This waiver has therefore enabled these entities to earn separate income sources outside of their core business and encouraged them to diversify their portfolios, free from any additional tax implications. This in turn has facilitated asset growth and financial stability amidst turbulent market changes. However, the recent KRA decision has sought to withdraw this four-decade-old waiver with effect from 1 October 2021. The KRA stated that this decision was premised on section 64(1) of the Tax Procedures Act, 2015 which authorises the KRA to withdraw a public ruling in whole or in part, by way of a notice in at least two newspapers of nationwide circulation. This notice was published and circulated on 22 September 2021.
Employers in these entities are set to incur greater overheads from 1 October 2021, as each of their income sources from the above specified categories will be computed separately. Employers need to be aware of the incoming changes and prepare to comply accordingly.