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Covid-19 Tax Reduction Now Law.

id : 100 Covid19   
posted by : Admin
 DOQ : 2020-05-22 12:13:11
   Admin
  
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Tax Laws (Amendment) Act 2020 (the Act) was assented to by the President on 25/05/2020.

Key changes include

- doubling tax free employment income
- increasing tax bands by about 40%
- reducing highest tax rate
- cutting by half most investment deductions
- widening withholding tax scope
- scrapping tax exemptions for parastatals.

EMPLOYMENT TAX

The amount of personal relief has been increased from Kshs.16,896 p.a to Kshs. 28,800 p.a.

The rate of tax in the highest bracket has been reduced from 30% to 25% and the income subject to tax in the highest bracket has been increased from Kshs. 47,059 to Kshs. 57,333.

PENSION BENEFITS

Pension withdrawals or from the NSSF before the expiry of 15 years from the date of joining the scheme has been aligned to new PAYE tax rates. On the other hand, any withdrawal from the same after the expiry of 15 years from the date of joining the scheme for amounts exceeding Kshs 1.2 million, has been reduced from 30% to 25%.

QUALIFYING INTEREST

Qualifying interest refers to interest received by a resident individual from commercial banks or a financial institution licensed under the Banking Act, the Central Bank of Kenya (CBK) and a registered Building society. Wht on qualifying interest is final.

The Act has expanded the definition to include all interest received by a resident individual. This is a positive development as it will encourage investment by individuals in various interest bearing instruments.


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