Saccos, banks terminate loan calculations based on tax relief

Saccos, banks terminate loan calculations based on tax relief

Teachers and Civil servants will no longer get loans from commercial banks and saccos based on the tax relief.

Teachers Arena has learnt that most banks and saccos which opened the window for employees to seek loans based on the adjusted PAYE have now started to terminate the service.

The tax relief will come to an end this October 30th.

Mwalimu National Sacco has already issued a notice to teachers informing them of the changes. Teachers who are members of the sacco will not be able to get loans using the new tax relief after 12th October 2020.

Commercial banks have also not been left behind. An internal memo to National bank workers ordered a cease to loan issuance based on the latest PAYE formula.

Members of the bank will not be able to get loans calculated based on the formula after 20th October 2020.

President Uhuru had announced the tax relief measures to cushion employees due to the coronavirus pandemic.

Teachers have been enjoying the PAYE (Pay As You Earn) relief which some banks had converted into a borrowing power. Absa bank was the first commercial bank to issue teachers with loans based on the adjustments.

“Iam glad to inform you that we are now considering the New Tax relief in lending. You therefore stand a chance of higher amount qualification. For calculations and enquiries contact 07********” read an SMS sent to a teacher by the bank.

Some banks also gave teachers three months loan holiday (moratorium) to cushion them against the pandemic.

Pay As You Earn (PAYE) was reduced from 30 per cent to 25.

“There will be a reduction of the income tax rate from its maximum of 30 to 25 per cent,” said President Uhuru in April.

President Uhuru Kenyatta also directed the Treasury to offer 100 per cent tax relief for persons earning a gross income of Sh24,000.

Uhuru said a reduction of corporation tax will be from 30 per cent to 25 per cent.

“There will also be a reduction of the turnover tax rate from three per cent to one percent,” he said.

Uhuru also suspended the listing on CRB of any persons in micro small or medium enterprises whose loan accounts were due or in arrears effective April 1.

“..this is to protect jobs for our people and uncertainty for employers..” he said.

He further ordered the reduction of VAT from 16% to 14% effective 1st April.

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