Prof. Njuguna Ndung’u is the Cabinet Secretary, National Treasury & Economic Planning

Prof. Njuguna Ndung’u is the Cabinet Secretary, National Treasury & Economic Planning. PHOTO[COURTESY]

The Finance Bill 2024, recently introduced in Kenya, proposes a series of tax reforms that will significantly affect businesses across various sectors. Here’s how these changes are expected to impact businesses owned by women, ranging from SMEs to larger enterprises:

Taxation of Digital Marketplace Operators

Women-owned businesses operating digital marketplaces or platforms will face new tax obligations. Non-resident operators will be taxed at 20%, while residents will face a 5% tax rate. This could increase operational costs for digital entrepreneurs, impacting profit margins.

VAT Changes

The bill removes VAT exemptions on financial services like credit card issuance and foreign exchange transactions. This may lead to increased costs for financial service providers, affecting businesses owned by women in the fintech and banking sectors.

Excise Duty Amendments

Introduction of excise duty on digital services provided by non-residents will affect online service providers, including those owned by women. Services such as money transfers and digital lending will now attract a 20% excise duty, potentially increasing service costs.

Income Tax Adjustments

The bill introduces withholding taxes on goods supplied to public entities and minimum top-up taxes for multinational group members. These changes could increase compliance burdens and administrative costs for affected businesses, including those led by women.

Deductions and Exemptions

While contributions to certain medical funds and affordable housing levies become deductible expenses, exemptions on insurance premiums are limited. This mixed bag of deductions and exemptions may require careful planning by women-owned businesses to optimize tax positions.

Operational Adjustments

Changes in tax procedures, such as extended timelines for KRA decisions and revised methods for computing statutory timelines, will require businesses to adjust their operational strategies. Compliance with integration requirements for real-time tax submissions could add to administrative overheads.

Sector-Specific Impacts

VAT changes in sectors such as tourism and manufacturing, including scrapped exemptions and increased VAT applicability, may affect businesses owned by women differently depending on their industry focus and operational scale.

The Finance Bill 2024 introduces sweeping changes that will affect businesses owned by women across Kenya. While some measures like deductible expenses for medical funds could be beneficial, increased taxes on digital services and reduced VAT exemptions pose challenges. Women entrepreneurs, particularly in digital and financial sectors, need to prepare for higher compliance costs and potential adjustments in pricing strategies to navigate these regulatory changes effectively.