The Kenya Revenue Authority (KRA) has issued a clarification on the applicability of insurance relief to contributions made to the Social Health Insurance Fund (SHIF).
In a statement on Friday, November 8, KRA noted that the Income Tax Act currently provides insurance relief for health policies that commenced on or after January 1, 2007, and for contributions made to the National Health Insurance Fund (NHIF).
However, KRA clarified that this relief is tied specifically to NHIF contributions, governed by the National Health Insurance Fund Act, which has now been repealed with the enactment of the Social Health Insurance Act.
As a result, the KRA emphasized that the existing insurance relief does not cover SHIF contributions under the Social Health Insurance Act.
“The relief as provided refers to the NHIF under the National Health Insurance Fund Act, which was repealed by the Social Health Insurance Act. Consequently, the relief as currently provided under the Income Tax Act does not apply to contributions made to SHIF,” KRA stated.
To address this, the Tax Laws (Amendment) Bill, 2024, has proposed a change in the law that would allow for SHIF contributions to be deducted from taxable income. If enacted, this amendment would align the tax treatment of SHIF with that of NHIF under the prior framework.
The clarification comes about a month after the Social Health Authority (SHA) was launched, requiring employed Kenyans to contribute 2.75 percent of their salaries to SHIF, which is managed under SHA. Recently, the National Treasury also proposed tax amendments aimed at allowing SHIF and housing levy contributions to be deducted from employees’ gross salaries before taxation, potentially reducing the tax burden on these contributions.
