Key Transitional Clauses in Recent Tax Legislation

*Predictable tax environment ✅ Paragraph 146 of Part I of the First Schedule to the VAT Act outlines a provision for #VATexemption for taxpayers who incur significant capital expenditure. Specifically, if a taxpayer invests at least two billion shillings, they may apply for a VAT exemption. This exemption is contingent upon the approval of the Cabinet Secretary responsible for National Treasury and Planning. The key condition for granting this exemption is that the Cabinet Secretary must be convinced that the expenditure will foster #investment within the manufacturing sector. In a bid to rationalize the tax expenditure, the #TaxLawsAmendment Act 2024 (TLAA) sought to repeal this exemption but provided a transition provision allowing existing exemptions to continue for one year. The transition provision, however, appear to have suffered a drafting error because strict interpretation of the same rendered all the exemptions provided in the calendar year 2024 null and void even though the amendment came into force in December 2024 - in effect, the amendment applied retrospectively. Based on this, the #NationalAssembly is seeking to rectify the drafting error vide the Value Added Tax (Amendment) Bill, 2025 to allow exemptions that had been granted before 27 December 2024 to continue for one year. As currently drafted, however, the transition clause in the Bill has note eliminated the legislative gap—it retrospectively ties the eligibility of exemptions to a date preceding the commencement of the Act, effectively rendering the transition period void and unintentionally excluding exemptions granted in the year 2024. On 10 April 2025, I, on behalf of the Public Finance and Tax committee of ICPAK, had the honor of making oral submissions on the Value Added Tax (Amendment) Bill, 2025 before the #Departmental Committee on #Finance and #National #Planning. We proposed an amendment that provides clarity and ensures the transition period is both legally sound and practically implementable. Our recommendation seeks to align the provision with the intent of the legislature—to give businesses that had already received exemptions adequate time to complete their projects and make informed investment decisions going forward. This is especially critical for the manufacturing sector, which remains a cornerstone of Kenya’s economic transformation agenda. Ensuring predictability in the tax regime is essential for investor confidence and long-term capital planning. #ICPAK #VATAmendment #TaxPolicy #ManufacturingKenya #LegislativeEngagement #PublicFinance #InvestmentInKenya

The UAE’s Ministerial Decision No. 120 of 2023 establishes transitional rules for corporate tax purposes, which addresses adjustments to Immovable property, Intangible assets, Financial assets and Financial liabilities owned prior to the date of the first tax period applicable to a Taxable Person. Off this, the rules applicable to Immovable Property provide significant benefits to the real estate sector by addressing pre-corporate tax period appreciation. The relief applies to immovable property that is sold during or after the first tax period for a gain. This Ministerial Decision also covers similar transitional rules for intangible assets and financial assets/liabilities, with comparable adjustment mechanisms. However, for intangible assets, only a maximum of 10-year of lookback period is available for the time-apportionment calculation. Here is a quick run through on this Ministerial Decision for the property market. With majority of the UAE companies having a First tax return deadline of 30.09.2025, for more details on its applicability to your specific case, get in touch with your chosen tax advisors now.

Yesterday, I was reading sections of Personal Income Tax in the new Tax Act. Then something completely unrelated struck my mind. I paused and asked myself: If a company starts its accounting period in December 2025, will it be taxed under the old law or the new law? What about transactions that spill into 2026? Won’t accountants be stressed trying to prorate taxes? What about templates and accounting systems already designed to fit the old law? Cross-year transactions are messy in real life faa. One question led to another. Before I knew it, it was past 2 a.m. At some point, it clicked. All these questions fall under one quiet but powerful concept in tax law, “Transition.” Transition is not confusion. It’s not prorating everything. Transition is structured and very practical. This is for your healthy consumption, please read through 👇 When people heard “the new tax law takes effect from 1 Jan 2026”, many assume this: “Anything connected to 2025 uses the old law, anything connected to 2026 uses the new law.” Sounds logical. But tax does not work by emotions or accounting year sentiments. Tax works by timing rules. That is exactly what transition is about. Transition answers one simple question: Which tax law applies when a transaction sits between the old law and the new law? Because in real life: Businesses don’t stop operating on 31 December Supplies happen before payment Payments cross years Assets are bought long before disposal So the law does not rely on accounting periods alone. Each tax has its own trigger date. Different taxes, different timing rules 👇 This is where clarity comes in. VAT: Transaction / supply date VAT follows when the supply happens, not when cash is received. So: Goods supplied in December 2025 Payment received in January 2026 👉 Old VAT rules apply, because the supply happened before the new law. But: Goods supplied in January 2026 👉 New VAT rules apply, even if payment comes later. WHT: Payment date Withholding Tax is triggered when payment is made. So: Service rendered in November 2025 Payment made in January 2026 👉 New law applies, because WHT follows the payment date. Straightforward. Now, very important one: Companies Income Tax (CIT) CIT works differently. For Companies Income Tax, there is NO proration. If a company’s accounting period ends in 2026, the new tax law applies to the entire period, even if that accounting year started in December 2025. Why? Because CIT follows the year of assessment (basis period), not individual transaction dates. So a company with a November 2026 year end will compute its entire Companies Income Tax under the new law, not partly under the old law and partly under the new law. Penalties & Interest: Time-based Penalties and interest depend on: When the default occurred How long it lasted So part of a penalty period may fall under the old law, and part under the new law. Yes, they can overlap. Digest and repost for others to benefit👍