In one such bill, even though the Finance Act 2023 amendment had made the withholding tax collections due within five working days without any defined penalties, the new proposal seeks to take away this relief.
If the new amendment bill passes, employers and individuals who remit withholding tax will be charged a hefty amount for failing to adhere to this time limit.
According to the Tax Procedures (Amendment) (No. 2) Bill 2024, a person who is required under the section to withhold tax and, without reasonable cause, fails to do so would suffer a penalty of 10 per cent of the amount owed.
“A person who is required under this section to withhold tax and, without reasonable cause, fails to withhold the whole amount of the tax which should have been withheld; or fails to remit the amount of the withheld tax to the Commissioner by the fifth working day after the deduction was made, shall be liable to a penalty of ten per cent of the amount not withheld or remitted,” part of the bill reads.
In the Finance Bill 2024, the government also sought to introduce a withholding tax on goods supplied to public entities at a three per cent rate for residents and five per cent for non-residents. Withholding tax is a type of income tax paid to the government by the payer of the income or the employer rather than by the recipient of the income or the employee.
It is deducted at the source and charged to the employer instead of from the employee and is significantly lower than the Pay-As-You-Earn (PAYE) Tax.
Another proposal in the bill that has been basically plucked from the Finance Bill 2024 and could highly impact what employers remit to their employees is the one proposing an increase in the monthly deductible for pension contributions.
If this is enacted, it could transition the pension sector from Exempt-Exempt-Exempt to Exempt-Exempt-Tax increasing the contributions from Ksh20,000 to Ksh30,000.
This revelation comes just as the National Treasury Cabinet Secretary (CS) John Mbadi confirmed that the government would be reviewing the National Social Security Fund (NSSF) Act 2024 in order to level the playing field for employers in the private sector seeking to introduce their own private pension for their employees.
“The government is committed to addressing these issues to safeguard the operations of all pension funds and give employees the most favourable pension benefits,” Mbadi stated in his November 4 address.
Even after it was declared unconstitutional by the Employment and Labour Relations Court (ELRC) on four grounds, the contentious act that has fought legal battles since its enactment continues to work.
In a ruling in February of this year, the Supreme Court through Chief Justice Martha Koome lifted the orders of the Court of Appeal that allowed the government to increase mandatory pension contributions under the NSSF scheme and referred the matter back.
"In the circumstances, this case is to be remitted to the Court of Appeal to determine the substantive merits of the Judgment of the ELRC. Due to the nature of the matter, the surrounding public interest, and the time taken by the case in the corridors of justice, it is prudent that the matter be heard on a priority basis," the CJ ruled. By
