The Kenya Revenue Authority (KRA) has issued an important update regarding the tax relief status of contributions to the newly established Social Health Insurance Fund (SHIF).
According to KRA, the tax relief currently available under the Income Tax Act does not extend to contributions made to SHIF.
KRA’s Clarification on SHIF and Tax Relief
The KRA clarified that while health insurance contributions to policies, including the National Health Insurance Fund (NHIF), have been eligible for tax relief since January 1, 2007, the situation has changed with the implementation of the Social Health Insurance Act. This new law replaced the NHIF Act and introduced SHIF, restructuring the country’s health insurance system as part of Kenya’s broader reforms to enhance healthcare accessibility and quality.
“The relief as currently provided refers to the NHIF under the National Health Insurance Fund Act, which was repealed by the Social Health Insurance Act,” KRA stated in a public notice on Friday.
As a result, contributions to SHIF are not currently eligible for tax relief under the Income Tax Act, marking a significant shift from the previous system that applied to NHIF contributions.
Future Amendments Could Allow Tax Deductions for SHIF Contributions
However, the KRA has noted that the Tax Laws (Amendment) Bill of 2024 includes proposed changes that could allow SHIF contributions to be tax-deductible. If passed, this amendment would align SHIF contributions with the previous NHIF tax relief arrangements, benefiting taxpayers by allowing them to deduct their SHIF contributions from taxable income.
The Transition from NHIF to SHIF
The introduction of SHIF, through the Social Health Insurance Act, is part of Kenya’s ongoing efforts to improve its healthcare system. The new legislation aims to address the challenges faced by the NHIF system and better meet the country’s healthcare needs, particularly with a focus on universal healthcare (UHC) goals. By replacing NHIF with SHIF, the government seeks to restructure contributions and benefits to ensure a more efficient and inclusive system for all Kenyans.
For now, citizens making contributions to SHIF should be aware that these contributions do not qualify for tax relief under the current Income Tax Act, but potential changes in the future could alter this status.
