The impending withdrawal or cancellation of Kenya’s Finance Bill 2024, which was not assented by the President, brings several forms of relief to landowners and real estate investors. Here’s how:
1. Maintenance of Current Tax Rates and Structures
One of the primary concerns of the Finance Bill 2024 was the introduction of new taxes and adjustments to existing ones. With the bill being withdrawn:
- Capital Gains Tax: The proposed increase in capital gains tax rates will not take effect, maintaining the current rates. This is a relief for real estate investors who might have faced higher tax liabilities on the sale of properties (TPA Global).
- Minimum Top-Up Tax (MTT): The proposed MTT of 15% targeting large multinational enterprises will not be implemented. This would have affected entities engaged in significant real estate transactions, so its cancellation avoids added tax burdens.
2. Avoidance of New Digital and SEP Taxes
The bill proposed replacing the Digital Service Tax with a 30% SEP tax, targeting non-resident entities earning income from digital marketplaces. For real estate investors and firms heavily relying on digital marketing and online platforms:
- The existing Digital Service Tax remains, which is significantly lower at 1.5% of gross transaction value. This avoids the higher cost and compliance burden associated with the SEP tax (TPA Global).
3. Stable Withholding Tax Regime
The Finance Bill proposed several changes to the withholding tax regime, including increased rates for certain types of income:
- Current Withholding Tax Rates: These will remain unchanged, providing stability and predictability for real estate investors dealing with international transactions and services. The avoidance of higher withholding tax rates on income from digital services and other sources is a significant relief (TPA Global).
4. Simplified Compliance and Administrative Burden
The bill introduced various administrative changes intended to enhance compliance but potentially increasing the administrative burden:
- No New Compliance Measures: With the withdrawal of the bill, real estate investors and businesses will not have to adapt to new compliance requirements or administrative changes. This simplifies ongoing operations and financial planning.
5. Consistency in VAT and Excise Duties
The Finance Bill proposed changes in VAT and excise duties, which could have impacted the cost structure for real estate projects:
- No Increase in VAT Registration Threshold: Smaller real estate developers and investors will not be subject to a higher VAT registration threshold, simplifying their tax compliance process (Kenyans) (Grant Thornton Kenya).
6. Investor Confidence and Market Stability
Legislative stability is crucial for maintaining investor confidence:
- Avoiding Market Disruptions: The withdrawal of the bill helps maintain the current market dynamics without the disruption of sudden legislative changes. This stability is crucial for ongoing and future real estate projects, fostering a more predictable investment environment (Deloitte United States).
Conclusion
The withdrawal of the Finance Bill 2024 brings significant relief to landowners and real estate investors by maintaining the current tax regime and avoiding the introduction of new taxes and compliance burdens. This stability and predictability are beneficial for ongoing and future investments, particularly in attractive locations like Diani.
At Pazurina Holiday Homes, we recognize the importance of stable investment environments for our clients. With the current favourable conditions, there has never been a better time to invest in prime real estate. Our exclusive beach plots in Diani offer an exceptional opportunity for those looking to own a piece of paradise.
We invite potential investors to explore our range of properties and take advantage of the current market stability. Visit our website or contact us for personalized advice and to discover more about our offerings. Secure your investment with Pazurina Holiday Homes and own a prime piece of Diani today!
