Kenya’s National Treasury has released the 2025-26 Budget Statement on 12 June 2025.

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.

Reduced corporate tax rates for NIFC-certified firms

The 2025-26 budget provides 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 (NIFC) that invest at least KES 3 billion in new capital over three years. The budget also offers a 15% tax rate for the first three years and 20% for the next four years to NIFC-certified start-ups. Additionally, it exempts dividends from tax for NIFC-certified holding companies and regional headquarters that reinvest at least KES 250 million annually in Kenya.

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 budget stipulates that multinational entities may enter into agreements with the Commissioner on related-party transaction pricing, especially for complex cases, to reduce transfer pricing disputes.

Tax exemption of gratuity payments

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

Fringe benefit tax 

The budget mentioned that employers will pay fringe benefit tax at the corporate tax rate, while withholding tax on qualifying dividends and interest is considered final.

Excise duty amendments

Excise duty amendments include provisions to tax services provided online by non-residents without a physical presence in Kenya.

Diminution allowance

The budget allows for a complete cost deduction for items like industrial tools and loose tools (utensils, linen) in the first year of purchase, replacing the current three-year depreciation period.

VAT amendments 

Proposed amendments to the VAT Act aim to clarify the definition of a Tax Invoice, mandate invoices for all supplies, reduce the bad debt refund period from three to two years, and allow taxpayers refunds or offsets against VAT liabilities in the future. The 2025 budget also addresses VAT recovery for misuse of exempted or zero-rated goods and shifts certain zero-rated items to exempt status to prevent revenue loss.

These tax measures are set to take effect from 1 July 2025 after approval.

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