5 per cent by the employer towards the Housing Development Fund. According to the National Assembly’s Finance and Planning committee, the government is looking to collect Sh83 billion in the current financial year through the tax.
KRA has not directly indicated whether it will be backdating collections to July, but a circular to staff within the Authority indicated that effective dates of the new tax rates will be applied as per the Act. This implies that the authority will be working with the July 1, September 1 and January 1, 2024 as the effective dates as provided in the Act.
“All officers are advised to read this circular and the specific provisions of Finance Act 2023. Further, officers are advised that the provisions of the Act shall come into effect on the dates specified in Section 1 of the Act. The Act provides the following effective dates July 1, 2023; September 1, 2023; and January 1, 2024”, the memo signed by Deputy Commissioner, Corporate Policy Maurice Oray states.
Subject to the determination of the three-judge bench constituted by Chief Justice Martha Koome to hear the petition against the Finance Act, other updates on the iTax portal are set to be made ahead of the respective effective dates.
The portal, for instance, will be updated to capture the provision for Digital Assets Tax at 3 per cent on September 1. Provision for the Export and Investment Promotion Levy is also due on September 1. The system will also be updated at the end of this year to capture provisions that are effective January 1, 2024 such as the reduction in residential income tax from 10 to 7.5 per cent.
