In the wake of a landmark Court of Appeal decision declaring the Finance Act 2023 unconstitutional, the Federation of Kenya Employers (FKE) has called on the Kenya Revenue Authority (KRA) to provide immediate guidance on tax remittance procedures.
The ruling, delivered on July 31, 2024, has left businesses across Kenya in a state of uncertainty as they approach the deadline for July 2024 tax payments.
In an open letter addressed to the KRA Commissioner General on August 9, 2024, FKE Executive Director and CEO Jacqueline Mugo highlighted the pressing need for clarification. “Our members and indeed all taxpayers in Kenya are unable to remit taxes in accordance with the Judgment for reasons that the Kenya Revenue Authority (KRA) has not yet configured its systems to comply with the court of appeal Judgment,” Mugo stated.
The Court of Appeal’s decision effectively nullifies several key provisions of the Finance Act 2023, including changes to VAT rates on petroleum products, new income tax brackets, and regulations surrounding electronic invoicing. This reversion to previous tax laws has left many businesses unsure of their tax obligations.
Mugo emphasized the urgency of the situation, noting that August 9 marked the deadline for July 2024 tax remittances. “Our members may face penalties if KRA does not immediately address this concern,” she warned.
The ruling has far-reaching implications for Kenya’s tax landscape. It overturns the High Court’s previous decision regarding 18 sections introduced to the Finance Bill on the floor of the House, citing a failure to meet public participation thresholds. Additionally, the Court found fault with Parliament’s process for addressing public input on the bill.
While the Affordable Housing Levy remains in force due to separate legislation, many other tax provisions are now in flux. The reversion to tax laws as amended by the Finance Act 2022 means significant changes in VAT rates, withholding tax deadlines, and income tax brackets.
