How Your Payslip Will Look Starting This Month

As a result of the Court of Appeal’s decision to permit the execution of the Finance Act, which would allow the government to retroactively apply all of its taxes to July 1, 2023, salaried workers will start receiving less pay this month.

The conservatory orders blocking the Act’s execution were withdrawn by the Court of Appeal on Friday, July 28. As a result, the Kenya Revenue Authority (KRA) is now able to collect the extra taxes in an effort to meet its goal of raising an additional Ksh211 billion in the 2023–2024 Financial Year.
This indicates that the mandatory housing levy and Pay As You Earn (PAYE) for high-income workers are among the new taxes that will go into force at the end of August.

The Export and Investment Promotion Levy, Value Added Tax (VAT) of 6% on petroleum goods, and Turnover Tax are additional taxes covered by the Act. Kenyans.co.ke examines the impact of the new taxes on your payslip.

What does “backdating taxes” mean?

The taxman will use retrospective application in an effort to backdate the taxes, which implies that the July deficit will be collected on the payroll for August.

All Kenyan employees are required under the Housing Levy to contribute 1.5% of their gross monthly income to the government’s Affordable Housing initiative. Employers, on the other hand, match the contributions and pay the same amount.

As a result, workers who have already received their monthly paycheck for July 2023 will be required to pay the housing levy for both months (3% of their gross monthly salary) and 1.5% for the following months.

For instance, a worker making Ksh50,000 per month in gross pay will contribute Ksh1,500 at the end of August and Ksh750 each of the following months.

What percentage of the employees’ paychecks will be taken off?

Along with the 1.5% Housing Levy, another tax item that will go into force is the increased PAYE, which added two additional rates: 32.5 percent for workers earning between Ksh500,000 and Ksh800,000 per month and 35 percent for those earning over Ksh800,000.

For instance, a worker receiving a gross pay of Ksh600,000 will have Ksh11,473 withheld due to the combined effects of the housing charge of 1.5% and the tax rate of 32.5%.

How exactly will the KRA carry it out?

The Kenya Revenue Authority (KRA) was chosen by the Ministry of Lands to serve as the collection agent once the Act went into effect. The taxman’s new goal for the 2023–2024 fiscal year is to raise an additional Ksh211 billion.

The KRA modified the iTax portal in accordance with the revised tax rates, according to an internal message distributed to its employees. According to reports, the taxman had asked the authorities to prepare the systems in case the conservatory orders were overturned.

The Finance Act of 2023’s new bands have been implemented with an update to PAYE. With effect starting on July 1, 2023, these adjustments have also been made to the consolidated payroll return. Please urge taxpayers to download the most recent P10 return from their profiles; the website has also been updated with the new return, according to a portion of a KRA internal memo.

How should we move forward?

Sen. Okiya Omtatah of Busia filed a lawsuit to prevent the Act from being put into effect. The senator said that Kenyans’ rights were being abused by the required pay deductions to fund President Ruto’s Affordable Housing initiative.

The High Court responded to his petition by issuing conservatory orders prohibiting the Act’s implementation, claiming that Kenyans would be unfairly taxed.

However, the State, led by Treasury Cabinet Secretary Njuguna Ndung’u and the Attorney General’s office, filed a motion with the appellate court to overturn the orders, claiming that the circumstance had put the government in crisis with regard to its attempts to generate money. The State was awarded victory by the Court of Appeal.

The petition will now proceed to a full trial, which will be considered by a three-judge bench made up of Justices David Majanja, Christine Meoli, and Lawrence Mogambi.

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