The Finance Act No 8of 2020 - as Plain Text by MWakili

NATIONAL COUNCIL FOR LAW REPORTING LIBRARY SPECIAL ISSUE Kenya Gazette Supplement No.

104 (Acts No.

8) REPUBLIC OF KENYA KENYA GAZETTE SUPPLEMENT ACTS, 2020 NAIROBI, 30th June, 2020 CONTENT Act PAGE The Finance Act, 2020 103 !NG NATO AL COUNCIL FOR LAW Rt REtE1V76.071.10 NAtRoal, KENYA TEL: 2719231 FAX: 2712e94.

PRINTED AND PUBLISHED BY THE GOVERNMENT PRINTER, NAIROBI 103 THE FINANCE ACT, 2020 No.

8 of 2020 Date of Assent: 30th June, 2020 Date of Commencement: See Section 1 AN ACT of Parliament to amend the laws relating to various taxes and duties and for matters incidental thereto ENACTED by the Parliament of Kenya, as follows PART IPRELIMINARY 1.

This Act may be cited as the Finance Act, 2020 Short title and and shall come into operation as follows commencement.

(a) sections 2, 3, 4, 5, 6, 7, 8 (a), 9, 16, 18 and 19, the 1st January, 2021; (b) section 13 (a) (i) and (iv), 13 (d), 14 (a) and 22 (a) (i) on 1st July, 2021; and (c) all other sections, on the date of assent.

PART IIINCOME TAX ACT 2.

Section 6A of the Income Tax Act is amended in Amendment of subsection (1) by deleting section 6A of Cap.

470.

(a) the words "one hundred and forty-four thousand shillings" and substituting therefor the words "two hundred and eighty-eight thousand shillings"; and (b) the word "ten" and substituting therefor the word "fifteen".

3.

Section 12 of the Income Tax Act is amended in Amendment of subsection (1) by deleting paragraph (a) and substituting section 12 of Cap.

therefor the following new paragraph 470.

(a) if the minimum tax payable under section 12D is higher than the instalment tax under this section; and 4.

The Income Tax Act is amended by inserting the Insertion of new following new sections immediately after section 12C sections 12D and 12E in Cap.

470.

Minimum tax.

12D.

(1) Notwithstanding any other provision of this Act, a tax to be known as minimum tax shall be payable by a person if (a) that person's income is not exempt under this Act; 104 No.

8 Finance 2020 (b) that person's income is not chargeable to tax under sections 5, 6A, 12C, the Eighth or the Ninth Schedules; or (c) the instalment tax payable by that person under section 12 is higher than the minimum tax.

(2) The tax payable under this section shall be paid in instalments which shall be due on the twentieth day of each period ending on the fourth, sixth, ninth and twelfth month of the year of income.

Digital service tax.

12E.

(1) Notwithstanding any other provision of this Act, a tax to be known as digital service tax shall be payable by a person whose income from the provision of services is derived from or accrues in Kenya through a digital market place: Provided that a resident person or a non-resident person with a permanent establishment in Kenya shall offset the digital service tax paid against the tax payable for that year of income.

(2) The tax payable under subsection (1) shall be due at the time of the transfer of the payment for the service to the service provider.

5.

Section 15 of the Income Tax Act is amended in Amendment of subsection (2) by section 15 of Cap.

470.

(a) deleting paragraph (h); (b) deleting paragraph (s); (c) deleting paragraph (ss); (d) deleting paragraph (u); and (e) deleting paragraph (v).

6.

The Income Tax Act is amended by repealing Repeal of section section 22C.

22C of Cap.

470.

7.

Section 34 of the Income Tax Act is amended in Amendment of subsection (1) by inserting the following new paragraphs section 34 of Cap.

470.

immediately after paragraph (m) 105 2020 Finance No.

8 (n) tax upon the gross turnover of a person whose income is chargeable to tax under section 12D shall be charged at the rate specified in the Third Schedule.

tax upon the gross transaction value of services (o) chargeable to tax under section 12E shall be charged at the rate specified in the Third Schedule.

8.

Part I of the First Schedule to the Income Tax Act Amendment of is amended by the First Schedule to Cap.

470.

(a) deleting paragraph 44; (b) deleting both paragraphs 53.

(c) inserting the following new paragraph immediately after paragraph 52 53.

Monthly pension granted to a person who is sixty- five years of age or more.

