Kenya's Tax Relief Measures Responding to the COVID-19 Pandemic

Francis Ugango, Partner Crowe Erastus & Co
Nairobi – March 26, 2020

The Kenya government on 25 March 2020 has issued a range of measure to relieve businesses and its citizens during the SARS-CoV-2 (COVID-19) pandemic. The measures aim to protect jobs, provide certainty to employees and employers, businesses and general public. They include:-

Value Added Tax rate has been reduced to 14% from 16% effective 1 April 2020.

For employees, Pay As You Earn tax has been exempt 100% for incomes up to KES 24,000 ($240) and the higher tax rate of 30% reduced to 25%.

For resident corporate businesses the corporate tax rate has been reduced to 25% from the previous 30%.

Micro, small businesses and Medium enterprises in the Turnover Tax bracket will have the Turnover Tax rate reduced from 3% to 1%.

For senior citizens (elderly), Orphans and vulnerable, KES 10 billion has been set aside for cash transfers as a cushion from adverse COVID-19 effects.

The Central Bank of Kenya has reduced the Central Bank Rate (CBR) by 1 point to 7.25% which targets banks to reduce lending rates. Further the bank cash ratio has been lowered by 1 point to 4.25% to avail additional liquidity and stimulate further lending by banks especially to small businesses.

Temporary suspension from listing with Credit Reference Bureaus for businesses and persons whose loans fall in arrears effective 1 April 2020.

Other measure to provide businesses with much needed cash include expediting Value Added Tax refunds by Kenya Revenue Authority (at least 10 billion in next 3 weeks) and payment of verified pending bills by government (at least 13 billion in next 3 weeks)