Kenya: New income tax exemption rules for collective investment schemes
New rules establish the framework for obtaining and maintaining income tax exemption under Section 20 of the Income Tax Act.
The Income Tax (Collective Investment Schemes Income Tax Exemption) Rules, 2026 were published in the Kenya Gazette on August 28, 2026, establishing the framework for collective investment schemes seeking and maintaining income tax exemption under Section 20 of the Income Tax Act.
A collective investment scheme may qualify for exemption when it:
- Is registered and compliant under the Capital Markets Act
- Was established solely to invest on behalf of unit holders or shareholders
- Has met all its tax obligations
Applications must be made in writing to the Commissioner. Once an application has been considered, the Commissioner will issue a written tax exemption certificate to the manager or trustee for the applicable year of income or may reject the application and provide the grounds for rejection. Schemes must also maintain separate, identifiable accounts for unit holders or shareholders that are exempt persons under the First Schedule to the Income Tax Act.
The Commissioner may revoke an exemption if the qualifying conditions are no longer met. The rules repeal the previous registered unit trust and collective investment scheme rules but preserve the registration status of schemes registered under them.
Read an October 2026 report prepared by the KPMG member firm in Kenya