Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
More tax for foreign suppliers, imported scrap metal dealers
The new law will require buyers of scrap metal and State procuring entities to deduct a withholding tax of 5 percent and remit it to the taxman before settling the supplier’s bill.
Offshore suppliers servicing orders by public agencies in Kenya and imported scrap metal sellers will now pay withholding tax (WHT), in addition to value-added tax (VAT), on their earnings if a new proposal by the Treasury is passed, widening the tax net to include foreigners winning big-ticket tenders in government.
The Finance Bill, 2025 proposes to include payment to State foreign suppliers and scrap metal dealers amongst those subject to payment of withholding tax, making such payments subject to taxation being income derived from Kenya.
WHT is a tax that is deducted at source – meaning, it’s taken from payments made to a person or company and then remitted directly to the tax authority by the entity or individual making the payment.
Currently, the withholding tax is charged at five percent on income from management or professional, royalties, interest, winnings, rent, commission, or any other income that may not be consistent.
“Section 10 of the Income Tax Act is amended in subsection (1), by adding the following new paragraphs immediately after paragraph (k) – (l) supply of goods to a public entity and (m) sale of scrap,” says the Bill that was tabled in Parliament on Wednesday.
Foreign suppliers to State entities currently have to pay VAT, which is charged at 16 percent of the value of the goods or services they supply, meaning that the new levy will compound their tax burden.
The law generally requires that organisations or individuals that generate income partly or whole from business activities carried out in the Kenyan market should pay income tax, but many firms have often dodged the firms by under-declaring their income.
Last year, Auditor-General Nancy Gathungu revealed that evaded over Sh150 billion in taxes by under-declaring their revenues, highlighting the difficulty of relying on voluntary compliance by firms.
The National Treasury has been trying to seal tax loopholes by making it mandatory for all tax-deductible expenses to be accompanied by an eTIMS receipt, which is an electronic tax receipt generated by the seller.
The new law will require buyers of scrap metal and State procuring entities to deduct a withholding tax of 5 percent and remit it to the taxman before settling the supplier’s bill, making it harder for the supplier to escape the tax.
In the case of foreign suppliers and scrap metal dealers, the tax will be final as they are non-resident companies or individuals and the taxman will not have any other opportunity to interact or scrutinize their activities and have no tax obligation locally.
