The Finance Act 2025 allows NIFCA-certified companies to benefit from reduced corporate tax rates, tax exemptions on dividends with reinvestment conditions.

Kenya’s President William Ruto signed the Finance Act 2025 into law on 26 June 2025.

This follows after Kenya’s National Treasury published the 2025-26 Budget Statement on 12 June 2025, outlining key tax measures aligning with proposals highlighted in the 2025 Finance Bill.

Earlier, Kenya’s Cabinet Secretary for National Treasury and Economic Planning, John Mbadi, presented the Finance Bill 2025 on 30 April 2025.

Corporate tax rates and exemptions

One key aspect of the 2025 Finance Act is to establish Kenya’s position as a regional financial hub through reduced corporate tax rates for companies and startups, and tax exemption for certified holding companies and regional headquarters.

The Act offers:

  • A 15% corporate tax rate for 10 years and 20% for the next 10 years to companies certified by the Nairobi International Financial Centre Authority (NIFCA) that invest at least KES 3 billion over three years, with a requirement to employ Kenyans in senior management roles;
  • Start-ups certified by NIFCA have a 15% tax rate for three years and 20% for the following four years;
  • Tax exemption on dividends earned by certified holding companies and regional headquarters, provided that at least KES 250 million is reinvested annually in Kenya.

VAT amendments

  • Amends the VAT Act to clearly define a “Tax Invoice” to address existing ambiguities;
  • Mandates the issuance of tax invoices for all supplies, including taxable and exempt;
  • Reduces the period for claiming refunds on bad debts from three years to two years, allowing taxpayers to either request a refund or offset it against future VAT liabilities;
  • Enables the recovery of VAT when exempted or zero-rated goods/services are used for unintended purposes in Special Economic Zones;
  • Reclassifies some locally consumed zero-rated goods and services to exempt status to prevent revenue leakages;
  • Eliminates exemptions for goods with multiple uses that complicate effective monitoring.

Digital asset tax

The digital asset tax rate has been reduced from 3% to 1.5%.

Minimum top-up tax due date

The minimum top-up tax payment due date is specified at the end of the fourth month after a company’s accounting period concludes.

Advance pricing agreements (APA)

The Act authorises the Commissioner to establish Advance Pricing Agreements with multinationals to minimise cross-border tax disputes.

Fringe benefit tax 

Employers will pay fringe benefit tax at the corporate tax rate, while withholding tax on qualifying dividends and interest is considered final.

Betting levy

The Finance Act 2025 introduces a 5% excise levy on betting deposits to curb gambling addiction.

Virtual asset services levy

A 10% fee on virtual asset services has been introduced to regulate and capitalise on the digital economy.

Excise duty amendments

Amendments to excise duty laws in Kenya have been introduced. Provisions now include the levy of excise duty on excisable services provided via the internet or electronic networks. Non-resident persons without a physical presence in Kenya are subject to these excise duty provisions.

Tax exemption of gratuity payments

All gratuity payments, public or private, will be exempt from tax.

The measures will go into effect on 1 July 2025.