Category: LexBytes

The Tax Appeals Tribunal (Amendment) Bill, 2021 (“the Bill”) proposes to make several changes to the Tax Appeals Tribunal Act (“the Act”). First, it introduces a timeline of 7 days from the date the decree or order was made by the Tribunal, within which an appellant can lodge an application for review. To qualify to lodge such an application, an appellant should not have not lodged an appeal for such decision or order at the High Court. It also specifies grounds for making such applications for review, which include discovery of new and important evidence, existence of an error apparent on the face of the record and/ or any other sufficient reason. This proposed change is an attempt to address the gaps that exist in the current law which neither establishes the timelines for lodging an application for review nor clarifies the instances in which such application may be lodged. The Bill also proposes digitization of the Tribunal’s processes by permitting electronic service and communication. Further, the Bill proposes to introduce a requirement for the chairperson and the members of the Tribunal to serve on a full- time basis, and to bar ex- KRA employees from being appointed as members of the Tribunal.

The Voluntary Tax Disclosure Program (VTDP) was introduced by the Finance Act, 2020, as part of the changes made to the Tax Procedures Act (TPA). The VTDP is a program which allows taxpayers to voluntarily disclose any tax liabilities, which were previously undisclosed to the Commissioner of Domestic Taxes, for the purposes of tax compliance where relief will be granted on penalties and interest on the tax disclosed. The aim of the VTDP is to encourage voluntary disclosure of undeclared taxes and payment of principal taxes by avoiding the imposition of punitive penalties and interest. This will (i) enhance tax compliance, (ii) improve revenue collection and (iii) bring more taxpayers under the tax net. Under the VTDP, the taxpayer is required to review total tax compliance and apply for amnesty on all areas of non-compliance.

President Kenyatta has directed KPLC to renegotiate existing contracts with Independent Power Producers (IPPs) with a view to lowering the tariffs payable by KPLC to IPPs. This follows a raft of recommendations by a presidential taskforce established in March 2021 to review Power Purchase Agreements (PPAs). The Ministry of Energy has been directed to immediately commence the implementation of the taskforce report with a view to lowering the costs of electricity by 33% before the end of the year. Other key recommendations of the task force to be implemented are: Cancellation, with immediate effect, of all unconcluded negotiations of PPAs and to ensure that future PPAs are aligned to the Least Cost Power Development Plan (LCPDP); KPLC to adopt standard PPAs and a standard Government letter of support; KPLC to undertake a forensic audit on the procurement and system losses arising from the use of Heavy Fuel Oils (HFOs); and Disclosure of the beneficial owners of IPPs.

As a general rule, an employee does not have the right to unilaterally withdraw his/her resignation. However, there are special circumstances where this rule does not apply. The High Court in Edwin Beiti Kipchumba v National Bank of Kenya Limited [2018] eKLR observed that the existence of special circumstances, such as the pressure on the employee, lack of a cooling off period and the short time taken to withdraw the resignation constituted a valid reason for the withdrawal of his resignation. In making its determination, the court cited two other cases:

Section 15(7) of the Income Tax Act requires that a person who derives income from one or more specified sources submit a separate account and a separate computation in respect of each specified source. The Kenya Revenue Authority (KRA) published a notice on 22nd September, 2021 informing the public of the withdrawal of the waiver of this requirement. This waiver had been issued through a letter dated 7th February, 1979 addressed to the Institute of Certified Public Accountants (ICPAK). The withdrawal of this waiver is scheduled to take effect from 1st October, 2021. Henceforth, all taxpayers will be required to prepare a separate account in respect of each specified source of income. In the event of a loss, that loss may only be deducted from gains or profits of that person derived from the specified source in the following year or subsequent years of income, in so far as that loss has not already been deducted.

On 20th September 2021, the High Court of Kenya ruled that the amendment to section 12D of the Income Tax Act which introduced minimum tax, is unconstitutional. Minimum tax was introduced under the Finance Act, 2020 to be charged at the rate of one per cent (1%) of the gross turnover of a business beginning from 1st January, 2021. However, individuals and companies remitting employment tax and PAYE, rental income tax, turnover tax for small-sized firms, as well as capital gains tax and proceeds from mining or oil exploration taxes were exempted from payment of this minimum tax. The High Court ruling comes as a relief for companies that were wary of paying the prescribed levy on total sales from the beginning of 2021, even as they had to cope with the economic fallout occasioned by the coronavirus pandemic. This decision will not only ensure that many businesses are productive but it will also provide an opportunity for loss-making businesses to bounce back and generate the much-needed revenue to support themselves.

The Finance Act, 2021, which came into force on 29th June, 2021, introduced some amendments to the Insurance Act. The definition of the term “broker “has been redefined in the Insurance Act, Chapter 487 of the Laws of Kenya (“the Act”) to include foreign reinsurance brokers who do not have a residence or a place of business in Kenya. Previously, the Act did not permit brokers who neither undertook direct insurance business nor had a place of business or a resident representative in Kenya, to practice insurance business in Kenya. Another addition to the Act is the requirement for all registered and licensed insurers to pay the annual fee stipulated under the Act. This amendment is a re-introduction of the annual fee which was payable by insurers until 2017 when the Act was amended discontinuing the payment of annual fees. Notwithstanding this reinstated requirement on insurers, the Act is not clear on the purpose for which this annual fee is pegged.

The Employment and Labour Relations Court recently declared that section 42 (1) of the Employment Act, 2007, in so far as it excludes an employee holding a probationary contract from the provisions of Section 41 of the Employment Act, is unconstitutional. The latter provision of the law requires formal notification and hearing before termination of the employment of an employee on the grounds of misconduct, poor performance or physical incapacity. The court explained that the provision of Section 42 (1) is inconsistent with Articles 41 (Labour Relations) and 47 (Fair Administrative Action) of the Constitution which provide for the rights to fair labour practices and fair administrative action, hence is null and void. Employers are now required to adhere to the procedural requirements set out in the law and their internal organizational policies when terminating probationary contracts, and can no longer terminate employees on probation arbitrarily or at will

Parental Responsibility over children to vest equally in both parents in proposed changes to the law – The Children (Amendment) Bill, 2020 (“Bill”) seeks to amend the Children Act (“Act”) by vesting equal responsibility for parental care and protection of a child in both parents of that child. Further, the Bill provides that neither the father nor mother of the child shall have a superior right or claim against the other in the exercise of such parental responsibility. In the proposed changes, the provisions of the Act that vested parental responsibility in the mother at the first instance, and allowed the father to acquire parental responsibility later have been repealed. Consequently, it will be mandatory for parents, whether married to each other or not, to have equal parental responsibility over their child. The proposed amendments are in line with Article 53(1) of the Constitution of Kenya, 2010 which provides that both parents to a child have equal responsibility to provide for and protect that child.

The Ministry of Lands and Physical Planning on 16th July, 2021 issued a new Gazette Notice No. 7146, revoking the previous Gazette Notice Numbers 11348 of 2020, and 520, 1706 and 1707 of 2021. These Notices had previously indicated the properties to be affected by the conversion process. The new Notice also includes a new list of all the properties affected by conversion, and provides that persons affected may lodge an objection within 90 days from the date of publication of the Notice, which is accessible here. Landowners are therefore encouraged to confirm whether their properties are affected, and lodge any complaints, within the prescribed 90 days.