2010 KENYA Budget 101; For Your Information

Being Overly buzy has made this random Budget Post come waaaaaay late… but it doesnt harm… here are highlights completely summarized…

GENERAL PROVISIONS

Income Tax (PAYE, NSSF, NHIF)

  • Income tax amnesty under certain circumstances for
    Kenyans in diaspora up to the year ending 31st December 2010.
  • Advance tax for PSV drivers and conductors abolished.
  • 20% late payment penalty on PAYE removed.
  • Taxpayers can now object to the Commissioner in respect of PAYE penalties.
  • Taxpayers filing PAYE returns online on a monthly basis not required to file quarterly returns.

Corporate Tax

  • Interest-free loans will be deemed to accrue interest at the Treasury Bill rate for thin-capitalisation purposes.
  • The definition of related parties now expanded to include individuals.
  • Rental of aircraft engines from non-residents exempted from withholding tax.
  • Lease payments to residents in respect of assets exempted from withholding tax.
  • 20% late payment penalty on withholding tax removed.
  • 2% monthly interest will no longer be applicable on penalties.
  • Farm works capital deductions increased to 100%.
  • Tax deducted from petroleum service contractors to be remitted by 20th of the subsequent month.
  • Taxpayers can now object to the Commissioner in respect of withholding tax penalties.
  • Double Tax Treaties with EAC partner states, Mauritius, Iran and Kuwait have been concluded and await the modalities for putting into operation.

VAT

  • Withholding VAT by Ministry of Roads reduced from 16% to 8%.
  • All VAT refund claims submitted and audited by 30 June will be refunded by
    31 July.
  • VAT refunds for low risk taxpayers to be paid within 120 days.
  • All taxable supplies to gazetted exporters now standard rated.
  • Task force set up to come up with a new VAT Act by June 2011.
  • Refunds of input VAT on goods which were exempt and subsequently became taxable now available.
  • Refund of Input VAT incurred up to 24 months prior to registration VAT now available.
  • Transformers, fluorescent bulbs and other specified energy saving devices exempt from VAT.
  • Landing and parking services provided for aircraft are exempt from VAT.
  • Aluminium milk containers now subject to VAT.
  • The Commissioner empowered to gazette and authorize specific persons to carry out electronic formalities and procedures for use of electronic tax system.

Customs Duties

  • Increase of the East African Community Common External Tariff (CET) from 10% to 25%;
    • Aluminium conductors and cables.
  • Reduction of the CET from 10% to 0%:
    • Dries;
    • Petroleum coke, not calcined;
    • Stamping foil;
    • Pigments used in the manufacture of paint;
    • Flat-rolled products of iron and/or non-alloy steel of width of less than 600mm;  and
    • Felt paper and paperboard.
  • Reduction of the CET from 25% to 10%:
    • Gas cookers and other cookers of dual power sources; and
    • Cooking appliances and plate warmers for gas fuel or for both gas and other fuels.
  • Reduction of the CET from 25% to 0%:
    • Flat-rolled products of iron and/or non-alloy steel coated or plated with tin of a thickness of 0.5mm or more; and
    • Woven cloth, of stainless steel.
  • Exemption of import duty:
    • Lamps/bulbs made using LED technology woven cloth, of stainless steel; and
    • Parent stocks used in the poultry industry.
  • Duty remissions:
    • Specific inputs which attract duty and which are used in the production of duty free finished products;
    • Textile coated with gum used in the manufacturing of outer book covers;
    • Looped pile fabrics of gum boot manufacturing;
    • Barley and malt; and
    • Other Copper wire of copper alloys.
  • Extension of a 35% or US$ 0.20 per kg on imported used clothing for 1 year.
  • Extension of application of CET rate of 25% on imported cement.
  • Reduction of Import duty on wheat grain from 35% to 10%.
  • Reduction of Import duty on rice from 75% or US$ 200 per tonne to 35%.

Excise Duties

  • Excise duty on malt beer increased from KShs 54 per litre to Kshs.65 per litre.
  • Excise duty on non-malt beer increased from Kshs.45 per litre to Kshs.55 per litre.
  • Introduction of duty at KShs 120 per litre or 35% whichever is higher on denatured spirits.

Education and Health

  • KShs 9b allocated to free primary education.
  • KShs 16.2b allocated to free secondary education.
  • This is an additional KShs 2 billion allocated to free primary and free secondary tuition.
  • 300 new computers for schools in each constituency.
  • KShs 1bn to expand the 26 technical training institutions so as to increase the admission levels.
  • Recruitment of 2,000 tutors on contract terms in village polytechnics.
  • KShs 640m to increase training in polytechnics and universities.
  • KShs 560m for information, science and technology colleges including the upgrade of KSTC through funding from the Royal Danish Embassy.
  • Recruitment of 35 nurses, 10 public health officers, 5 community health workers per constituency.

