The recently released Finance Bill introduces changes that will significantly raise the cost of doing business in Kenya, particularly impacting banking services. VAT exemptions on various banking services are being removed, leading to increased expenses for both businesses and consumers.
VAT Imposed on Banking Services
Under the new regulations, VAT will now be applied to a range of banking services, including advances, credit granting, cheque handling, processing, clearing, settlement, and the issuance of credit and debit cards. Additionally, VAT will affect telegraphic money transfers, foreign exchange transactions, and the management of unit trusts or collective investment schemes registered by the Capital Markets Authority.
Impact on Businesses and Individuals
These changes are expected to burden businesses and individuals relying on banking services, resulting in higher costs and potentially affecting profitability. Consumers may face increased fees and charges for various transactions, adding to their financial strain.
Broadening the Tax Base
The removal of VAT exemptions on banking services aims to broaden the tax base and enhance revenue collection. However, it also underscores the challenges faced by businesses amidst rising operating costs and economic uncertainty.
Requirement for KRA PINs
The Finance Bill introduces several changes, including the mandatory requirement for Kenyans to provide their Kenya Revenue Authority (KRA) PIN for various transactions. This requirement extends to registering remote employees, conducting business transactions with government ministries and agencies, registering mobile cellular Pay Bill and Till Numbers, and engaging in online business activities.
Importance of KRA PINs
KRA PINs are essential for various transactions, including business name and company registration, trade licensing, importing goods, customs clearing, and forwarding. They are also necessary for electricity connections, approval of development plans, water deposits, and membership registration in professional bodies.
Enhancing Accountability and Transparency
Although requiring KRA PINs may add an extra step to transactions, it serves to bolster accountability and transparency in financial dealings, contributing to a more robust regulatory environment.
