Kenya: Five-year tax loss carryforward limit under Finance Act 2025
Effective July 1, 2025
The Kenya Revenue Authority (KRA) on September 1, 2025, issued a private ruling addressing the new five-year limit on loss carryforwards, which was introduced by the Finance Act 2025 (read TaxNewsFlash).
Background
The Finance Act, 2025 amended Section 15(4) of the Income Tax Act (ITA) to introduce a limit of five years within which tax losses may be carried forward and deducted. The amendment became effective on July 1, 2025, and now provides that:
Where the ascertainment of the total income of a person result in a deficit for a year of income, the amount of that deficit shall be an allowable deduction in ascertaining the total income of such person for that year and the succeeding five years of income.
This new wording has two direct consequences:
- Tax losses may now be carried forward for a maximum of five years from the year in which they arise
- Any portion of a loss that remains unutilised after the five-year period will lapse and cannot be used to offset future taxable profits
Read a 2025 report prepared by the KPMG member firm in Kenya
For more information, contact a KPMG tax professional:
Stephen Waweru | swaweru@kpmg.co.ke