Njeru Mwangi – Chartafai LLP

Harnessing Artificial Intelligence (AI) in Tax Optimization

The arrival of Artificial Intelligence (AI) brings revolutionary opportunities for future tax optimization processes because of continual business changes. AI’s capability to inspect extensive data alongside its predictive functionality and process automation allows tax authorities together with businesses to enhance compliance and minimize inefficiencies and maximize tax administration efficiency.

The capabilities of AI systems become evident while detecting tax-related fraud activities and fighting against them. VAT fraud poses one of the major challenges among all tax fraud schemes. AI systems make diagnoses of normal patterns from transaction data to detect duplicate invoices as well as abnormal trading behaviors. The discovery of fraudulent activities before they spread becomes possible for tax authorities through their operations which safeguard system security along with preventing tax loss.

The tax authorities expand their tax base through AI systems which help identify new taxable entities. Economic monitoring powered by artificial intelligence allows detection of fresh revenue streams in the informal sector which reaches vast proportions of economies. AI technology enables organizations to monitor satellite images together with mobile money data alongside other information sources for establishing market sizes of informal markets. The tax authority leverages gathered data to develop proper formalization procedures to include informal businesses into their tax system.

The tax consulting optimization process gets revolutionized by AI because it utilizes policy creation together with extensive impact analysis. AI systems analyze previous data through computational models to determine multiple targeted situations that assist policymakers in developing tax protocols that are effective and unbiased. Using predictions from AI analytics helps decision-makers make data-driven choices because AI systems provide forecasts about revenue performance besides enforcement data and economic development percentages.

Business organizations achieve better flexibility through AI systems during periods of accelerated business environment transformations. Better systems and perpetual strategies must come from tax authorities due to the digital world’s effect on e-commerce and remote work which alters traditional business operations. AI prediction functionalities help tax authorities identify upcoming challenges which enables them to modify their operational guidelines. AI enables tax officials to perform real-time digital cross-border operation monitoring which gives them awareness about emerging industry trends and enables them to obtain tax revenue from new industrial sectors.

AI implementation in tax optimization helps establish clear standards of financial transparency within operations. The real-time capability of AI analytics together with automated processes decreases both corruption and human error occurrences. Taxpayers choose to comply voluntarily with tax authorities because the system operates fairly and impartially therefore they maintain trust in the system.

Chartafai – Audit Firm in Kenya
By Njeru Mwangi
Managing Partner

Navigating Compliance in Kenya – What Businesses Need to Know

Maintaining compliance in Kenya’s changing regulatory environment is crucial for the stability and expansion of businesses, in addition to being required by law.

Businesses need to keep ahead of the curve in order to prevent expensive fines and harm to their reputation due to changes in tax regulations, financial reporting standards, and fraud concerns.

What you should know is as follows;

1. Effects of IFRS Changes on Businesses

Financial reporting is impacted by the ongoing evolution of the International Financial Reporting standards(IFRS) compliance, tax planning, and reporting. Important updates consist of:

By unifying the measurement and recognition of insurance contracts, IFRS 17(Insurance Contracts) mandates that insurers increase the transparency of financial statements.
Clearer disclosures, such as how companies categorize obligations as current or non-current, are now emphasized in IAS 1 (Presentation of Financial Statements)(Presentation of Financial Statements)
New guidance on deferred taxation of assets and liabilities from transactions such as leases and decommisioning expenses is introduced by IAS 12 (Income Taxes)

Tip: Companies should evaluate the effects of these modifications on their tax planning and financial statements.

2. Common Tax Compliance Mistakes & How to Avoid Them

The Kenya Revenue Authority (KRA) is scrutinizing Kenyan companies more and more when it comes to taxes.

Common compliance pitfalls include:

Late VAT & PAYE filings, leading to heavy penalties.
Incorrect tax deductions, resulting in audits and fines.
Non-compliance with eTIMS, as real-time tax reporting is now mandatory.
Withholding Tax (WHT) errors, where businesses fail to remit the correct amounts on payments for professional services, interest, and dividends.

Solution: Ensure automated tax tracking, regular compliance reviews, and a clear understanding of sector-specific WHT obligations to avoid disputes with KRA.

3. Your First Line of Protection Against Fraud: Internal Audits

Internal audits are an essential tool for maintaining financial integrity because fraud risks are rising. An effective internal auditing system is beneficial

Early detection of financial irregularities and misstatements is key.
Prevent fraud and bolster internal controls.
Gain the confidence of stakeholders, investors and regulators.

