@BusinessDaily

Listing firms to cede 40pc stake to enjoy tax cut in bill

4 months ago, 17 Maý 07:45

By: Charles Mwaniki

Business owners taking firms public via a stock market listing will have to cede at least a 40 per cent stake to qualify for a lower corporate tax, according to a new less generous Income Tax Bill.

The draft bill says those listing the 40 per cent of shares will get to pay 25 per cent corporate tax for five years, compared to 30 to 35 per cent for other companies.

Under the existing law that the Treasury wants to repeal, companies listing 40 per cent of issued shares get an incentive of paying 20 per cent in corporate tax for five years.

Those listing 30 per cent stake get to pay 25 per cent tax, similar to firm’s listing via introduction.

The amendments therefore collapse the different tax incentives into one, potentially making listing by family-owned firms less attractive for the owners who would like to retain a greater degree of control over companies.

“There is no tax advantage in the new stipulation, especially at a time when we have seen firms delisting from the market. In a way it is taking away incentive to list,” said ABC Capital corporate finance manager Johnson Nderi.

New proposals

The Capital Markets Authority (CMA) had not responded to Business Daily queries on the new proposals by the time of going to press. It has, however, been calling for additional tax incentives to entice firms to list.

The Nairobi Securities Exchange (NSE) #ticker:NSE has gone through an IPO drought in recent years, with only two (the NSE self-listing and the Stanlib I-Reit) in the last six years.
Many of the smaller firms that have come into the market in the last six years have opted to list by introduction, which automatically gave them the tax incentive while allowing the owners of some, like Flame Tree Group and Nairobi Business Ventures, to sell just 15 per cent stakes to the public each and retain the lion’s share of the issued shares.

Mr Nderi added that the stipulation in the law of listing 40 per cent rather than maintaining a free float of a similar size has introduced room for different interpretations of the law, given that the business owners can argue that the shares they remain with are also listed in the market.


Read More


Category: business news opinion corporate topnews economy markets lifestyle

Suggested

11 hours ago, 00:07
@StandardMedia - By: Lee Mwiti
State offers to make refunds on housing tax

CS assures those who do not qualify for houses under proposed State plan that they will get back their contributions. ...

Category: business news
1 hours ago, 10:23
@BusinessDaily - By: Galgallo Fayo
Embattled UNEP head refunds travel expenses

The Unep boss makes clear his intention to stay put, insisting that he will accept personal responsibility . ...

Category: business news
1 hours ago, 10:12
@BusinessDaily - By: Galgallo Fayo
Karume estate in deeper trouble

KRA issued the Jacaranda Hotels Limited with an enforcement notice on January 12, seeking immediate payment of tax arrears amounting to Sh197 million. ...

Category: business news lifestyle markets
Now
@BusinessDaily - By: Victor Juma
Uhuru hits consumers with more hidden taxes

Tough times ahead as it emerges that President’s memo included an array of new and higher levies expected to significantly raise the cost of living. ...

Category: business news opinion lifestyle
11 hours ago, 00:07
@StandardMedia - By: Moses Omusolo
Vivo wraps up Engen deal for Sh20 billion

Pact will see firm take over rival’s outlets in eight countries, including Kenya. ...

Category: business news
17 hours ago, 18:15
@BusinessDaily - By: Brian Ngugi
Uhuru slaps M-Pesa with 66pc mobile cash tax rise

The cost of sending money through mobile services such as Safaricom’s M-Pesa will increase further after President Uhuru Kenyatta proposed to raise tax on the services from 12 per cent to 20 per ...

Category: business news

@BusinessDaily

Listing firms to cede 40pc stake to enjoy tax cut in bill

4 months ago, 17 Maý 07:45

By: Charles Mwaniki

Business owners taking firms public via a stock market listing will have to cede at least a 40 per cent stake to qualify for a lower corporate tax, according to a new less generous Income Tax Bill.

The draft bill says those listing the 40 per cent of shares will get to pay 25 per cent corporate tax for five years, compared to 30 to 35 per cent for other companies.

Under the existing law that the Treasury wants to repeal, companies listing 40 per cent of issued shares get an incentive of paying 20 per cent in corporate tax for five years.

Those listing 30 per cent stake get to pay 25 per cent tax, similar to firm’s listing via introduction.

The amendments therefore collapse the different tax incentives into one, potentially making listing by family-owned firms less attractive for the owners who would like to retain a greater degree of control over companies.

“There is no tax advantage in the new stipulation, especially at a time when we have seen firms delisting from the market. In a way it is taking away incentive to list,” said ABC Capital corporate finance manager Johnson Nderi.

New proposals

The Capital Markets Authority (CMA) had not responded to Business Daily queries on the new proposals by the time of going to press. It has, however, been calling for additional tax incentives to entice firms to list.

The Nairobi Securities Exchange (NSE) #ticker:NSE has gone through an IPO drought in recent years, with only two (the NSE self-listing and the Stanlib I-Reit) in the last six years.
Many of the smaller firms that have come into the market in the last six years have opted to list by introduction, which automatically gave them the tax incentive while allowing the owners of some, like Flame Tree Group and Nairobi Business Ventures, to sell just 15 per cent stakes to the public each and retain the lion’s share of the issued shares.

Mr Nderi added that the stipulation in the law of listing 40 per cent rather than maintaining a free float of a similar size has introduced room for different interpretations of the law, given that the business owners can argue that the shares they remain with are also listed in the market.


Read More

Category: business news opinion corporate topnews economy markets lifestyle

Suggested

11 hours ago, 00:07
@StandardMedia - By: Lee Mwiti
State offers to make refunds on housing tax

CS assures those who do not qualify for houses under proposed State plan that they will get back their contributions. ...

Category: business news
1 hours ago, 10:23
@BusinessDaily - By: Galgallo Fayo
Embattled UNEP head refunds travel expenses

The Unep boss makes clear his intention to stay put, insisting that he will accept personal responsibility . ...

Category: business news
1 hours ago, 10:12
@BusinessDaily - By: Galgallo Fayo
Karume estate in deeper trouble

KRA issued the Jacaranda Hotels Limited with an enforcement notice on January 12, seeking immediate payment of tax arrears amounting to Sh197 million. ...

Category: business news lifestyle markets
Now
@BusinessDaily - By: Victor Juma
Uhuru hits consumers with more hidden taxes

Tough times ahead as it emerges that President’s memo included an array of new and higher levies expected to significantly raise the cost of living. ...

Category: business news opinion lifestyle
11 hours ago, 00:07
@StandardMedia - By: Moses Omusolo
Vivo wraps up Engen deal for Sh20 billion

Pact will see firm take over rival’s outlets in eight countries, including Kenya. ...

Category: business news
17 hours ago, 18:15
@BusinessDaily - By: Brian Ngugi
Uhuru slaps M-Pesa with 66pc mobile cash tax rise

The cost of sending money through mobile services such as Safaricom’s M-Pesa will increase further after President Uhuru Kenyatta proposed to raise tax on the services from 12 per cent to 20 per ...

Category: business news
Our App