The year 2022 saw the introduction of several legislative and regulatory updates. Similarly, Kenya launched some notable policies and strategies whose implementation will impact both the private and public sectors.
As 2022 draws to a close, we look back at some of the key legislative and policy measures that came up, some of which were covered under Vellum.
❖ Central Bank of Kenya (Digital Credit Providers) Regulations, 2022
On March 21, 2022, CBK announced the publication of the Regulations which provide for the licensing and oversight of Digital Credit Providers (DCPs). The Regulations and strict measures will help curb complaints by a section of Kenyans who use online platforms to get quick loans and have, in one way or another, felt harassed by some of the Digital Credit providers in the country. Read more
❖ Data Protection Regulations
Three data protection regulations under the Data Protection Act 2019 (DPA) came into force this year. These include the Data Protection (General) Regulations, 2021; the Data Protection (Registration of Data Controllers and Data Processors) Regulations, 2021; and the Data Protection (Compliance and Enforcement Regulations), 2021 (the “Regulations”).
The Regulations guide how personal data is processed by fully operationalising and giving effect to the DPA. In this regard, the Regulations set out procedural guidelines that must be adhered to by data controllers and data processors as they interact with personal data. Data processors and controllers who meet the prescribed thresholds must register with the Office of the Data Protection Commissioner. Read more
❖ Employment (Amendment) Act, 2022
Employers are prohibited from requiring any clearance or compliance certificates from prospective employees unless the employer issues the employee with an offer of employment.
❖ Copyright (Amendment) Act, 2022
It provides for sharing revenue from ring back tunes between the artists/copyright holders and the telecommunications companies. Premium rate services are now entitled to 8.5 percent; telecommunication operators 39.5 percent; and the artist or owner of the copyright is entitled to not less than 52 percent of the revenue.
❖ The Finance Act, 2022
Exemption of non-resident digital services providers
Non-resident persons with a physical presence in Kenya have been exempted from paying digital service tax set at 1.5% of the transaction value. This was a relief to non-residents with a physical presence in Kenya who are already subjected to corporation tax on the income derived from digital platforms. The exemption serves to prevent double taxation of the income derived from digital platforms and creates a level playing field with resident companies who are not subjected to digital service tax.
Capital Gains Tax rate
The capital gains tax rate (CGT) has increased from 5% to 15%. However, where a firm (certified by the Financial Centre Authority) invests five billion shillings in Kenya and the transfer of such investment is made after 5 years, the applicable CGT rate will be the rate that was prevailing at the time the investment was made.
The country-by-country tax reporting requirement
Entities in Kenya that are members of a multinational enterprise group (MNE) whose annual turnover is at least Ksh 95 billion are required to submit returns to the Kenya Revenue Authority (KRA). The returns consist of a country-by-country report (CbCR), master file, and local file. This filing requirement is consistent with the OECD’s base erosion and profit shifting (BEPS) Action 13 on country-by-country (CbC) reporting. It covers Kenyan-headquartered MNEs and subsidiaries and branches of MNEs with a taxable presence in Kenya.
Employee Share Option Plans (ESOPS)
The Finance Act 2022 amended the formula for calculating the value of the benefit derived from an ESOP scheme run by an organization. The amendment changed the point at which the benefit accrues to the employee from the date “the option is granted by the employer” to the date “when the employee exercises the option.” Previously, the difference between the offer price and the market price was computed on the date the employer granted the option.
The amendment considers the change in the value of shares over time. Thus, taxing the benefit on the actual cost to the employer as at the date the benefit crystallizes.
Annual Inflation Adjustment
The KRA Commissioner General has been empowered to exempt specified products from inflation adjustment after considering the circumstances prevailing in the economy in that year.
❖ Designation of critical infrastructure
In January 2022, infrastructure in the telecommunications sector, including voice/data communication, internet connectivity, domain and IP management, and data and information management, was designated as critical infrastructure. The designation of critical infrastructure gives investors in the sector the confidence to continually improve their infrastructure and service delivery, knowing that their systems and equipment are safe.
Policies and strategies
❖ National Cybersecurity Strategy
Kenya developed its first cybersecurity strategy in 2014. Significantly, the 2014 strategy culminated in the development of the 2022 National Cybersecurity Strategy. The latter gives guidance for a coordinated approach in the execution of cybersecurity operations in Kenya.
The strategy combines good governance with several measures and interventions to develop the bases and pillars for effective cybersecurity for the public and private sectors. The strategy also offers a framework for defending and safeguarding Kenya’s cyberspace supported by strategic pillars. Further, it also includes a matrix for its implementation, which lists the tactical actions connected to its Strategic Pillars. Read more
❖ Kenya National Digital Master Plan 2022-2032
The Kenya National Digital Master Plan 2022-2032 is a sequential progression of the Master Plan 2014-2017, the blueprint for leveraging and deepening the contribution of ICT to accelerate economic growth. It was officially launched during the annual ‘Connected Kenya summit 2022’. The 2022-2032 Master Plan has been conceptualised to streamline ICT projects across the national and county governments and provides a resource mobilization strategy to guide ICT investors. Read more
❖ Central Bank Digital Currency
The Central Bank of Kenya (CBK) released a discussion paper on a Central Bank Digital Currency (CBDC) around the possible introduction of a digital currency in the country. CBDC is a digital currency issued by the central bank and intended to serve as a legal tender. It is mainly developed on blockchain technology and aims to complement and serve as a digital alternative to paper money. It is the same as fiat currency and is exchangeable one-to-one with physical cash. As the digital equivalent of banknotes and coins, it offers a new platform for holding and exchanging money. Read more
- The Bottom Up Economic Transformation Agenda 2022-2027
President William Ruto’s plan to transform Kenya’s economy is anchored in the Kenya Kwanza Manifesto that sets out the Bottom up economic transformation plan. The core pillars of the plan focus on five sectors; Agriculture, MSME economy, Housing and settlement, Healthcare, and Digital superhighway and creative economy.