Highlights of the Finance Bill 2023: Tax changes and proposals by Kenya Kwanza government

  • 8 May 2023
  • 5 Mins Read
  • 〜 by Kennedy Osore

The Finance Bill 2023 is the first fiscal legislative proposal under the Kenya Kwanza administration, aimed at implementing the Bottom Up Transformation Agenda.

The Kenyan economy is expected to maintain a 6.1% growth rate over the medium term, with leading indicators showing strong performance in Q1 of 2023.

The projected revenue collection for FY 2023/24 is Ksh. 2.8936 trillion, an increase from the previous year. Below are some of the proposed changes highlighted in the Finance Bill 2023 to support revenue collection efforts.

Income Tax

  • Digital asset tax

The Bill proposes implementing a digital asset tax that must be paid on any income earned from the transfer or exchange of digital assets. The definition of digital assets includes cryptocurrencies such as Bitcoin, and non-fungible tokens (NFTs). The tax rate proposed for digital asset transactions is 3% of the exchange or transfer value. The responsibility of deducting the digital asset tax and sending it to the Kenya Revenue Authority (KRA) lies with the individual who owns the platform or facilitates the exchange or transfer of digital assets. They are required to remit the deducted amount to KRA within 24 hours of making the deduction.

The introduction of the digital asset tax signifies the government’s increasing recognition of digital assets as a legitimate source of income. It also shows the government’s efforts to regulate and tax this emerging sector, which has been largely unregulated thus far.

  • Post-retirement medical fund relief

If a resident individual can demonstrate that they have made contributions to a post-retirement medical fund during a given income year, they will be eligible for a personal relief known as post-retirement medical fund relief. The relief will be either 15% of the amount contributed or a maximum of KSh60,000 per year, whichever amount is lower.

The main objective of this proposal is to encourage individuals to enrol in voluntary post-retirement medical schemes. The uptake of these schemes has been relatively low since the introduction of the Post-Retirement Medical Fund (PRMF) Regulations in 2018, which permitted pension schemes and employers to establish medical funds for their members or employees to save for post-retirement healthcare insurance.

  • Personal income tax

Schedule 3 of the Income Tax Act is proposed to be amended to introduce a graduated Pay As You Earn (PAYE) tax rate of 35% for those earning KSh 500,000 and above, up from the current 30%.

  • Digital content monetization

The Bill seeks to introduce a tax on digital content monetization which would impact digital content creators, influencers, and online entrepreneurs generating revenue from such activities. Digital content monetization includes offering electronic entertainment, social, educational, artistic, or other materials in exchange for payment. The proposal suggests that payments related to digital content monetization should be subject to a 15% tax. The main objective of this proposal is to increase government revenue by tapping into the fast-growing digital economy in Kenya.

  • Sales promotion, marketing, and advertising services payments

A 5% withholding tax will be charged on sales promotion, marketing, and advertising services for payments that exceed Ksh. 24,000. As a result, service providers are likely to increase their fees for these services. Additionally, entities that pay for these services will be withholding tax agents responsible for remitting the excise duty.

Excise Duty

  • Adjustment for inflation

The Bill proposes to repeal the provision that gives the Commissioner the authority to adjust the specific rate of excise duty annually, taking inflation into account.

  • Payment of excise duty within 24 hours

As per the Bill, the Commissioner has the authority to issue a notice in the Gazette requiring taxpayers in any particular sector to remit the excise duty collected on specific excisable services within 24 hours after the close of transactions for the day. This provision may cause inconvenience and cashflow challenges for taxpayers as they will have to remit the excise duty within a shorter time frame.

  • Excise duty on fees for mobile money transfer services provided by payment service providers and cellular phone service providers

The excise duty on fees for mobile money transfer services provided by payment service providers and cellular phone service providers will rise from 12% to 15%. The probable outcome of this change would be a reversal of the progress made towards financial inclusion as it will become costlier to conduct business transactions and make payments through mobile money services.

  •  Advertisements of alcoholic beverages, betting, gaming, lotteries, and prize competitions on television, print media, billboards, and radio stations

These will be subject to excise duty at 15%. This will likely result in an additional tax burden for advertisers in these industries, leading to an increase in advertising costs. The increase in cost may be passed on to consumers, ultimately leading to a rise in the prices of the advertised products or services. The proposal is expected to have a negative impact on the advertising industry and businesses that rely on it, as the increased cost of advertising may deter companies from promoting their products or services.

  • Remittance of excise duty within 24 hours

The Bill grants the Commissioner the power to publish a notice in the Gazette, mandating taxpayers in a specific industry to remit the excise duty collected on certain excisable services within 24 hours of the close of daily transactions. The Commissioner has broad discretion and can impose this 24-hour remittance requirement on any relevant sector. 

Tax Appeals Tribunal Act

  • ‘Pay to Play’ at the Tax Appeals Tribunal 

To file an appeal at the Tax Appeals Tribunal, a party other than the Commissioner must provide a deposit or security equivalent to 20% of the disputed tax. In the previous budget cycle, a proposal was introduced to require a 50% deposit, but it was abandoned. Taxpayers argued that the deposit requirement was discriminatory and would prevent taxpayers with limited resources from accessing the justice system if they were unable to meet the deposit requirement. Taxpayers also argued that the deposit requirement unfairly placed the burden solely on them, as KRA would be exempt from the same requirement in cases where the Commissioner appeals a TAT decision, particularly regarding tax refunds.

Miscellaneous Fees and Levies

  • Export and investment promotion levy 

A levy called the export and investment promotion levy, will be charged on all goods listed in the Third Schedule and imported for home use. The purpose of this levy is to generate funds for enhancing manufacturing, increasing exports, generating employment, reducing foreign exchange expenditure, and promoting investments. 


  • Deductions into the National Housing Development Fund

Each employer must contribute 3% of their employees’ monthly basic salary to the National Housing Development Fund. In addition, employees must contribute 3% of their monthly basic salary. The combined amount of employer and employee contributions should not exceed 5,000 shillings per month. Employees who are not eligible for affordable housing have four exit routes after seven years of contribution or reaching retirement age, whichever comes first:

  • Transferring contributions to a Retirement Benefits Authority registered pension or retirement scheme;
  • Transferring contributions to a person who is registered and eligible for affordable housing under the National Housing Development Fund; or
  • Transferring contributions to a spouse or dependent children; or
  • Receiving contributions in cash.

Next Steps

The Finance Bill’s publication period was shortened from seven days to six days, which is the required period under the Standing Order. This was done to expedite the Bill’s passage as Parliament was proceeding for a long recess starting Friday, May 5, 2023. After the Bill’s first reading on May 4, 2023, the Finance Committee plans to have a working retreat in the upcoming week to examine the Bill. During this retreat, they will be meeting with government agencies such as KRA and the National Treasury, among others.

To accelerate the Bill’s progress, public participation will be limited to essential stakeholders such as KEPSA, KAM, and others, with a date to be determined by the Finance Committee following their meetings with the government agencies.