Tip: Consistent internal audits improve openness and guarantee adherence to financial reporting guidelines and tax regulations.

Important Compliance Topics for Companies

Businesses should concentrate on the following areas to ensure compliance:

Finance compliance – Make sure taxes are accurate, avoid fraud, and adhere to IFRS/GAAP.
Regulatory Compliance – Comply with industry regulations, hold onto your licenses, and keep yourself informed.
Employement and labor law – Manage contracts, maintain workplace equity, and abide by wage laws.
Cybersecurity & Data Protection: Secure data, train staff, and adhere to GDPR/CCPA.
ESG Compliance: Adhere to ethical norms, comply with environmental regulations, and coordinate CSR.
Anti-Corruption & Ethics: Train employees, promote whistleblowers, and abide by anti-bribery legislation.
Industry-Specific Compliance: OSHA for manufacturing, HIPAA for healthcare, and AML/KYC for finance.
Contractual & Supplier Compliance: Keep an eye on suppliers, control risks, and review contracts.
Risk management includes conducting audits, keeping an eye on compliance, and being crisis-ready.

Key compliance areas of business — “Navigating the Compliance Landscape: A Deep Dive into Key Areas for Business Success – Coming Soon in Detailed Articles!”
By Njeru Mwangi
Managing Partner

Kenya’s 2025/26 Budget Policy Statement: Key Highlights and Implications

Kenya’s 2025/26 Budget Policy Statement has been tabled in the National Assembly, revealing notable shifts in the country’s fiscal planning. While total government expenditure is set to reduce, some key areas—particularly recurrent spending—are receiving increased allocations.

Below is a breakdown of the major adjustments and what they mean for the economy.

1. Lower Spending, Higher Recurrent Costs

• Total expenditure was cut by KES 66.2B to KES 4.263T.

• Recurrent spending up by KES 19.4B to KES 3.096T.

• Development budget down by KES 79.6B to KES 725.1B.

2. Revenue Challenges and Widening Deficit

• Revenue target cut by KES 130.8B to KES 3.386T.

• Ordinary revenue down KES 183.8B, while Appropriation-in-Aid up KES 52.9B.

• Deficit widens by KES 71.6B to KES 831.0B.

3. Shift in Borrowing Strategy

• Domestic borrowing target up by KES 138.4B to KES 684.2B.

• External borrowing decreased by KES 66.9B to KES 146.8B.

• More local borrowing could keep interest rates high.

4. Devolution Takes a Hit

• County allocations reduced by KES 6.0B to KES 436.7B.

• This could strain essential services at the county level.

Impact on Kenyans

• Fewer infrastructure projects due to lower development spending.

• Higher domestic borrowing may keep loan rates high.

• Counties may struggle with reduced funding.

• Revenue shortfalls could lead to future tax hikes.

The government faces a tough balancing act—tightening spending while meeting growing obligations. The final budget will be key in shaping Kenya’s economic outlook.

Chartafai – Audit Firm in Kenya
By Njeru Mwangi
Managing Partner

The Future of Auditing in Kenya: Emerging Trends and Technologies

Auditing profession is progressing to an era of change in Kenya due to the technological advancement and changing regulatory landscape, and growing customer expectations. In an era where companies are operating in a varied and challenging space, audit firms also need to transform themselves and offer efficient and valuable services. Five key developments are shaping the future of auditing

Technology-Driven Audits

Gone are traditional sampling techniques replaced by sophisticated data analytics, artificial intelligence, and automation empowering auditors to review entire datasets almost in real-time. Cloud-based audit platforms take this a step further, enabling real-time collaboration while providing deeper financial insights.

Remote and Hybrid Auditing

Cloud accounting solutions have changed the landscape for audits, allowing access to data from anywhere and minimizing full onsite engagements. This hybrid approach provides more flexibility without compromising audit integrity and effectiveness.

Regulatory and ESG Focus

Real time VAT invoicing (eTIMS) and enhanced tax reporting are among the evolving VAT regulations that Kenyan businesses will need to navigate. Demand for Environmental, Social, and Governance (ESG) reporting is increasing from both investors and regulators, compelling auditors to assure financial and non-financial statements alike (KRA Public Notices 2024, NSE ESG Disclosure Guidance 2023).

Cybersecurity and IT Risk

As businesses digitize their operations, cybersecurity risks have emerged as a key focus for audit. Today, auditors evaluate IT controls to protect against cyber threats and system vulnerabilities to ensure business resiliency against this new level of risk.

