The KPMG tax consulting firm has analysed that the reversal of COVID-19 tax cushioning measures is expected to lead to complications in accounting for company tax filings for the year.
The firm has reviewed the proposals carried in the Tax Laws (Amendment) [No.2] Bill, 2020.
Firms who have since filed returns at the prevailing rate of 25 percent will for instance be required to make new provisions to cover for the looming change in the rate of tax to 30 per cent effective January 1, 2021.
“The proposed provision will introduce challenges during the computation of the 2020 annual tax liability and filing of tax returns given that it is expected that resident companies will be required to apportion their income prior to determining the annual tax position,” KPMG states in the report.
According to the report the provision also appears to retrospectively change the application of the 25 percent rate especially for taxpayers who have already filed their tax returns based on the 25 per cent tax rate.
Further, the audit firm observes the proposed amendments will serve to increase the burden of tax on entities under the current tough operating environment with firms already remitting a higher 15 per cent of dividends paid out to non-residents.
“The proposed increase in the corporation rate will mean that despite the current economic challenges, companies will need to dig deeper to settle their tax liabilities,” the report adds.
However, Kenyans earning gross salaries below Ksh.24,000 will mark gains from the amendments which intend to leave them exempt from paying income tax beyond the December 31, 2020 deadline.
Additionally, manufacturers of supplies consumed in aid funded project will mark relief as they become exempt from value added tax (VAT) upon the bill’s adoption.
The National Assembly is expected to give the final nod to the desired tax reversals on Tuesday next week.
Earlier this week, the National Assembly Committee on Finance and National Planning held public consultations as part of its review of the bill after which it will make recommendations to MPs on the adoption or retention of cushioning measures.
The committee is facing pressure to retain the measures alongside new proposals to reverse past tax hikes.
