The government has announced a new financial levy on contractors providing goods and services to both national and county governments, starting September 1, 2024.
This mandate, detailed in the Levy Order, 2023, imposes a 0.03% levy on the total value of procurement contracts, excluding taxes.
The Public Procurement Regulatory Authority (PPRA) made this announcement on August 30, 2024.
The levy will apply to all new contracts, including extensions, renewals, and variations.
For instance, a contractor with a Ksh1 billion project will incur a Ksh300,000 levy, while a Ksh1 million contract will attract a Ksh300 levy.
This levy will be applicable to all procurement contracts, including Local Service Orders (LSOs) and Local Purchase Orders (LPOs). Contractors are required to remit the levy by the 20th of the following month, with a 5% penalty imposed on overdue amounts each month.
Procuring entities must file monthly returns on the Public Procurement Information Portal, detailing levies collected and remitted.
This initiative reflects the government’s commitment to enforcing compliance with the new regulations.
Initially introduced under last year’s “capacity building levy” initiative, this charge aims to enhance public procurement systems.
However, it is anticipated to increase the cost of doing business with the government, potentially impacting smaller contractors.
Currently, there are 7,554 contracts recorded on the Public Procurement Information Portal, with the total value of procurement contracts estimated between Ksh1.45 trillion and Ksh1.89 trillion.
The levy is expected to boost government revenues, though its impact on smaller businesses is a notable concern.