KUSCCO seeks review of Tax Act for more equitable tax treatment for Saccos

Kenya Union of Savings & Credit Cooperatives (KUSCCO) has proposed amendments to Section 19A of the Income Tax Act to create a more equitable and neutral tax framework for all cooperative societies in Kenya, regardless of their form

The current Income Tax Act (ITA) in Kenya presents a differential treatment between cooperative societies that is based on membership.

Cooperative societies are classified as follows for taxation: designated primary societies that are registered and operate as credit and savings cooperatives, other than primary societies other than Saccos, every other designated cooperative societies and Primary societies given meaning in the ITA borrows from the Cooperatives Act and is restricted to individual persons.

KUSCCO says the current differential tax treatment of saccos that is based on the pedantic difference between individual persons and groups of individual persons is problematic because it creates an uneven playing field among saccos.

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This can hinder the growth and sustainability of other saccos, which may struggle to compete under a heavier tax burden.

“Addressing these issues would require a review of the Income Tax Act to ensure a more equitable tax treatment for saccos, recognizing their shared goals and contributions to the economy and community,” KUSCCO stated.

They proposed for expanding the meaning of the term “designated primary societies” to include groups of individual persons. Sacco membership may include individual persons or groups of individual persons.

KUSCCO detailed that reviewing of the act will ensure a more equitable tax treatment for all types of cooperatives, recognizing their shared goals and contributions to the economy and community.

The umbrella body key proposals to the National Treasury also include harmonization of tax rates on SACCO dividends and interest as part of ongoing commitment to a fair and inclusive tax environment.

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They proposed that the tax rates for interest and dividends paid by saccos be harmonized to 5% respectively.

The KUSCCO is also seeking tax relief for low-income earners and ensuring fair tax treatment for SACCOs with both individual and group memberships.

The review should aim to align the tax treatment of saccos whose membership include groups of individual persons to ensure fairness and equity.

It will also ensure that the tax provisions do not disincentive the formation and operation of any type of cooperative society, including saccos whose membership includes both groups of individual persons and individual persons.

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“By implementing these changes, the tax framework will better support the cooperative movement in Kenya, fostering a more equitable and sustainable environment for all cooperative societies,” KUSCCO stated in statement.

In a letter dated 27th May 2025, and directed to the Clerk of the National Assembly Departmental Committee on Finance and National Planning KUSCCO Group Managing Director Arnold Munene called for an opportunity to engage the national assembly to further deliberate on the proposals and recommendations.

By Obegi Malack

Obegimalack@gmail.com

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