Expanding Role: Beyond Compliance

Audit has matured from being a compliance activity to adding advisory services. Auditors play a crucial role in providing strategic insights about risk management, operational efficiencies, and business growth, and that means businesses want trusted partners in decision-making.

NSSF NEW RATES 2025

National Social Security Fund (NSSF) contribution rates, which will take effect on February 1, 2025. These adjustments are part of the government’s ongoing efforts to enhance social security provisions for all salaried Kenyan employees. These changes are put into practice through the NSSF Act of 2013 to achieve better social security outcomes for Kenyan employees.

Important Updates:

• Contribution Rates: Employees must contribute 6% of their monthly salary to NSSF but employers must match these contributions so the monthly total effectively reaches 12%.

• The set salary limits have received a nationwide increase. According to newly implemented rules the minimum contribution raised to Ksh 8,000 and maximum contribution increased to Ksh 72,000. The new rules dictate that payroll contributions will apply proportionately to salary amounts spanning from Ksh 8,000 to Ksh 72,000 for all staff in this income bracket.

• Increased Deductions: Monthly NSSF payments for an employee earning Ksh 80,000 monthly will experience a complete pay increase from Ksh 2,160 all the way to Ksh 4,320.

• Payroll Adjustments: The update of payroll systems by employers becomes necessary to fulfill legal requirements as well as reflect the modified payment rates. Employees should anticipate receiving fewer funds in their take-home payments owing to the larger tax deductions.

NHIF vs SHIF

Kenya’s Social Health Insurance Fund (SHIF), replacing the National Hospital Insurance Fund
(NHIF), is transforming healthcare access with a structured, income-based contribution model
under the Social Health Authority (SHA). SHA administers three key funds. One of the funds is
Primary Healthcare Fund that provides preventive services. The other is the Emergency, Chronic,
and Critical Illness Fund which supports urgent and costly treatments. Lastly, the Social Health
Insurance Fund (SHIF) that covers routine healthcare, outpatient services, chronic care, maternal
health, and vaccinations.
SHIF offers a broad range of healthcare services, including preventive, curative, and
rehabilitative care, with a focus on outpatient services, chronic disease management, maternal
and child health, and vaccinations. Contributions are set at 2.75% of monthly income. Employers
match this amount for salaried employees, while self-employed individuals pay 2.75% with a
minimum of KES 300. Contributions are due by the 9th of each month, with late penalties.
Registration requires a National ID for adults, a birth certificate for children, or an Alien ID for
foreign residents. Upon the implementation of SHIF regulations, every resident in Kenya must
apply for membership within 90 days by filling out Form 1 and submitting the necessary
identification documents. Dependents—spouses, children, and financial dependents—are
covered, extending healthcare to entire families.
Before SHIF, the NHIF system followed a tiered contribution model where members contributed
based on their income, starting from KES 150 for low-income earners and increasing in steps up
to KES 1,700 for individuals earning higher wages.
SHA ensures provider accreditation, quality through audits, and accountability. Though it’s a
major stride toward universal healthcare, some challenges remain, such as managing costs for
diverse income levels.

AUDIT SENIOR – Chartafai

Chartafai is a professional services firm of Certified Public Accountants that leverages technology to provide timely solutions with convenience and ease of accessibility. We value our clients and strive to understand their needs, business models and expectations to deliver within the ethical standards.
Our Professional services are structured against the background of independence, objectivity, value-addition, customer focus and professionalism. Chartafai is recognized for producing tailor made solutions based on our clients’ needs. We consider our customer satisfaction to be an authentic measure of our performance.

JOB DESCRIPTION
We are seeking to recruit an Audit Senior to fill a vacancy. The Audit Senior reports to the Audit and Assurance Manager and is responsible for organizing and managing client engagements and projects including the completion of engagement tasks and project components. 

