Proposed law on tax likely to hurt credit societies and savers

Proposed law on tax likely to hurt credit societies and savers
The National Treasury has reviewed the Income Tax Act with a view to making it productive, simple and supportive of the government’s Big Four Agenda.
The proposed law is also meant to spur the growth of the economy, embrace best practices and align with the Big Four Agenda.
A key highlight of the bill and how it will affect the cooperative societies is that it provides for taxation of co-operative societies, including those involved in savings and credit.
The existing Act provides for taxation of designated co-operatives, primary co-operatives and primary societies, which are registered and engage in the business of credit and savings cooperative society.

INTEREST INCOME
Co-operative societies, other than a credit and saving societies, will be subject to a corporation tax on total income of the year, deducting it from dividends and bonuses issued to members.
For a credit and saving co-operative society registered under the Co-operative Act, the income chargeable to tax will be the aggregate of all income, except interest from members. This implies that interest income from members will not be subject to corporate tax. This is in accordance with the existing Act.
Interest income from other sources other than members’ interest will be subject to corporate tax.
This is a radical shift from the existing Act under which only half of interest income from non- members is subject to corporate tax.

10 PER CENT
Any other income generated by the SACCO, including that which is generated from members trading with the SACCO, will be subject to corporate tax.
Co-operatives will also be affected by the Bill in the following ways:
i) Dividend income paid by a cooperative society to members, shall be subject to withholding tax of 10 per cent. The withholding tax is final tax.
ii) Capital gains tax has been proposed to increase from five to 20 per cent.
What are the implications for the cooperative movement?


Source: https://www.nation.co.ke/oped/opinion/Proposed-law-on-tax-likely-to-hurt-credit-societies-and-savers/440808-4614754-q8sckaz/index.html

 

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