National Hospital Insurance Fund(NHIF) contributors will get tax relief beginning January 2022 if the Finance Bill 2021 proposals are passed into law.
Kenya’s Finance Bill 2021 was published on 5th May 2021 and read for the first time on 11th May 2021.
The Bill proposes that the amount of insurance relief to be claimed is equivalent to 15% of the premiums paid up to a maximum of KSh 5,000. Currently, only education insurance policyholders ads and those with life or medical insurance enjoy insurance relief on the premiums paid.
Given that the state insurer’s contributions are mandatory for employed persons, all employees are bound to enjoy this relief. In addition, self-employed individuals who make voluntary contributions will equally benefit.
“By allowing tax relief on the NHIF contributions, individuals will enjoy a maximum relief KSh 255 per month (being 15% of KSh 1,700, which is the maximum monthly NHIF contribution).
According to a tax alert from Deloitte Kenya, while this relief is minimal, it is expected to improve NHIF remittances and simultaneously aid the government in attaining its Universal Heath Coverage (UHC) agenda as stipulated in the Big 4 Agenda.
In the recent past, in a bid to fund UHC, there have been proposals to increase NHIF contributions.
“However, the fear of increased cost of employment and overburdening the already overtaxed employees may have hindered this increase. With this tax relief, there are fears that the move could signal new NHIF rates,” said Deloitte. Based on the Public Finance Management Act, 2012, the Finance Bill should be assented into law by the end of June 2021.
The Finance Bill 2021 has proposed amendments to the Income Tax Act; The Value Added Tax Act, 2013; The Excise Duty Act, 2015; The Tax Procedures Act, 2015; The Miscellaneous Fees and Levies Act, 2016; The Tax Appeals Tribunal Act, 2013; The Capital Markets Act; The Insurance Act; The Kenya Revenue Authority Act, 1995; The Retirement Benefits Act, 1997; and The Central Depositories Act, 2000.