Kenya’s healthcare system has undergone a significant transformation with the enactment of the Social Health Insurance Act, which introduced the Social Health Insurance Fund (SHIF) to replace the National Health Insurance Fund (NHIF). This shift, part of broader reforms to enhance healthcare accessibility and quality, has implications for taxpayers, particularly regarding insurance relief.
The Social Health Insurance Act repealed the NHIF Act, effectively transitioning Kenya’s medical insurance framework to SHIF. Designed to align with the government’s Universal Health Coverage (UHC) goals, SHIF aims to address the shortcomings of NHIF by restructuring contributions and benefits.
However, this transition has created a gap in tax relief eligibility. Under the current provisions of the Income Tax Act:
- Insurance relief is available for health policies commencing on or after January 1, 2007, or contributions made to NHIF under the former NHIF Act.
- With NHIF now repealed, these reliefs no longer apply to contributions made to SHIF under the new law.
In a public notice, the Kenya Revenue Authority (KRA) addressed this issue, confirming that:
- Contributions to SHIF are not eligible for insurance relief under the existing Income Tax Act framework.
- The Tax Laws (Amendment) Bill, 2024, has proposed amendments to extend tax deductions to SHIF contributions, aligning them with the relief previously available for NHIF.
The current lack of tax relief on SHIF contributions has raised concerns among taxpayers, particularly public officers and civil servants who rely heavily on medical insurance schemes. Without this relief, the financial burden on outpatient and inpatient healthcare costs may increase for many households.
However, the proposed amendment to the Tax Laws aims to address this gap. If enacted, SHIF contributions would become tax-deductible, offering financial relief to contributors and reinforcing the government’s commitment to affordable healthcare.
As SHIF takes root, the proposed changes could significantly benefit taxpayers by restoring the tax advantages previously associated with NHIF. This development would not only ease financial strain but also support Kenya’s healthcare reforms, ensuring that the transition to SHIF achieves its intended objectives of improved accessibility and quality care.
For now, contributors to SHIF should monitor updates on the Tax Laws (Amendment) Bill, 2024, as its passage would mark a critical step in making Kenya’s new healthcare framework more inclusive and financially sustainable.
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