If its covered, it counts 2011 Kenyan Budget Highlights

General provisions Income Tax (PAYE, NSSF, NHIF) Salaried employees with no other sources of income and whose employer deducts PAYE tax are no longer required to file personal tax returns. Employees will be eligible for personal relief from only one employer in cases where they have more than one employer. TheCommissioner granted express powers to register taxpayers who donot to apply for Personal Identification Number (PIN). Medical services or medical insurance paid by anemployer on behalf of full time employees beneficiaries is now clarified as anon-taxable benefit. Corporate Tax Real Estate Investment Trusts (REITs) exempt from corporation tax and dividends paid by REITs are exempt from withholding tax. Kenya Government allows organizations to enter into Tax Information Exchange Agreements with other countries for Transfer Pricing purposes. Withholding tax on management, professional or training fee increased to 10% from 5%. Winnings from betting and gaming activities will attract 20% withholding tax. TheCommissioner will prescribe how to calculate deemed interest and this deemed interest will be subject to withholding tax. Leasing of locomotives or rolling stock from nonresidents now exempt from withholding tax. Returns, records or documents required for tax purposes shall be prepared in Kenya Shilling and maintained in English or Kiswahili. Direct contributions by members of Association of Kenya Insurers (AKI) in respect of Integrated Motor Insurance Data Base System project exempted from income tax until February 2012. VAT Draft VAT Legislation Bill is ready and will be made available to thepublic for their comments. No time lines have been provided for theinacting of thenew VAT legislation. Customs Duties Remission of import duty on aseptic plastic bags for storing fruit extracts to 10% from 25%. Import duty on premixes used in themanufacture of animal feeds has been zero rated. Reduction of import duty to 10% on heads used in manufacture of sprays. Increase of duty on galvanized wire to 10% from 0%. Duty remission on inputs for production of solar panels. Exemption of import duty on battery operated vehicles. Exemption of import duty on apron buses essentially used in airports. Exemption of import duty on tsetse fly traps. Exemption of import duty on machinery, equipment and motor vehicles for official use by theKenya Police. Exemption of duty on security equipment including CCTVs, handheld metal detectors, bomb detectors, walkway screening detectors and under carriage mirrors. Importation of rice at 35% instead of 75% for aperiod of one year. Remission of import duty on wheat grain at 0% instead of 10% granted last year, for aperiod of one year for gazetted millers. Remission of import duty on maize grain at 0% instead of 50% for aperiod of six months for gazetted millers. Reduction of import duty on food supplements from 25% to 10%. Zero rating of import duty on motor cycle ambulances. Excise Duties Removal of excise duty on kerosene. Harmonization of theexcise duty regime on cigarettes at Ksh.1200 per mille or 35% of theretail selling price, whichever is higher. Harmonization of excise duty regime on beer at Ksh. 70 per litre or 40% of theretail selling price, whichever is higher. Excise duty on wine increased to Ksh 80 per litre or 40%, whichever is higher. Excise duty on Ready To Drink (RTD) beverages of strength not exceeding 10% by volume of alcohol shall be Ksh 70% or 40% of theretail selling price. TheFourth Schedule of theCustoms and Excise Regulations amended under theProvisional Collection of Taxes and Duties Act to include anew list of conditions to be satisfied by denaturants.

June 2011

Infrastructure Ksh.221.4 billion for physical infrastructure - most of these resources have been allocated towards road, energy and transport development. Ksh.100.9 billion has been allocated to theMinistry of Roads to fast track implementation of critical roads to allow Kenyans early opportunity to use them. Ksh.65.7 billion has been allocated to Ministry of Energy. Of this above amount, geothermal development will receive Ksh.16.1 billion, which will be used to drill and assess theviability of producing 140 MW. TheRural Electrification Programme will benefit from Ksh.5.6 billion to facilitate supply of power from national grid to 460 trading centres and 110 secondary schools, among other public facilities country wide. Ksh.3.3 billion as mobilization fund to initiate theimplementation of anew Standard Gauge Railway (SGR) connecting Mombasa to Kampala with abranch line to Kisumu. Anadditional Ksh.1.9 billion toward construction of anew branch line from Embakasi Railway Station to Jomo Kenyatta International Airport (JKIA). Ksh.1 billion to initiate upgrade for theNairobi Ruiru via Makadara, Dandora, Githurai and Kahawa railway line to expand passenger services by at least ten fold. Healthcare Ksh.64 billion for health services delivery plan and restructure of thehealth delivery system by shifting emphasis from curative to preventive health care. Ksh.903 million will be earmarked for purchase of ARVs. Ksh.150 million for purchase of modern equipment for screening cervical and breast cancer. Ksh.534 million allocated toward finalization of rehabilitation of health facilities initiated under theeconomic stimulus programme. Ksh.6.6 billion will be channelled toward enhanced immunization coverage throughout thecountry. Continue to support expansion of voluntary health insurance services in order to ensure more Kenyans access health services. Education Ksh.8.25 billion towards theprovision of free primary education (FPE). Ksh.18.5 billion for free day secondary education (FDSE). Ksh.1.67 billion for free school feeding programme, mainly in ASAL areas. Ksh.387.7 million for early childhood development. Additional Ksh.750 million for further upgrading of National Schools. Ksh.680 million for purchase of computers for schools to enhance access to quality learning materials. Ksh.780 million to improve infrastructure in schools with Ksh.380 million going to construction of low cost boarding schools in ASAL areas. Ksh.53.2 billion allocated to tertiary education to further enhance access to higher education for our children.

