KRA Clarifies Insurance Relief on SHIF Contributions

The Kenya Revenue Authority (KRA) has released a circular regarding the application of insurance relief for contributions to the Social Health Insurance Fund (SHIF), which has emerged as Kenya’s new medical insurance scheme for public officers and civil servants. This comes following the enactment of the Social Health Insurance Act, which replaced the former National Health Insurance Fund (NHIF) Act. As SHIF takes root, it is essential for taxpayers to understand how these changes affect eligibility for insurance relief, particularly when it comes to offsetting hospital bills and other medical benefits under this comprehensive medical insurance scheme.

Clarifications from KRA

In its public notice, KRA clarified the current policy, stating:

1. “The Income Tax Act provides for insurance relief for a health policy whose term commences on or after the 1st January, 2007, or a contribution made to the National Health Insurance Fund (NHIF).”

2. “The relief as provided refers to the NHIF under the National Health Insurance Fund Act, which was repealed by the Social Health Insurance Act.”

This indicates that, under the current legal framework, only contributions to NHIF as defined by the former NHIF Act qualify for insurance relief.

3. “The relief as currently provided under the Income Tax Act does not apply to contributions made to the SHIF under the Social Health Insurance Act.”

This statement confirms that SHIF contributions are ineligible for the existing insurance relief, representing a shift in policy for many Kenyans.

Impact on SHIF Contributions and Tax Relief

The transition from NHIF to SHIF is a key development in Kenya’s public healthcare framework, but the lack of insurance relief on SHIF contributions raises financial concerns for public service members. Without tax deductions similar to those previously available under NHIF, public officers may feel a higher burden on outpatient and inpatient medical costs.

KRA noted that “The Tax Laws (Amendment) Bill, 2024 has proposed an amendment to provide a deduction for SHIF contributions against taxable income.” If Parliament adopts this amendment, it could alleviate the tax burden for public officers and others enrolled in the SHIF scheme. This change could prompt National Treasury to allocate resources toward easing medical scheme costs for civil servants.

Voice Your Opinion

Should contributions to SHIF be eligible for insurance relief under the Income Tax Act? Do you believe it’s essential for Treasury to support this scheme to ensure comprehensive medical benefits for all Kenyans, including public service professionals? Let us know by participating in this quick poll!

Next Steps

Until any amendments are enacted, contributions to SHIF will not qualify for insurance relief. Public officers and others under SHIF are encouraged to stay updated on any new scheme developments through trusted sources, such as Treasury, Safaricom’s healthcare communication channels, and by checking their email for further clarification from SHA (Social Health Authority). Legislative updates may also address contributions to the medical scheme fund, with a view toward providing clarity on the future of healthcare costs for civil servants and other Kenyans.

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