The Institute of Certified Public Accountants of Kenya (ICPAK) has proposed a 7% reduction in the top Pay As You Earn (PAYE) tax rate.
During the public hearing on the Finance Bill 2025. Stakeholders recommended lowering the top PAYE rate from 35% to 28% and increasing monthly personal relief from Ksh 2,400 to Ksh 3,000.
In addition, the body has proposed expanding the PAYE bands to make Kenya more competitive, increase disposable income, and spur economic growth, suggesting a study for comparative analysis with other jurisdictions.
ICPAK Submits Proposals on Finance Bill 2025
Regarding Income Tax Exemption Approval Period, ICPAK proposed the extension of the approval period from 60 to 90 days.
In their submissions, ICPAK officials argued that retaining the 60 days would help avoid confusion regarding the tax status of applicants during the interim phase.
On the Bill’s proposal requiring employers to apply all applicable deductions, reliefs, and exemptions before remitting PAYE, stakeholders recommended maintaining the current practice where relief is deducted from the computed PAYE arguing that the proposed change could lead to an increased tax burden for employees.
In addition, the stakeholders proposed the review of the proposed 5-year cap on tax loss deductibility to 15 years, with losses from investment allowances carried forward indefinitely, arguing that 5 years is too short for capital-intensive projects.
Also Read: CS Mbadi Reveals Sections of Finance Bill 2024 to Return in New Tax Proposals
ICPAK Proposals on Finance Bill 2025
Additionally, ICPAK recommended deletion of the proposal in the Bill to remove the 15% corporate tax incentive for local assemblers to encourage investment, long-term economic activity, and job creation in the local automotive industry.
Moreover, regarding the proposed taxation of real estate companies, the body mandated to regulate the accountancy profession recommended retaining the 15% preferential income tax rate for firms constructing at least 100 residential units.
According to their argument, this will support the affordable housing agenda and help prevent a surge in housing prices.
Also Read: Kenya’s Credit Outlook Revised to Positive, Rating Affirmed Ahead of Finance Bill 2025
Cabinet Approves Finance Bill 2025
The Cabinet approved the Finance Bill 2025 following a meeting chaired by President William Ruto at State House, Nairobi in April.
Key provisions include streamlining tax refund processes, sealing legal gaps that delay revenue collection, and reducing tax disputes by amending the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act.
Employers will also be required to automatically apply all eligible tax reliefs and exemptions when calculating Pay As You Earn (PAYE) taxes for employees.
At the same time, the Cabinet also gave nod to the Public Finance Management (Amendment) Bill, 2024.
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