Additional Ksh.840 million under theMinistry of Education to scale up thebursary program for orphans and children from poor households in secondary schools. Ksh.300 million under theMinistry of Education to provide sanitary towels to all needy primary school going girls. Implementation of theNew Constitution Ksh.20.8 billion towards theimplementation of thenew constitution, which include setting up constitutional offices; drafting of new laws; judicial reforms, expansion of Parliament facilities, and preparation for thenext elections. Ksh.1.5 billion for salaries for constitutional office holders. Ksh.9.3 billion for judiciary to prioritize theimplementation of theConstitution and continue to implement strategies that will lead to reduced case backlog, improved access to justices and modernize thecourt system. Ksh.8.1 billion to cater for additional physical facilities and infrastructure, including embracing ICT to fully realize live Court hearing broadcasts, and modernization of theexisting facilities in National Assembly. TheIIEC budget has been enhanced to Ksh.12.1 billion to ensure smooth preparatory activities. Ksh.2 billion to cater for emerging requirements for constitution-related expenditures. Security Police numbers are also expected to increase with therecent recruitment of 7,000 new officers. Enhanced funding for operations and maintenance by Ksh.3.5 billion in order to improve police operations and fight crime more swiftly. Security apparatus such as CCTV cameras, metal detectors are excempted from import duty. Financial Sector Reforms in thefinancial sector are aimed at increasing access to financial services, greater efficiency and improving theoverall stability of thefinancial system. Continued licensing of microfinance institutions; encouraging theAgency banking model; and reviewing thelegal, regulatory and supervisory frameworks for thefinancial sector to improve them further and ensure conformity to thenew Constitution and to support drive towards greater access to credit. Kenya Deposit Insurance Corporation Bill and the National Payments System Bill shall be published shortly. Improving theinterbank markets; increasing disclosures of information on bank ratings, performance and productivity; and aligning pricing of Government Bonds to reference rates used by banks. Encouraging banks to share infrastructure to gain economies of scale; and to reduce overheads through increased use of ICT, Agency and mobile banking. Extending credit referencing to sharing of positive information by banks to encourage competition for good borrowers. Plan to introduce reforms to improve thelegal, regulatory and administrative processes relating to collateral.

 Pension scheme fund managers no longer restricted to investing in guaranteed funds. Introduction of over thecounter trading for bonds and regulated commodities future market. Insurance Regulatory Authority to assume control of afinancially troubled insurer. Life insurance contract pricing to use Kenya mortality experience. Youth Employment and Engagement Ksh.1.6 billion for Kenya Youth Empowerment Project (KYEP) to go towards labour-intensive works and social services. Enhance theYouth Enterprise Development Fund and theWomen Enterprise Fund by Ksh.385 million and Ksh.440 million respectively. Ksh. 210 million (Ksh.1 million per constituency) towards competitive sports for youth countrywide. Minister urges theprivate companies under their Corporate Social Responsibility (CSR) budgets to match this amount, at least on ashilling for shilling basis. Tax breaks for farms offering internships and training for youth. Agricultural & Rural Development Ksh.6.4 million under theMinistry of Agriculture for provision of water in 170 constituencies. Ksh.1.1 billion, which translates to Ksh.30 million per constituency for 20 water pans of 100,000 cubic metres in all the35 needy constituencies. Ksh.400 million for establishing Livestock Fund and providing Ksh.492 million for on-going and additional slaughter houses in ASAL areas. Ksh.475 million as aconditional grant under theMinistry of Education for 1,900 schools countrywide or Ksh.250,000 per school for 10 primary schools per constituency covering 190 rural based constituencies to expand access to clean drinking water thereby improving thehealth of our children. KSh 7.3 billion for irrigation programmes covering various parts of thecountry. KSh 2.3 billion for basic services - water/irrigation, health, solar power, slaughterhouses - in marginalized areas.

Additional KSh 3.7 billion (KSh 17.8 million per constituency) for CDF for completion of existing projects. KSh 2 billion capital grants to cooperative societies to pay coffee debts. KSh 4.2 billion for resettlement of IDPs (all categories). Agriculture :For Food Security and Employment TheInternational Fund for Agricultural Development (IFAD) has extended agenerous support of USD.10 million as aRisk Sharing Facility to leverage commercial banks to lend about Ksh.10 billion to rural and agriculture development targeting 700,000households. Establishing aKsh.5 billion Impact Investment Fund under theKenya Incentive Based Risk Sharing Agricultural Lending (KIRSAL) to be implemented over afour year period in order to leverage Ksh.50 billion lending to agricultural sector and rural development targeting another 1.5 million smallholder farmers and over 10,000 agribusinesses throughout thecountry. Ksh.1 billion as aninitial Government contribution to this Fund. Miscellaneous KSh 2.1 billion to boost thecurrent safety nets to cushion thevulnerable (disabled persons, orphans, older persons, and urban poor). KSh 3.3 billion (first phase) to enhance pension for retired teachers and cushion them from rising cost of living. Sim card registration before activation. East African Community Continue to position Kenya through appropriate economic policy and reforms to reap thebenefits from regional integration with opportunities accorded by EAC Common Market Protocol and thewider COMESA market. Implementation of theprovisions of theCommon Market Protocol and support of theongoing negotiations of theEast African Monetary Union Protocol to ensure that theexercise comes to alogical conclusion for thebenefit of theEast African people.

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