KRA clarifies insurance relief applicability for Social Health Insurance Fund contributions

By Robert Mutasi 

The Kenya Revenue Authority has published a public notice with the view of clarifying the application of insurance relief on contributions to the Social Health Insurance Fund.

This comes in the wake of the latest reforms, necessitated by the Social Health Insurance Act that replaced the National Health Insurance Fund with the SHIF, intended to reform Kenya's health financing framework.

It explained that insurance relief under the Income Tax Act is available on such health-related contributions. In other words, insurance relief was given on health policies whose terms commenced on or after January 1, 2007, or such contributions to the NHIF made under the National Health Insurance Fund Act. 

However, the introduction of the SHIF replaces the conditions precedent for insurance relief on the same type of contributions.

According to the KRA, insurance relief as provided for under the Income Tax Act does not cover the contributions paid to the SHIF.

The clarification emphasizes that although NHIF was covered under the old system, the Social Health Insurance Act repealed the legislation on NHIF, and hence the contribution towards the new SHIF does not attract the same tax relief.

The KRA public notice also discusses the ongoing legislative efforts regarding the amendment of laws affecting their eligibility for insurance relief on SHIF contributions in the future. 

The Amendment Bill to the Tax Laws, 2024, has a proposed amendment aimed at reinstating eligibility for relief by making the SHIF contributions deductible from taxable income.

This will align the SHIF contributions with previous tax relief provisions under NHIF and will, in substance, offer a form of financial relief to contributors under the new healthcare scheme upon passage.

The authority has urged members of the public who may require more information to contact its Customer Care Centre through the listed telephone numbers or email addresses, or visit the nearest tax office or Huduma Centre for support.

The agency, therefore, declares that it is committed to observing principles of transparency and the provision of timely information to taxpayers on changed tax policies affecting them.

The transition from NHIF to SHIF is part of a broader strategy by the Kenyan government to increase access to and improve quality healthcare.

However, the withdrawal of insurance relief on SHIF contributions has raised debates on the financial implications for Kenyans, especially to middle- and low-income earners who rely on such deductions to reduce their taxable income.

The outcome of the proposed amendment will be eagerly awaited by taxpayers and other stakeholders, as it has the potential to restore some level of tax relief on mandatory healthcare contributions.

Meanwhile, the KRA notice plays an important role in reminding taxpayers of the dynamism that characterizes taxes in Kenya.