KRA will from Friday, March 8, 2024, deduct Excise Duty on M-Shwari loans at the point of disbursement.
M-Shwari notified customers about the new changes on Tuesday through text messages.
Previously, the Excise Duty was being deducted at the point of loan repayment.
M-Shwari charges 7.5 per cent facility fee on loans disbursed while the Excise Duty on the facility fee is 20 per cent.
However, as part of an operational adjustment, the Excise Duty charge will now be collected at the point of disbursement, that is, when a customer receives their M-Shwari loan.
This means that the loan amount received by the customer will be net of Excise Duty tax.
“Dear customer, we wish to advise you that effective March 8, 2024, Excise Duty on the facility fees charged on your approved M-Shwari loan amount will be deducted at the point of disbursement of your loan,” the message reads.
Assuming you take a loan of Sh1,000, the facility fees of 7.5 per cent on the loan amount to Sh75. KRA will then deduct the Excise Duty of 20 per cent on the Sh75, which is Sh15.
This means that unlike before when you would receive the Sh1,000 applied for, effective today, your M-Shwari account will be credited with only Sh985.
“This change does not introduce any new charges or taxes relating to M-Shwari loans. It is simply a change in the process of collecting Excise Duty on M-Shwari,” M-Shwari clarified.
As per the Excise Duty Act, 2015, all fees/charges due on services provided by financial institutions in Kenya are liable to a tax called Excise Duty Tax (EDT).
Following the signing of the Finance Act of 2021 into law, the Government of Kenya introduced Excise Duty Tax on all loan-related fees/charges, including for M-Shwari loans.
As a result, the facility fees charged on M-Shwari loans have been subject to a 20% Excise Duty Tax since the beginning of the financial year 2021/22.
M-Shwari is a revolutionary banking product created in partnership with M-Pesa and NCBA, which allows you to save and borrow money through your phone while earning you interest on money saved.
You can open and operate an M-Shwari bank account through your mobile phone via M-Pesa, without having to visit a bank or fill out any forms.