RESPONSIBILITIES

• Manage assurance engagements by defining the audit strategy in consultation with the senior partner and execute it in compliance with Chartafai policies and protocols. When required, you’ll personally execute complex audit procedures and lead teams or parts of teams on engagements, depending on the size of the engagement
• Developing and implementing policies and procedures
• Monitor the assurance team’s progress against the plan and alter it when needed
• Coach and develop people by sharing knowledge with team members and helping team members attain experiences that cultivate technical competencies Conduct timely performance reviews and provide performance feedback/on-the-job training.
• Builds strong working relationships with clients to gather information, resolve problems and to sell/cross-sell products or services.
• Ensure working papers are secured and arranged as required for review by partners.
• Identifies, communicates, and solves engagement and technical issues as well as communicating engagement progress in a timely and organized manner.
• Assists in identifying business development opportunities and in developing new business proposals, budgets and fee quotes.
• Assists in preparing billings and in collections.
• Works as an effective team member to successfully complete engagements including: - Preparing financial statements, footnote disclosures and management letter comments. - Assisting with engagement administration including developing audit programs and customized procedures, budgets and engagement letters.
• Establishing work schedules using effective project management techniques.
• Researching and analyzing financial statement and audit related issues.
• Strong project management, organizational skills and attention to detail.
• Strong analytical, technical and research skills.
• Ability to balance multiple priorities and complete assignments within time constraints and deadlines.
• Strong verbal and written communication skills.
• Ability to quickly adapt to changing client and business dynamics with recommended solutions.
 REQUIRED EDUCATION AND EXPERIENCE: 

If you fit the above description apply including application letter and your CV using the following email: , info@chartafai.com on or before 29 January 2024

System and Control Environments

Internal controls play a crucial role in business operations, as they establish a framework for efficient and effective management. The advantages of implementing internal controls are vast, including improved financial management, decreased risk of fraud and errors, and increased compliance with regulations and standards.

Enhanced financial management is one of the primary benefits of internal controls. It ensures that financial transactions are accurately recorded, monitored, and reported, resulting in precise financial statements that provide valuable insights into a business’s performance. Where financial management can be challenging due to factors such as currency fluctuations and inflation, the importance of internal controls is even more significant.

Internal controls also establish checks and balances that make it challenging for employees to engage in fraudulent activities or make mistakes that can negatively impact the business. This enhances the overall security of the organization.

Increased efficiency is another benefit of internal controls. By streamlining processes and eliminating unnecessary steps, time and resources can be saved, which is particularly crucial for small businesses that have limited resources.

Furthermore, internal controls can help businesses comply with regulations and standards. In highly regulated industries, it is crucial to ensure that businesses comply with the applicable laws and regulations. By implementing internal controls, businesses can avoid fines and other penalties.

Internal controls provide accurate and timely information to management, enabling informed decision-making. This is especially important in unpredictable business environments, where informed decisions can make all the difference. By implementing internal controls, businesses can improve their operations and increase their chances of success.

Supply and Dollar

The relationship between supply and the dollar is a critical concept in the world of economics. It is known that when the supply of goods and services increases, their prices tend to decline due to the excess of products available. On the other hand, when the supply of goods and services decreases, their prices tend to rise due to the shortage of products available in comparison to the demand.

Moreover, the value of the dollar is also impacted by supply and demand. If there is a high demand for the dollar, its value tends to increase compared to other currencies, while a low demand leads to a decrease in its value. Understanding this relationship is crucial, as it can significantly impact a country’s economy, particularly its ability to trade with other nations.

Over the past decade, the Kenyan shilling has experienced a significant depreciation, primarily due to persistent current account deficits, rising debt levels, and the surging prices of commodities such as crude oil. The weakening of the shilling can be attributed to the high demand for dollars from importers in the commodity and energy sectors, caused by the increasing crude oil prices globally. This situation was compounded by supply chain constraints and geopolitical pressures during the pandemic recovery period, which constrained supply in the economy.

In 2023, the Kenyan shilling continues to depreciate primarily due to the continued dollar demand from importers in the oil and energy sectors, leading to a shortage of dollars in the Kenyan market. Consequently, it is crucial to understand the relationship between supply and the dollar, particularly for those seeking a more comprehensive understanding of the global economy, as it impacts a country’s economic performance.

Sacco’s opportunities and challenges facing Sacco’s

Savings and Credit Cooperative Organizations (SACCOs) provide financial services to their members, but they face several challenges.

One is limited membership due to a lack of outreach beyond their region. To address this, SACCOs can invest in mobile banking and members-only platforms. Another challenge is outdated technology, which can be overcome by investing in modern digital systems and training staff to leverage technology.

Limited capital base is another issue that can be addressed through partnerships with development finance institutions. SACCOs also face competition from other financial institutions, which can be resolved by using business intelligence and analytics to offer unique services. Reporting and data management challenges can be resolved by using a SACCO management system.

Finally, manual processes, outdated technologies, and unreliable technology vendors can be overcome by investing in reliable and up-to-date systems. SACCOs can overcome their challenges and deliver quality services to members through investments in technology, training, partnerships, and governance structures.