Hillary Gachango.

The new PAYE regime is nigh. It is now clear that the Bill is in the kitchen to give effect to the President’s declaration. From today’s update by the CS, National Treasury, the new PAYE regime appears to be taking shape. Major Highlights 1. The first band of the PAYE graduated scale is set to rise from 24,000 to 32,333 The Band will be Zero rated for Paye It means more of the first 32,333 of your monthly income will remain in your payslip ofvourse after giving way to AHL , NSSF &SHA . 2. Scrapping of personal relief. Personal relief has been in existence in Kenya for decadesdating back to 1997. It has been evolving though . The scrapping of the Personal relief is in line with the Medium-Term Revenue Strategy 2024/25 - FY 2026/27), With the 1st band in the PAYE graduated scale being zero rated , the scrapping of personal relief present No exposure . This is a great move

Having an eTIMS Invoice Is No Immunity to a Tax Audit: eTIMS Never Replaced Substantive Tax Laws The introduction of eTIMS improved transparency and traceability of transactions within the tax system. However, it is important to understand that having an eTIMS invoice does not provide immunity from a tax audit, nor does it replace the application of substantive tax laws. Under Section 15(1) of the Income Tax Act (ITA), expenses are deductible only if they are wholly and exclusively incurred in the production of income. This is a substantive legal test that all eTIMS expenses must undergo. A legitimate eTIMS invoice does not change the legality of an expense as per ITA Section 15. If an expense is personal or incurred for non-business purposes, it remains disallowable regardless of the fact that it was validly generated through eTIMS. Section 17 of the VAT Act, 2013 clearly outlines that input VAT is claimable only to the extent that goods or services are used or intended to be used in making taxable supplies. This means certain inputs remain restricted. For example, VAT relating to personal expenses is generally not claimable, even where a valid invoice exists. Even with eTIMS, TPA still gives the tax authority the power to review and audit your books. Section 59 of the TPA gives the tax authority power to review and verify the tax affairs of a taxpayer, requiring the production of records, documents, and supporting information even after returns have been filed using the auto-populated invoices transmitted through eTIMS. If the review and audit result in disallowing some expenses that did not meet the test of Section 15(1) of the ITA or Section 17 of the VAT Act, the tax authority can issue an additional assessment (Section 31). It is therefore critical to understand that the fundamentals did not change. What eTIMS did was to properly operationalize enforcement of the tax laws by ensuring transaction visibility. If a dispute arises, Section 56 , TPA places the burden of proof on the taxpayer to demonstrate that the Taxman’s tax decision is incorrect. True tax compliance depends on the proper application of substantive tax law.