The Kenyan Court of Appeal has overturned judgments that had prevented the Finance Act from going into effect from July 2023, and the tax changes for Kenya is effective 1 July 2023. 

• Kenya: New Tax Tables effective 1 July 2023 - Suspended
• Kenya: Tax table changes effective 1 July 2023 - Judgment overturned 

Please take note of the important information below:

• New tax tables for Kenya will be deployed on 7 August 2023  at 20:00 on the Sage Portal.
• Take note: Your payroll must be on Release 6.0b, before you install the Kenya tax files and reports.

All changes will be applied in the current pay period and will affect Net Salaries when the tax tables are installed.

1. The tax tables are affective from 1 July 2023 and not for the full tax year.
2. If you are using Monthly Tax Calculations, it is advised that you remain in your July Payroll Month, and follow the steps related to Monthly Tax Calculations.
3. If you are using Annual Tax Calculations, follow the steps for Annual Tax calculations before the deployment to ensure that employees are taxed according to the correct tables. 

Steps to follow in preparation of the tax file release:

• Create a backup of your company 

If your company uses Annual Tax Calculations

• Please follow the steps below in your Current Kenya Company
  • Ensure that your Company is in July 2023
  • Copy the Company structure to a new number.  (On the Company Listing screen, select Add Co (Add Companies)> Copy Company Structure)
  • Access the newly created company to ensure that it created correctly.
  • Transfer employees from current company to the new company. (From the Main Menu > Employee >Transfer Employee)
    • Transfer without YTD figures.
    • Do not Transfer with a Clear Payslip. (Transfer with payslip values)
    • If you have terminated employees in July, Select to Transfer all employees (Active and Terminated)
    • Termination Date = 30/06/2023
    • Tax Year Start Date = 01/07/2023
    • Retain existing Engagement Date and Service Periods.
    • Transfer From:   (this will be the original Kenya Company)
    • Transfer To:   (this will be the new Kenya Company)
  • Clear the payslips for July in the current company (this will be in the original company)
    • Ensure that you clear Earnings, Deductions and Perks Tax Values
    • There might be a Tax difference in July because the employees were terminated for a previous month. Decide how you want to handle the tax differences. (Refund to the employees; load it as additional tax to get a zero net salary effect; or load it as additional tax to get a zero Net Salary effect and then load the same values in the new company as additional tax)
    • If you use the Sage Self Service module for your Kenya companies, take note that new GUIDs must be created in the Transfer To company. The records will need to be uploaded from the new company, and workflows will need to be setup
  • If you terminated any employee in July with a July termination date.  Change the termination date to 2023/06/30
  • Print a report with Tax values per employee
  • Re-Print month end reports if needed
  • Make a backup and roll the company with terminated employees to a new pay period (August) to avoid any further tax calculations
  • In the old Company, in August, change the Africa Rule linking to work on Monthly Tax Calculations.  This will ensure that there are no further tax recalculations. 
•  Follow the steps below in your New Company
  • Ensure that all Payslip values are correct.
  • Reconcile July payments with July reports printed from the original company. This is to confirm that all values remain unchanged after the transfer
  • If you decided to carry tax values over to the new company – capture the additional tax values
  • Make a backup of this company.
  • If you have not already created an Affordable Housing Levy deduction then now is the time to do it
    • The Affordable Housing Levy (AHL) is calculated based on the employee's gross monthly salary in accordance with Employment Act, Section 31B (4). Previously, we considered the "gross salary" to be equal to the “basic salary”. However, after receiving feedback from Kenyan clients, it seems that their expectation is that gross salary of the employee is their “total income” before any deductions i.e.: all earnings and benefits, exclude non-salary income such as refunds for business expenses, loans and savings.
    • The new deduction line must be called Affordable Housing Levy, deduction type Calculated
    • Then add a new method using Gross Salary * 1.5% for both Deduction and Company Contributions
    • Link the relevant employees to the Affordable Housing Deduction line

If your company uses Monthly Tax Calculations

• Preparation before deployment of the Tax Tables - 7 August
  • Ensure that your Company is in July 2023
  • If you have not already created an Affordable Housing Levy deduction then now is the time to do it.
    • The Affordable Housing Levy (AHL) is calculated based on the employee's gross monthly salary in accordance with Employment Act, Section 31B (4). Previously, we considered the "gross salary" to be equal to the “basic salary”. However, after receiving feedback from Kenyan clients, it seems that their expectation is that gross salary of the employee is their “total income” before any deductions i.e.: all earnings and benefits, exclude non-salary income such as refunds for business expenses, loans and savings.
    • The new deduction line must be called Affordable Housing Levy, deduction type Calculated
    • Then add a new method using Gross Salary * 1.5% for both Deduction and Company Contributions
    • Link the relevant employees to the Affordable Housing Deduction line
  • Print a report with Tax values per employee.

• Steps to follow after deployment of the Tax Tables - 7 August
  • You can now extract the new tax tables and overwrite the existing tax files in your payroll folder. 
  • Do a General Recalculation to ensure that the new tables are correctly applied.
  • Print your new July reports, reflecting the new tax values.
  • Decide how you want to handle the tax differences in the July calculations. Do you want to refund/claim it from employees in August or do you want to issue employees with revised payslips for July.
  • Affordable Housing Levy Relief
    • Note that the tax relief for the affordable housing is not yet incorporated into the PAYE of the P10 Return. If you decide to link an employee to the relief, the employee will have tax differences
    • To link the Affordable Housing Relief:
      • On the Africa Rule linking Screen the newly added deduction line must be linked to the Housing Relief Rule.  
      • Ensure that you only link the Deduction, not the CC Line 

Should you require assistance with applying these steps, please contact your Sage accredited Business Partner. 

Information regarding the changes will be included in the zipped file containing the Tax tables, which will be available on the Sage Portal on the evening of 7 August 2023.