9.

The Third Schedule to the Income Tax Act is Amendment of amended in Head B by inserting the following new Third Schedule to paragraphs immediately after paragraph 10 Cap.

470.

11.

The rate of tax in respect of minimum tax under section 12D shall be one per cent of the gross turnover.

12.

The rate of tax in respect of digital service tax under section 12E shall be one point five per cent of the gross transaction value.

10.

The Eighth Schedule to the Income Tax Act is Amendment of amended in paragraph 3 by deleting sub-paragraph (2) and Eighth Schedule substituting therefor the following sub-paragraph to Cap.

470.

(2) The gain accruing to a company on any transfer of machinery classified in paragraph 1 (b) of the Second Schedule is not chargeable to tax under section 3(2) (1).

PART IIIVALUE ADDED TAX ACT 11.

Amendment of Section 17 of the Value Added Tax Act, 2013, is section 17 of No.

amended by deleting subsection (2) and substituting 35 of 2013.

therefor the following new subsection (2) If, at the time when a deduction for input tax would otherwise be allowable under subsection (1) 106 No.

8 Finance 2020 (a) the person does not hold the documentation referred to in subsection (3), or (b) the registered supplier has not declared the sales invoice in a return, the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation: Provided that the input tax shall be allowable for a deduction within six months after the end of the tax period in which the supply or importation occurred.

Section 68 of the Value Added Tax Act, 2013 is Amendment of 12.

section 68 of No.

amended by inserting the following new sub-section 35 of 2013.

immediately after subsection (2) (2A) Notwithstanding the repeal of paragraph 102 of the First Schedule, the exemption of goods imported or purchased locally for direct and exclusive use in the implementation of projects under a special operating framework arrangement with the Government, shall continue for existing projects for the remaining period of the agreement.

The First Schedule to the Value Added Tax Act, Amendment of 13.

First Schedule to 2013, is amended No.

35 of 2013.

(a) in Section A of Part I by (i) deleting tariff numbers 8802.11.00, 8802.12.00, 8802.20.00, 8803.30.00, 8805.10.00, 8805.21.00 and 8805.29.00 and their respective descriptions appearing immediately after paragraph 39; (ii) deleting tariff numbers 8309.90.90 and its corresponding description appearing in paragraph 39 (3); (iii) deleting paragraph 45; (iv) deleting paragraph 47; (v) deleting paragraph 50; (vi) deleting paragraph 65; (vii) deleting paragraph 67; 107 2020 Finance No.

8 (viii) deleting paragraph 104; (ix) by inserting the following proviso in paragraph 108 "Provided that this paragraph shall, subject to paragraph 20 of the Second Schedule, be suspended ,f9F six months from the date of assent." (b) in Section A of Part I, by inserting the following new paragraph immediately after paragraph 110 111.

Maize (corn) seeds of tariff no.

1005.10.00.

(c) in Part II, by inserting the word "ambulance" immediately after the word "dental" appearing in paragraph 4.

(d) in Part II, by inserting the words "excluding helicopters of tariff numbers 8802.11.00 and 8802.12.00" at the end of paragraph 18.

14.

Amendment of the The Second Schedule to the Value Added Tax Act, Second Schedule 2013, is amended in Part A by to No.

35 of 2013.

(a) deleting paragraph 13; (b) deleting paragraph 18.

(c) inserting the following new paragraph immediately after paragraph 19- 20.

The supply of maize (corn) flour, cassava flour, wheat or meslin flour and maize flour containing cassava flour by more than ten percent in weight: Provided this paragraph shall be in operation for a period of six months from the date of assent.

PART IVEXCISE DUTY ACT 15.

Section 2 of the Excise Duty Act, 2015, is Amendment of amended by deleting the definition of "licence" and section 2 of No.

substituting therefor the following new definition 23 of 2015.

"licence" (a) in the case of excisable services, means the certificate of registration; (b) in the case of excisable goods, means the licence issued under section 17; or (c) in the case of any activity under section 15 (1) (e), means the licence required thereunder.

108 No.

8 Finance 2020 The Excise Duty Act, 2015 is amended by deleting Amendment of 16.

section 10 of No.

section 10 and substituting therefor the following new 23 of 2015.

section Adjustment for 10.