Agriculture and environmental conservation

  • Improve agri-business through encouraging value added output.
  • KShs 150 million will be used to construct slaughter houses in West Pokot, Wajir and Kajiado. These will be managed by the farmers through Cooperatives.
  • KShs 250 million will be used to construct 10 slaughter houses countrywide to cater specifically to the local market.
  • KShs 175 million will be used to construct 5 mini leather processing factories as well as rehabilitating 2 existing ones.
  • 100 veterinary officers will be hired 20 for each ASAL district.
  • 180 cars will also be distributed in these districts to enhance these activities.
  • KShs 400 million for fixed maize dryers.
  • KShs 360 million for 30 mobile maize dryers.
  • KShs 525 million to purchase 15 rice milling plants.
  • 6 extension officers to be deployed per constituency.
  • 300 vehicles to be purchased to facilitate extension services.
  • Rural road maintenance – KShs 5.7 billion allocation at KShs 27 million per constituency.
  • Promote warehouse receipting as well as setting up a commodity exchange that will trade in these warehouse receipts.

 Telecommunications and technology

  • KRA Online:
    • Integrated tax system;
    • Automated Cargo tracking; and
    • Automated Valuation Database System.
  • Education:
    • 1.3B toward purchase of 300 computers per constituency; and
    • 560M to upgrade 14 colleges throughout the country.
  • Ports:
    • Single Window Port Community-based system.
  • ASAL Areas:
    • 200M toward implementation of an electronic based solution to aid in animal tagging for traceability and disease control.
  • No mention of Telecommunications.

Capital Markets

  • Amendments to the Capital Markets Authority Act will be introduced to facilitate the Demutualisation of the Nairobi Stock Exchange.
  • Demutualisation expected to result in the listing of the stock exchange to allow the public to own stock in the exchange.
  • Demutualisation expected to boost investor confidence, which declined due to the collapse of four brokerage firms.

Financial sector

Banking

  • Banking Act to be amended to raise the threshold of core capital that banks are allowed to invest in mortgage finance from 25% to 40%.
  • Banking Act to be amended to give the Deposit Protection Fund board the power to hold and sell unrealizable securities after winding up an institution.
  • Enhanced supervision by the regulator by giving more powers to the Central Bank of Kenya to act on adverse inspection or audit reports on the banks.
  • Microfinance Act to be amended to facilitate use of third party agents by Deposit Taking Microfinance Institutions.
  • Wording in the Central Bank of Kenya Act to be amended by deleting the word “interest” and substituting it with the word “return” to accommodate Islamic banking products.
  • Central Bank Act to allow CBK to share or disclose information obtained from surveillance of authorized foreign exchange bureaus with authorized agents.
  • Business bills reforms expected in 2010 – Banking Bill 2009, the Companies Bill 2010, Insolvency Bill 201, Deposit protection bill 2010 and National Payment Bill 2010.

Insurance

  • Third party injury claims under Motor Vehicle Third party risks to be done under a structured compensation scheme similar to the one in the Work Injury Benefits Act.
  • Insurance Act to be amended to expand ownership of an insurance agency business to East Africa community citizens.
  • Directors of insurance companies which default in remitting statutory contributions to be severally and jointly liable for payment of outstanding contributions together with the applicable interest.

Property Market

  • Penalty for lack of proper stamp duty stamp reduced from 25% to 5%. Penalty also capped at principal amount of duty.
  • Stamp duty fees on mortgages, charges and debentures reduced from 0.2%
    to 0.1%.
  • Penalty for outstanding land rent reduced from 2% per month to 1% per month. Amnesty also provided for land rent penalties accumulated and up to 30th June 2010.
  • Mortgage finance companies allowed to operate current accounts.
  • Capital threshold that banks allowed to invest in mortgage finance increased from 25% to 40%.

Infrastructure

  • An infrastructure spend of KShs 182 billion means KShs 30 billion or 20 percent up from the past year. All sub sectors appear to be winners of this increase.
  • Roads: KShs 78.6 billion is going to be spent on roads, 34% up from last year, of which Ks 700 million for Voi-Taveta road improving the trade connection from Mombasa port to Northern Tanzania; Isiolo will be opened up for KShs 4.2 billion, finally linking fully to Ethiopia with a bitumen road and unlocking the potential for trading with Ethiopia further; KShs 23.5 billion of road maintenance to get the roads in motorable condition.
  • Energy: KShs 34.1 billion is to fund energy sector development. Focus on renewable and affordable sources of energy, less dependency on hydro power. Procedural and licensing impediments will be removed to increase attractiveness for private investors. At least KShs 11.6 billion of the KShs 34.1 billion will be spent to add about 800MW to the installed capacity by 2014, mainly from geothermal power.
  • Ports: Efforts to position Mombasa as a preferred port and regional hub include acceleration of the Single Window Port Community – based System implementation for faster and competitive clearance of cargo, and enabling larger vessels to dock.
  • Railways: The designs of the standard gauge double line Mombasa – Malaba railway should be completed by the last quarter of 2010/2011, as should the construction of the Nairobi commuter backbone railway for KShs 1.9 billion.

Environment

  • Carbon credit investment framework to be brought into place. 

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