The government-backed Value Added Tax (Amendment) Bill, 2025 also seeks to extend the non-taxation of capital goods for a further one year.
Investors who shipped in capital goods worth more than Sh2 billion to promote investments in the manufacturing sector will laugh all the way to the bank if Parliament approves a new Bill that seeks to back date exemption of taxation to January 1, 2024.
The government-backed Value Added Tax (Amendment) Bill, 2025 also seeks to extend the non-taxation of capital goods for a further one year after the date of commencement of the Act to promote investment in the manufacturing sector.
“The principal object of this Bill is to amend the Value Added Tax Act. The Bill amends the First Schedule in Paragraph 146 of Part I to remove ambiguity caused by the use of the words after thus date, to emphasise that the provision was to apply twelve months from the date of commencement of the Tax Laws (Amendment) Act,” the Bill states in its memorandum of objects and reasons.
“Provided that the value of such investment is not less than two billion shillings, and the exemption was granted before January 1, 2024 and shall continue to apply for twelve months after this date,” the Bill states.
National Assembly Speaker Moses Wetang’ula on April 1, 2025 directed the House Business Committee (HBC) to fast-track their consideration of the Bill in line with Standing Order 42(2).
The Value Added Tax (Amendment) Bill, 2025, published on March 13, 2025, seeks to amend the Value Added Tax Act, Cap. 476, to clarify the commencement date of exemptions granted before January 1, 2024, on capital goods for investment in manufacturing valued at not less than Sh2 billion.
Mr Wetang’ula issued the directives when the House reconvened from the short recess on April 1, 2025.
He confirmed in a notification issued on March 26, 2025 that the Bill had matured for its First Reading and has been determined a priority.
Mr Wetang’ula directed the departmental Committee on Finance and National Planning to consider the Bill and table its report.
If enacted, the Bill will eliminate ambiguities in tax exemptions, creating a more predictable tax regime for investors in the manufacturing sector.
The House has also fast tracked the Excise Duty (Amendment) Bill, 2025 following a directive issued by Mr Wetang’ula on March 18, 2025.
The Bill proposes amendments to the Excise Duty Act to remove excise duty on imported fully assembled electric transformers, reducing costs for power sector investors.
The Excise Duty (Amendment) Bill, 2025, which has already been assented to by President William Ruto, is expected to enhance investment in Kenya’s power sector by lowering import costs for transformers, a critical component in electricity distribution.
The law sponsored by Majority Leader and Kikuyu MP Kimani wa Ichung’wah removes the excise duty that was imposed on imported fully assembled electric transformers and their parts.
This move will ease the cost burden on the importation of key transformer components, following concerns that the previous excise duty, introduced in the Tax Laws (Amendment) Bill, 2024, had an unintended negative impact on transformer manufacturing and supply.
The excise duty, set at 25 percent, was initially put in place with the goal of promoting local assemblers.
But the legislation had the opposite effect, raising the cost of parts for the assembly of transformers and thereby increasing the price of manufacturing.
The new amendment seeks to address these challenges by eliminating the duty on imported transformers and parts, thereby making it easier and more affordable to produce transformers domestically.
“The principal object of this Bill is to amend the Excise Duty Act to remove excise duty on imported fully assembled electric transformers.”
“The excise duty was imposed in the Tax Laws (Amendment) Bill, 2024 with the intention to support local assemblers but instead has resulted in increasing the cost of importing parts.”
The changes to the law is expected to lead to a reduction in the cost of electricity and enhanced power connectivity, especially through increased manufacturing and supply of transformers to Kenya Power.
