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In Kenya, many persons with disabilities (PWDS) are unaware of the tax exemption status available to them through the Persons with Disabilities Act 2003 and The Persons with Disabilities (Income Tax Deductions and Exemptions) Order 2010. This results in a missed opportunity for them to save money each tax year.
Most persons with disabilities (PWDS) in Kenya are unaware of their tax exemption status. Unfortunately, they are losing out on saving cash on a law they can exercise at the end of every tax year.
The Persons with Disabilities Act 2003 and The Persons with Disabilities (Income Tax Deductions and Exemptions) Order 2010 give those with special needs tax exemptions.
So how does the process work? And how much can a person with a disability save yearly from this relief? The information below answers these and other related questions starting with clarifying two concepts.
A tax exemption means that certain sources of income are not taxed. On the other hand, a tax rebate is a refund for when a taxpayer pays more than they are owed.
A taxpayer can receive a refund on the paid amount at the end of the fiscal year if they file an income tax return within a specified time. Every person (with or without disabilities) is entitled to a tax rebate as long as they meet the requirements. On the other hand, tax exemptions for disabled people are only for PWDS in public service of the private sector.
Articles 13.2. And 35.1. Of the People with Disabilities Act (PWD Act) 2003 in Kenya establishes that any employee with a disability is entitled to a tax exemption on all remuneration gained from employment plus other types of taxable income under certification of the Kenya Revenue Authority (KRA).
The exemption applies to people who earn below ksh.150, 000 per month or for their first Ksh. 1,800,000 per year.
In addition, PWDS are exempted from paying import duty, value-added tax (VAT), demurrage charges, port charges, and any other government levy for the importation of assistive devices such as wheelchairs and walking sticks, plus motor vehicles modified for special needs.
Furthermore, the act states that all goods or equipment donated to organizations and institutions of or for PWDS will be exempt from any government levy that would increase the cost of said donations.
People with disabilities can get tax exemptions as long as they meet the following qualifications:
● They must be registered with the National Council for Persons with Disabilities (NCPWDs) with a valid disability membership card.
● They must possess a disability assessment report that conveys the nature of the disability from a government-gazetted hospital.
● They must receive income subject to taxation under the Income Tax Act.
● They must undergo an assessment by a committee and obtain a recommendation. The committee consists of officials from NCPWD, KRA, and MOH (The Ministry of Health).
All persons with disabilities need a tax exemption certificate to enjoy the benefits. The tax exemption certificate is proof PWDS can present to employers or local authorities for exemption. Below is information on applying for the tax exemption certificate.
A tax exemption certificate is the best way for people with disabilities to get tax exemption easily. The process of getting the certificate goes as follows:
Applicants must fill out forms 1 & 2 in duplicate. Form 1 demands general information such as name, sex, and contact details, while Form 2 is a certificate of recommendation. Applicants must also attach the following documents:
● KRA Pin Certificate from the iTax platform.
● Copy of NCPWD Disability Card.
● Copy of National Identification Card.
● Copy of the Disability Assessment Report from government-gazetted hospitals. The report must possess a signature and remarks from the Director of Medical Services (at AFYA HOUSE LG 29).
● Certified copy of the latest payslip (where applicable).
● Tax compliance certificate
● Original letter from the employer stating the nature of the disability and how it affects the employee’s productivity in the workplace (where applicable).
● In the event of a renewal, a copy of the expired certificate is required.
After this, the applicant should submit these documents plus application forms to the NCPWD.
Upon invitation, the applicant must undergo vetting from a joint panel consisting of members from NCPWD, KRA, and the Director of Medical Services. If passed, the applicant receives a recommendation from the joining panel. The application is then submitted to KRA through the iTax platform by NSPWD on behalf of the applicant.
Once uploaded, the applicant plus and council receive an acknowledgement number sent to their emails for fast-tracking purposes.
The application undergoes processing and reviewing at KRA. Once the Commissioner is satisfied with the completeness and accuracy of the application, they issue a tax exemption certificate valid for 5 years. The certificate is sent to the applicant’s registered email.
It is also worth noting that applicants and the council receive emails upon rejection. The email states the reasons for the refusal, and the applicant can reapply upon the expiry of the five years validity period.
Renewals: Renewing the certificate demands going through this same process.
There is no downside to a tax exemption. That is why they are aimed at sheltering a particular group of people.
The primary advantage of tax exemption for persons with disabilities is saving cash from their income. Any form of impairment or disability can demand a lot in health care. The cost of acquiring sign language or braille classes, assistive devices such as wheelchairs, and medical services is often high.
That is why the Kenyan government offers tax exemptions on the employment income of people with disabilities. It is also a common occurrence in other African and international countries.
With tax exemption, PWDS will have a better chance at accessing their medical needs while still having an income that can support necessities.
Tax exemption on assistive devices and vehicles modified for special needs ensures that PWDS can access them more affordably. Consider the following:
● Import duty tax is 25% of the CRSP (current Retail Selling Price)
● Excise duty is 20% of the CRSP+import duty
● 16% of the CRSP+import duty+excise duty is VAT
● 2.25% of the CRSP is the IDF Fee
In other words, importing vehicles modified for special needs would be financially challenging. Tax exemptions make purchases easier financially.
It is also worth noting that PWDS who are tax compliant are less likely to miss out on Access to Government Procurement Opportunities (AGPO). The program entitles people with disabilities to 30 per cent of government tenders. Unfortunately, a lack of tax compliance prevents PWDS from participating in government procurement.
In 2017, KRA was concerned about the lack of knowledge among people with disabilities. The KRA tax education manager Jeddy Ochuodho stated that people with disabilities were still paying taxes on their income since they remained unaware of the exemptions they are entitled to.
Hopefully, these numbers have reduced since, considering the emergence of more organizations dedicated to teaching and helping PWDS. In addition, public members are more aware of the rights of persons with disabilities.
PWDS enjoy convenience thanks to an act of parliament that helps them save money to access special education and devices. The information above has shed ample light on tax exemptions for this protected group.
If you wish to learn more about tax exemptions and related topics, search Workpay’s collection of helpful literature. In addition, reach out to learn how we can help your business stay tax compliant when paying employees.
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