Kenya: Tax proposals in 2025/2026 budget
Minimum top-up tax due date; APAs for related-party transactions
Share
June 13, 2025
The 2025/2026 budget—presented on June 12, 2025—introduced several tax proposals, including:
- Digital asset tax: Reduction of the digital asset tax from 3% to 1.5% of the transfer or exchange value
- Retirement benefits exemption: Amendments to the First Schedule of the Income Tax Act (ITA) to refine the categorization of exempt retirement benefits, specifically payments of gratuity and other allowances under a public pension scheme
- Preferential corporation tax rates for NIFC-certified companies: Companies certified by the Nairobi International Financial Centre (NIFC) would benefit from a reduced corporate tax rate of 15% for the first 10 years and 20% for the following 10 years, contingent on investment and staffing conditions; dividends paid by these companies may be exempt from tax if reinvested significantly in Kenya
- Diminution allowance: Reintroduction of a diminution allowance for items such as loose tools and industrial tools, allowing for deductions in the first year of purchase to improve business cash flows
- Minimum top-up tax due date: Payable by the end of the fourth month after the year-end, aligning with the balance of tax payment period and OECD provisions
- Advance pricing agreements (APA): Multinational entities may be allowed to enter into agreements with the Commissioner regarding the pricing of related-party transactions, particularly for complex transactions to mitigate transfer pricing disputes
Read a June 2025 report (16 pages) prepared by the KPMG member firm in Kenya