AMMENDMENTS OF THE FINANCE ACT 2016 – PART VI – INCOME TAX PROVISIONS
  AREA AMENDED PREVIOUS PROVISION AMENDMENT EFFECT EFFECTIVE DATE
1 TAX BURDEN
i) Personal Relief reduced Personal Relief was Kshs.1,162/- ( Kshs.13,944/- p.a ) Personal Relief will be Kshs.1,280/-( Kshs.15,360/-p.a ). This is a 10% increase in personal relief leading to an increase in net income for the individuals. 1/1/2017
ii) Tax bands Existing tax bands for all employees is as follows;                                                           -First KShs. 121,968 @ 10%
Next KShs.114, 912 @ 15%
Next KShs.114, 912 @ 20%
Next KShs.114, 9120 @ 25%
Above KShs. 466,704 @ 30%
Expanded tax bands for all employees and The revised rates oftax shall be as;                                                           -First KShs. 134,164 @ 10%
Next KShs.126,403 @ 15%
Next KShs.126,403 @ 20%
Next KShs.126,403 @ 25%
Above KShs. 513,373 @ 30%
This will lead to a reduction in income tax payable for individuals leading to an increase in net income for the individuals. 1/1/2017
iii) Bonus & Overtime for  Low income earners exempted The tax was being based on the employment income including the bonus and overtime allowances and taxed to scale Bonuses, overtime and retirement benefits paid to individuals whose income does not exceed KES 10,164 per month between July and December 2016 and KES 11,180 per month effective 1 January 2017 is exempt from tax. Low income earners as per the definition will not pay tax on Bonuses and and overtime. They will therefore not qualify to pay tax despite earning extra on bonuses and overtime income. 1/1/2017
 
2 Mortgage Interest Previously,Mortgage interest deduction was only allowed to a maximum of KES 150,000 p.a (or KES 12,500 per month) Mortgage interest deduction allowable has been increased to KES 300,000 p.a (or KES 25,000 per month) Individuals paying for mortgage will get a higher relief on the interest and can claim up to kshs 300,000/= from January 2017 1/1/2017
 
3 Rental Income Rental income was being charged at 30% The amendment has set a minimum amount of the annual rental income subject to income tax at KES 144,000 per annum translating to a minimum monthly rental income of KES 12,000. Landlords getting rental income below Kshs 12,000 9/6/2016
 
4 Penalties & Interest The Commissioner had powers to waive  penalty only payable by a person The Commissioner may subject to certain conditions, remit, in whole or in part, any penalty or interest payable by a person Interest accrued on the principle plus penalty will be eligible for waiver from 1st January  2017 1/1/2017
 
5 WHT penalty Withholding tax rate is 5% while for wht-vat is 6%
Was 10% of amount not witheld
The witholding rates for services and VAT will not change but the penalty will be;
20% of amount not witheld
There will be an increased penalty for WHTVAT defaulters from 10% of amount payable to 20% 1/1/2017
 
6 KRA Tax refunds Refunds were being carried forward for a maximum of 10 years.The tax payer deducted credits against the next years profit. With effect from 1 January 2017, the Commissioner is required to respond to taxpayers’ applications for refund within 90 days of receiving the application Applications for waivers will  be responded too faster by the Commissioner of Domestic Taxes 1/1/2017
 
7 Tax Amnesty Resident persons earning taxable income outside Kenya were being taxed at the graduated scale rate. A person who earned taxable income outside Kenya shall be eligible for a tax amnesty provided that they submit their returns and accounts for the year of income 2016 by 31 December 2017 People who earn incomes outside of kenya wil be shielded from double taxation subject to the terms given. 1/1/2017