How the Finance Act 2021 is benefiting Small Enterprises in the Export Business

The Parliamentary Finance and National Planning Committee has amended the contested clause in the Finance Bill 2021, and have put transportation services of export goods under zero rate status. The Kenya Transporters Association Limited (KTA), has announced the new move as a great advantage to the local businesses in the country. The amended bill will now allow transporters engaged in offering these services to claim full Value Added Tax (VAT) on their purchases, just like other transporters from other countries in the region.

The Finance Amendment Bill 2021, in conjunction to the VAT in effect in the country had proposals to amend the provision relating to the due date for VAT payment to allow anyone who is liable to VAT to defer payment of the VAT to the 20th day of the month following the period in which the tax became due.

The Parliamentary Finance and National Planning Committee has signed the bill into a proposition that has sheltered all Micro, Small and Medium Enterprise business in the country dealing with exports together with those who play in the outside countries.

The bill which had been scheduled to be amended by 1^st July, 2021, was aimed at aligning the section on the payment due date with the other proposed changes relating to the definition and treatment of imported services. The change was to clarify that the due date for payment of VAT i.e., 20th of the month following the month the tax becomes due, applies to both registered persons making taxable supplies and to anyone who has imported a service into the country and is liable to reverse charge VAT.

According to KTA; all transporters engaged in the service would not be eligible to claim input VAT on their purchases and then apply for VAT refund. The amendment has come as a relief to most small businesses since they have been operating in a ‘deluge of losses’ spectrum considering the pandemic and the new extension of revenue collection by the government on taxes.

The transport sector contributes between 5 to 15 % of the GDP in the countries in the Great Lakes Region. However, the impact of transport goes well beyond its share of the economy as it serves as an intermediary service to all sectors and is therefore critical to economic growth and poverty alleviation. It is thus of paramount importance that the sector provides the society with adequate, effective, and efficient services, and that the sector provides these services at the least costs to society including collateral negative impact on environment and society.

Early this year the Kenya Revenue Authority (KRA) announced a huge breakthrough in collections, surpassing the previous targets, Sh 3.53 billion, with an improved performance rate of 102.6%.

“The Domestic Taxes also registered improved performance at 97.1%, the best progress since the start of the Covid-19 pandemic. The Domestic Taxes recorded an improved growth of 5.0% in January 2021 from a decline of 10.4% in December 2020,” said the taxman.

These replicates to the transport industry that, the President had given relief last year on several taxations to shoulder them from the effects of the pandemic. The Finance Bill 2021, has created an array of exponential advantages to small businesses, like the logistic companies in the country to maximize on their profits, since they would now have to enjoy a ‘Zero Rated Service’ as from the beginning of the new month of July.

The treasury, gazetted also other amendments in conjunction to the transport bill which had been earlier given an assent by President Uhuru Kenyatta. In the new law some assents were to begin early this month (July 1^st) while others were to start early next year, according to the gazette notice.

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“This Act may be cited as the Finance Act, 2021, and shall come into operation, or be deemed to have come into operation, as follows— (a) sections 9, 10, 13, 14, 19, 21(a), 21(b), 21(e), 40, 50, 58, 60, 73, 75, and 76, on the 1st January, 2022,” the notice stated.

The Financial Act of 2021 introduces amendments to various tax-related Acts of Parliament (Income tax, VAT, Exercise Duty, Tax Procedures and Miscellaneous fees and Levies) as well as other related statutes in the public finance sector including the Insurance Act, the Capital Markets Act, the Retirements Benefits Act, the Central Depositories Act, and the Stamp Duty Act.

The Bill proposed by Treasury, according CS Yatani seeks to help create a legal and policy framework to help the government achieve its medium-term budget goals.

KTA which has been on the forefront championing for the amendment of the Finance bill, through lobbying and presentations by various stakeholders opened the realm of business by calling on all investors in the transport sector to start banking on the system as it would benefit the growth of the country’s Gross domestic products, and improve small businesses as well.

Mombasa, Kenya.

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