(1) Despite section 8, the inflation Commissioner may, with the approval of the Cabinet Secretary, by notice in the Gazette, adjust the specific rate of excise duty once every year to take into account inflation in accordance with the formula specified in Part 1 of the First Schedule.

(2) The notice under subsection (1) shall be laid before the National Assembly within seven days from the date of publication.

(3) The National Assembly shall, within twenty-eight sitting days of the receipt of the notice under subsection (2), consider the notice and make a resolution either to approve or reject the notice.

(4) The notice shall cease to have effect, if a resolution disapproving the notice is passed by the National Assembly.

17.

The First Schedule to the Excise Duty Act, 2015, Amendment of is amended the First Schedule to No.

23 of 2015.

(a) in paragraph 1 of Part 1 by (i) deleting the expression "10%" appearing in the description "Beer, Cider, Perry, Mead, Opaque beer and mixtures of fermented beverages with non-alcoholic beverages and spirituous beverages of alcoholic strength not exceeding 10%" and substituting therefor the expression "6%" by deleting the expression "10%" appearing in (ii) the second column against the description "Spirits of undenatured ethyl alcohol; spirits liqueurs and other spirituous beverages of alcoholic strength exceeding 10%" and substituting therefor the expression "6 %"; (b) by deleting paragraph 5 in Part II.

PART VTAX PROCEDURES ACT 109 2020 Finance No.

8 18.

The Tax Procedures Act, 2015, is amended by Insertion of a new inserting the following new section immediately after section 37D in section 37C No.

29 of 2015.

Voluntary Tax 37D.

(1) There is established a Disclosure programme to be known as the Voluntary Programme.

Tax Disclosure Programme which shall be for a period of three years with effect from the 1st January, 2021.

(2) For purpose of this section, "voluntary tax disclosure programme" means a programme where a person discloses the person's tax liabilities to the Commissioner for the purpose of being granted relief of penalties and interest on the tax disclosed.

(3) A person with a tax liability may apply to the Commissioner for relief in the prescribed form with respect to tax liabilities that accrued within a period of five years prior to the 1st July, 2020.

(4) A person granted relief under this section (a) shall not be prosecuted with respect to the tax liability disclosed under this section; and (i) where the disclosure is made and tax liability paid in the first year of the programme, a full remission of the interest and penalty; (ii) where the disclosure is made and tax liability paid in the second year of the programme, remission of fifty per cent of the interest and penalty; and (iii) where the disclosure is made and tax liability paid in the final year of the programme, remission of twenty-five per cent of the interest and penalty.

110 2020 No.

8 Finance An application under subsection (3) (5) shall be voluntary and disclose all material facts.

(6) Where the Commissioner is satisfied with the facts disclosed in the application under subsection (3), the Commissioner shall grant the relief applied for: Provided that the relief shall not result in the payment of a refund to the person.

(7) Where the Commissioner grants relief under subsection (6), the Commissioner shall enter into an agreement with the person setting out the terms of payment of the tax liability and the period within which the payment shall be made which shall not exceed one year from the date of the agreement.

(8) Where a person fails to meet the terms of the agreement under subsection (7), that person shall be liable to pay the full interest and penalty that had been remitted under the agreement.

(9) A person granted relief under this section shall not seek any other remedy including the right to appeal with respect to the taxes, penalties and interest remitted by the Commissioner.

(10) Where, before the expiry of the agreement between the Commissioner and the person, the Commissioner establishes that the person failed to disclose a material fact in respect of the relief granted under this section, the Commissioner may (a) withdraw any relief granted; (b) assess and collect any balance of the tax liability; or (c) commence prosecution under section 80.

111 2020 Finance No.

8 (11) A person aggrieved by a decision of the Commissioner under subsection (10) may appeal against the decision.

(12) This section shall not apply to a person if the person (a) is under audit, investigation or is a party to ongoing litigation in respect of the tax liability or any matter relating to the tax liability; Or (b) has been notified of a pending audit investigation by the or Commissioner.

(13) The disclosure of a tax liability under this section shall be confidential.

19.

The Tax Procedures Act, 2015, is amended by Insertion of a inserting the following new section immediately after new section 42B in No.

29 section 42A of 2015.

Appointment of 42B.

(1) The Commissioner may digital service tax appoint an agent for the purpose of agent.

collection and remittance of digital service tax to the Commissioner.

(2) An appointment under subsection (1) may be revoked at any time by the Commissioner.

