Withholding VAT ropes in caterers and cleaners

The National Treasury has extended its tax net to an array of services in a bid to fairly distribute the weight of the Sh3 trillion budget on more shoulders.

Party-time services like security provision, cleaning and fumigation, catering outside hotel premises and transportation of goods (other than by air) will from July 1 be subjected to withholding taxes.

Also to be brought under the tax bracket are services such as sales promotion, marketing and advertising.

The move comes amid increased calls to Kenya Revenue Authority (KRA) to expand the tax base and enhance revenue.

“I therefore propose to expand the scope of application of withholding tax by subjecting additional services, other than management and professional fees, to withholding taxes,” Treasury secretary Henry Rotich said in his Budget Statement.

“This measure will enhance tax compliance by persons offering these services.”

In December, KRA promised to kick off an elaborate process of expanding the tax base this year. The process, expected to bring on board 500,000 new taxpayers, is set to net additional Sh60 billion for 2019/20.

The programme seeks to identify all Kenyans involved in any gainful business “who ought to be paying taxes, but they are not.”

On Thursday, Mr Rotich said the expanded economy has over the years witnessed an increase in services that are offered on commercial basis some of which are not within the ambit of withholding tax.