SMEs get tax reprieve as they list at NSE

Small businesses seeking to enter the Nairobi Securities Exchange (NSE) should not worry about their tax records two years prior to joining. Finance Cabinet Secretary Henry Rotich has given firms with tax issues an amnesty to list at the Nairobi Bourse, where they will only be required to pay principal taxes.

Geoffrey Odundo CEO NSE VAELL
NSE CEO, Geoffrey Odundo, speaking during the incubation of VAELL on Ibuka

The startups segment at the NSE, the Growth and Enterprise Market Segment (Gems) was launched by the Capital Markets Authority, with favourable listing conditions for the startups to raise finance from the capital markets for growth.

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Mr. Rotich said some small firms feared that upon listing, Kenya Revenue Authority might review their books and slap them with backdated penalties. This makes them avoid the capital market.

“The uptake has not been good in view of potential back taxes that the enterprises may be facing,” Rotich said yesterday.

“In this regard, I propose to introduce an amnesty on the tax penalties and interest, on any outstanding tax for two years prior to the listing, for startups that list under the Gems programme to encourage them to list and clean their tax records. The principal taxes shall, however, be paid in full.”

Since the launch of the Gems market, the NSE has not been all too successful in recruiting the startups. The Gems section was expected to list 19 firms by 2017 and 39 listings by 2023. But so far, only five firms have been listed in that segment.

In 2016, only one firm, K-Shoe, subscribed to the market, joining HomeAfrica, Kurwitu Ventures, Flame Tree Group and Atlas Development in the segment.

Atlas Development has since been delisted, further eroding the number of firms in the segment. To live up to their target of listing three to four companies annually, Capital Markets Authority Chief Executive Paul Muthaura said they would engage firms through an incubator programme dubbed Ibuka.

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The incubator currently boasts 12 firms, including APT Commodities, Moad Capital, Bluenile Rolling Mills, Myspace Properties, Vehicle and Equipment Leasing Limited (VAELL) and Polygon Logistics.

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