PART VIMISCELLANEOUS FEES AND LEVIES ACT 20.

Section 7 of the Miscellaneous Fees and Levies Amendment of Act, 2016, is amended in subsection (3) by deleting section 7 of No.

paragraph (b) and substituting therefor the following new 29 of 2016.

paragraph (b) goods imported under the East African Community Duty Remission Scheme shall be charged import declaration fee at a rate of one point five per cent of the customs value.

112 No.

8 Finance 2020 21.

The Miscellaneous Fees and Levies Act, 2016, is Insertion of a amended by inserting the following new section new section 9A in No.

29 of immediately after section 9 2016.

Duty on goods for 9A.

Notwithstanding the import duties home use from an payable under section 110 of the East export processing zone enterprise.

African Community Customs Management Act, 2004, an additional duty at a rate of two point five per cent of the customs value shall be payable in respect of goods entered for home use from an export processing zones enterprise.

22.

The Second Schedule to the Miscellaneous Fees Amendment of and Levies Act, 2016, is amended the Second Schedule to No.

29 of 2016.

(a) in Part A by (i) deleting paragraph (xv) and substituting therefor the following new paragraph (xv) aircraft, excluding aircraft of unladen weight not exceeding 2,000kg and helicopters of heading 8802.11.00 and 8802.12.00.

(ii) deleting paragraph (xxii); (iii) deleting paragraph (xxiii); (iv) by inserting the following new paragraph immediately after paragraph (xxiv) (xxv) equipment, machinery and motor vehicles for the official use by the Kenya Defence Forces and National Police Service.

(b) in Part B (i) deleting paragraph (vi); (ii) by inserting the following new paragraphs immediately after paragraph (vii) (viii) currency notes and coins imported by the Central Bank of Kenya.

113 2020 Finance No.

8 (ix) equipment, machinery and motor vehicles for the official use by the Kenya Defence Forces and National Police Service.

PART VIITAX APPEALS TRIBUNAL Section 13 of the Tax Appeals Tribunal Act, 2013, Amendment of 23.

section 13 of No.

is amended in subsection (6) by inserting the words "or 40 of 2013.

documents" immediately after the word "appeal".

PART VIIIMISCELLANEOUS Section 2 of the Public Roads Toll Act is Amendment of 24.

section 2 of Cap.

amended 407.

by deleting the definition of the term "toll (a) collector" and substituting therefor the following new definition "toll collector" means a public toll collector appointed under section 4 and includes a private toll collector appointed under section 4B; (b) by inserting the following new definitions in proper alphabetical sequence "base toll rate" means the unit rate prescribed by the Minister under section 4A for the calculation of applicable tolls; "Fund" means the National Roads Toll Fund established under section 6A; "Minister" means the Cabinet Secretary for the time being responsible for matters relating to roads.

25.

Section 3 of the Public Roads Toll Act is Amendment of amended section 3 of Cap.

407.

(a) by inserting the following subsection immediately after subsection (1) (1A) Notwithstanding subsection (1), a private toll collector shall only levy toll and collect monies payable on a public toll road constructed 114 No.

8 Finance 2020 under an agreement entered into under section 4A.

(b) by deleting subsection (2) and substituting therefor the following new subsection (2) The stations specified in the first column of the First Schedule are declared to be transit toll stations for the public roads respectively set out in the second column.

(c) by deleting subsection (5) and substituting therefor the following new subsection (5) The toll in respect of every vehicle approaching and proceeding through a toll station shall be paid to the toll collector in such manner as may be prescribed by the Minister.

26.

Amendment of Section 4A of the Public Roads Toll Act is section 4A of amended Cap.

407.

(a) by deleting subsection (3); (b) by deleting subsection (4); (c) by deleting subsection (5).

27.

Section 4B of the Public Roads Toll Act is Amendment of amended section 4B of Cap.

407.

(a) by inserting the following proviso immediately after subsection (1) Provided that the agreement may prescribe alternative arrangements for the levying, collection and administration of tolls and management of toll infrastructure.

(b) by inserting the following proviso immediately after subsection (2) Provided that the Minister may prescribe the base toll rate in the agreement and permit the person referred to in subsection (1) to adjust, vary or otherwise revise the toll in accordance with an adjustment mechanism provided in the agreement.

28.

The Public Roads Toll Act is amended by Insertion of new inserting the following new section immediately after section on Cap.

