Several legislative interventions that have affected the private sector came into force in 2021. As the year draws to a close, we look back at some of these interventions and their resultant impact.
The Finance Act, 2021 (the Finance Act) exempted resident persons from Digital Services Tax (DST). This was a relief for online platforms as this allowed such entities only to pay corporate income tax when they become profitable.
The Finance Act also stated that excise duty at the rate of 25% on imported glass bottles would not apply to glass bottles imported from any of the countries within the East African Community (EAC). This was a welcome move and would improve Kenya’s trade relationship with the countries in the EAC. It was also in line with the EAC objective of enhancing domestic, cross-border, and foreign investment in the EAC.
Further, the Finance Act increased excise duty on telephone and Internet data services from 15% to 20%, with the change inevitably increasing telephone and Internet data costs which Kenyans bore.
The Tax Laws (Amendment) (No.2) Act, 2020 reinstated the previous corporate tax rate of 30%, effective from January 1, 2021. In April 2020, the corporate income tax rate for resident companies had been reduced from 30% to 25% through the Tax Laws (Amendment) Act, 2020, to cushion taxpayers against the negative impact of the Covid-19 pandemic.
The Cabinet Secretary, National Treasury published an order in the Gazette, Legal Notice No. 206 dated 2 December 2020 amending the VAT rate back to the pre-Covid rate of 16% from 14% with effect from January 1, 2021.
On April 9, 2021, the Cabinet Secretary for Information, Communications and Technology, Innovation, and Youth Affairs published in the Kenya Gazette an amendment to the National Information Communications and Technology (ICT) Policy Guidelines, 2020 (the 2020 ICT Policy). The 2020 ICT Policy requires all companies providing ICT services to have at least 30% substantive Kenyan ownership. Companies registered to exclusively offer Business Process Outsourcing (BPO) Services were exempted from the local shareholding rule, a move seen to act as an incentive to attract foreign investment in the sector.
The Business Laws (Amendment) (No. 2) Act, 2021 was signed into law on 30th March 2021 to facilitate the ease of doing business in Kenya. Some of the key highlights include:
- The Law of Contract Act was harmonized with the Companies Act, 2015 by eliminating the requirement of a company seal to execute documents for companies. This made it easier to register online or file documents for companies.
- In light of the Covid-19 pandemic, various government agencies, including the Business Registration Service and the Capital Markets Authority (among other institutions), issued guidelines on conducting hybrid and virtual general meetings by companies.
- The Small Claims Court Act was amended to provide that all proceedings before the small claims court must be heard and determined on the same day or, if heard on a day-to-day basis, must be finalised within 60 days from the date of filing the claim.
- Harmonization of the date of remitting statutory deductions, i.e., NSSF, NITA, NHIF, and Pay as you Earn (PAYE), such that they are all submitted by the 9th of every month.
The Employment (Amendment) Act, 2021 introduced pre-adoptive leave that entitles an employee to one (1) month pre-adoptive leave with full pay where a child is placed in the continuous care and control of the employee.
The Central Bank of Kenya (Amendment) Act, 2021, brought digital lenders under the regulatory ambit of the Central Bank of Kenya (CBK). It is anticipated that CBK will rein in unscrupulous digital lenders employing unethical or illegal methods such as debt shaming, predatory lending, charging exorbitant interest rates, and unlawful sharing of defaulters’ data.