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As of October 1, 2024, Kenya has introduced a new system for healthcare contributions called the Social Health Insurance Fund (SHIF), which has replaced the former National Hospital Insurance Fund (NHIF). This change is part of the government’s broader commitment to enhancing healthcare access and ensuring affordability for all citizens. Below, we break down everything you need to know about SHIF contributions, eligibility for tax relief, payment deadlines, and the impact on different groups.

Key Changes Under the SHIF

Under the SHIF framework, every individual residing in Kenya is now required to contribute a percentage of their gross income to the Social Health Authority. This is aimed at ensuring that health coverage is accessible and sustainable. Here are the main points to consider:

• Contribution Rate: SHIF contributions are set at 2.75% of an individual’s gross income.
• Minimum Contribution: Regardless of income, a minimum monthly contribution of KES 300 is required.

This uniform approach ensures that everyone can access basic healthcare, and the contribution structure is intended to be equitable, with contributions aligned to income levels.

Tax Relief on SHIF Contributions

To make healthcare contributions more affordable, the Kenyan government has introduced a tax relief of 15% on SHIF contributions. This relief is granted under Section 31 and Paragraph 2, Head A of the Third Schedule of the Income Tax Act. However, it’s important to note the following limits:

• Monthly Cap: The maximum tax relief you can claim is KShs. 5,000 per month.
• Annual Cap: The maximum annual relief is capped at KShs. 60,000.

This tax relief is applied not only to SHIF contributions but also to health insurance premiums. Essentially, individuals can enjoy a combined tax relief on both premiums and SHIF contributions, up to the specified limits.

Who Needs to Contribute?

The SHIF system applies to various groups in Kenya. Here’s a breakdown:

1. Employed Individuals: Contributions are deducted automatically from the payroll, ensuring consistent compliance.
2. Self-Employed Individuals: Contributions must be made directly to the Social Health Authority, allowing flexibility for those not on a payroll system.
3. Indigent and Vulnerable Populations: Recognizing the economic challenges faced by some groups, the government will subsidize SHIF contributions for individuals categorized as indigent or vulnerable, ensuring no one is left without healthcare.

Payment Deadlines

Timeliness is crucial in the SHIF system to avoid penalties. All contributions are due monthly, with a payment deadline set for the 9th of the following month. If a contribution is missed, a penalty of 2% of the unpaid amount will be applied for each month it remains unpaid. This penalty is meant to encourage timely payments and maintain the financial stability of the healthcare fund.

Why SHIF Matters

The introduction of SHIF is more than a policy shift; it’s a move towards universal healthcare for all Kenyans. By contributing to SHIF, individuals not only ensure their own access to essential health services but also support a system that aims to provide healthcare coverage for the entire population. The 15% tax relief on contributions is an added advantage that makes it easier for Kenyans to fulfill their contribution obligations without feeling an undue financial strain.

How SHIF Will Impact Businesses

For employers, the introduction of SHIF means payroll adjustments and ensuring that deductions for employees’ contributions are remitted on time. This change also implies that businesses will need to update their payroll systems to align with the new SHIF requirements and deadlines.

For tax and payroll professionals, the new SHIF contributions bring additional layers of compliance. Ensuring that contributions are accurately deducted and remitted by the 9th of each month is crucial to avoid penalties. Furthermore, the need to keep track of the tax relief caps for employees makes it essential to have a reliable payroll management system in place.

Final Thoughts

The SHIF contribution system represents a step towards better healthcare for all Kenyans. While the change might bring new compliance responsibilities, the tax relief is designed to make contributions manageable and sustainable. As October 1st marks the beginning of this new era in healthcare funding, both employers and individuals must stay informed about their obligations and take advantage of the tax relief provided.