407.

115 Finance 2020 No.

8 section 6 Establishment of 6A.

(1) The Minister responsible for Fund.

the National Treasury shall establish a Fund No.18 of 2012.

to be known as the National Roads Toll Fund under the Public Finance Management Act, 2042.

(2) All tolls, except transit tolls, collected by the persons appointed under section 4 shall be remitted to the Fund.

(3) The purpose of the Fund shall be to provide funds for the (a) proper functioning of toll roads and toll stations; and development, repair or maintenance (b) of roads as the Minister may direct, taking into account regional balancing.

(4) The Fund shall be administered in accordance with section 24 of the Public Finance Management Act, 2012, and the regulations made thereunder.

Section 8 of the Public Roads Toll Act is amended Amendment of 29.

section 8 of by Cap.

407.

(a) deleting the words "shall be guilty of an offence and liable to a fine not exceeding five thousand" appearing in subsection (1) and substituting therefor the words "commits an offence and shall upon conviction, be liable to a fine not exceeding fifty thousand."; (b) inserting the following new subsection immediately after subsection (2) (3) Notwithstanding subsections (1) and (2), the person with whom the Minister enters into an agreement under section 4A may collect the unpaid tolls from defaulters as a civil debt 116 No.

8 Finance 2020 recoverable summarily.

30.

Section 11 of the Capital Markets Act is amended Amendment of in subsection (3) by inserting the following new paragraph section 11 of immediately after paragraph (g) Cap.

485A.

(ga) license, approve and regulate private equity and venture capital companies that have access to public funds.

31.

Section 18 of the Capital Markets Act is amended Amendment of in subsection (1) by deleting the words "and paying section 18 of beneficiaries from collected unclaimed dividends when Cap.

485A.

they resurface".

Section 204A of the Insurance Act is amended in Amendment of 32.

section 204A of subsection (3) by inserting the expression "within thirty Cap.

487 days" immediately after the word "may".

33.

Section 5 of the Kenya Revenue Authority Act, Amendment of 1995, is amended by inserting the following new section 5 of No.

subsection immediately after subsection (2) 2 of 1995.

(2A) The Authority may establish an institution to provide capacity building and training for the better carrying out of its functions.

34.

Section 16 of the Kenya Revenue Authority Act, Amendment of 1995, is amended in subsection (1) by inserting the section 16 of following new paragraph immediately after paragraph No.

2 of 1995.

(b) (ba) any commission received by the Authority for collecting any revenue on behalf of a county government or government agency: Provided that such commission shall not exceed two per cent of the total revenue collected on behalf of the county government or government agency.

35.

Insertion of a The Kenya Revenue Authority Act, 1995, is new section amended by inserting the following new section 20A in No.

2 of immediately after section 20 1995.

Limitation of actions.

20A.

Legal action against the Authority shall not be instituted unless (a) it is commenced within three years 117 2020 Finance No.

8 after the act, neglect or default complained of; (b) in the case of continuing injury or damage, within six months after the cessation of the act; and (c) at least one month written notice specifying the particulars of the claim and intention to commence the action or legal proceeding has the upon been served Commissioner-General.

36.

Section 21 of the Kenya Revenue Authority Act, Amendment-of 1995, is amended by inserting the following new paragraph section 21 of immediately after paragraph (e) No.

2 of 1995.

(f) with respect to capacity building and training.

Section 35 of the Retirement Benefits Act, 1997, is Amendment of 37.

section 35 of amended by renumbering the existing provision as No.

3 of 1997.

subsection (1) and inserting the following new subsections (2) A trustee who fails to submit a copy of the actuarial report to the Chief Executive Officer by the due date specified in the regulations shall pay a penalty of one hundred thousand shillings.

(3) Where the report remains unsubmitted, the trustee, in addition to the penalty specified under subsection (2), shall pay a further penalty of one thousand shillings for each day or part thereof during which the report remains unsubmitted.

38.

Amendment of The Second Schedule to the Insolvency Act, 2015, Second is amended in paragraph 3 (1) by inserting the following Schedule to No.

new item immediately after item (g) 18 of 2015.

(h) all amounts that are held on behalf of the Kenya Revenue Authority by a person licensed under the Banking Act who has been appointed as an 118 No.

8 Finance 2020 agent for revenue banking services by the Commissioner at the point of receivership or liquidation of the bank or institution.

.