335 THE FINANCE BILL, 2025 A Bill for AN ACT of Parliament to amend the laws relating to various taxes and duties; and for matters incidental thereto ENACTED by the Parliament of Kenya, as follows— PART I—PRELIMINARY 1. This Act may be cited as the Finance Act, 2025 and shall come into operation as follows — (a) sections 12 and 56, on the Ist of January, 2026; and (b) all other sections, on Ist July, 2025. PART II—INCOME TAX 2. Section 2 of the Income Tax Act is amended— (a) in subsection (1)— (i) in the definition of "debenture", by deleting the expression "and, for the purposes of paragraphs (d) and (e) of section 7(1) of this Act, includes any loan or loan stock, whether secured or unsecured"; (ii) in the definition of "individual retirement fund", by deleting the words "subject to the Income Tax (Retirement Benefit) Rules"; (iii) in paragraph (b) of the definition of "royalty", by inserting the words "and includes the distribution of software where regular payments are made for the use of the software through the distributor" immediately after the words "support fees"; (iv) by deleting the definition of "compensating tax"; (v) by deleting the definition of "Tribunal"; (vi) by deleting the definition of "venture company"; Short title and commencement. Cap. Amendment of section 2 of 470.
The Finance Bill, 2025 341 (1A) An employer shall, before computing the tax deductible under subsection (1), grant an employee all applicable deductions, reliefs and exemptions provided under this Act. (b) in subsection (2), by deleting paragraph (c); (c) by deleting subsection (5B). 18. Section 39 of the Income Tax Act is amended in subsection (1)(a), by deleting the expression "section 17A (in respect of a person other than an individual)". 19. Section 52B of the Income Tax Act is amended— (a) by deleting subsection (4) and substituting therefor the following new subsection— (4) Every company liable to tax under this Act shall also include with the self-assessment and return of income, an assessment and return of any dividend distributed out of untaxed gains or profits due with respect to such tax year and the tax so calculated shall be payable at the due date for the self-assessment. (b) by deleting subsection (5). 20.The Income Tax Act is amended by repealing section 54B. 21.The Income Tax Act is amended by repealing section 72B. 22.The Income Tax Act is amended by repealing section 72C. 23. Section 104 of the Income Tax Act is amended by deleting the words "in the manner provided by section 101 of this Act". 24. Section 109 of the Income Tax Act is amended in subsection (1)— (a) in paragraph (b), by deleting the words "fails to furnish a full and true return in accordance with the requirements of any notice served on him under this Act or"; (b) by deleting paragraph (c); Cap. Amendment of section 39 of 470, Amendment of section 52B of Cap. 470. Repeal of section 54B of Cap. 470. Repeal of section 72B of Cap. 470. Repeal of section 72C of Cap. 470. Amendment of section 104 of Cap, 470, of Amendment section 109 of Cap. 470.
344 The Finance Bill, 2025 employees in senior management are citizens of Kenya; and (iii) the regional headquarters of the company is in Kenya, at least sixty per cent of its employees in senior management are citizens of Kenya; (nb) in the case of a start-up certified by the Nairobi International Financial Centre Authority, fifteen per cent for the first three years and twenty per cent for the succeeding four years; (c) in paragraph 5— (i) in subparagraph (e), by inserting the words "which is a final tax" after the word "payable"; (ii) in subparagraph (h), by inserting the following proviso immediately after item (iti) — Provided that the tax paid under this paragraph is a final tax. (d) in paragraph 13, by deleting the words "three per cent" and substituting therefor the words "one point five per cent"; (e) by inserting the following new paragraph immediately after paragraph 14— 15. The rate of tax on fringe benefits provided by an employer shall be the resident corporate rate of tax for that year of income. 29. Part I of the Eighth Schedule to the Income Tax Act is amended — (a) in paragraph 1 — (i) in subparagraph (1), by deleting the definition of "company" and substituting therefor the following new definition— "company" includes a body of persons which carries on the activities of a members' Amendment of the Eighth Schedule to Cap. 470.
The Finance Bill, 2025 345 club and a trade association that is deemed to be carrying on business under section 21; (ii) by deleting subparagraph (3); (b) in paragraph 6(2)(h)(v), by inserting the words "an individual" immediately after the word "where". PART HI—VALUE ADDED TAX 30. Section 2 of the Value Added Tax Act is amended in subsection (1), by inserting the following new definition in proper alphabetical sequence — "tax invoice" includes an electronic tax invoice issued in accordance with section 23A of the Tax Procedures Act. 31.Section 8 of the Value Added Tax Act is amended— (a) in subsection (2)— (i) by inserting the word "and" after the words "unregistered person"; (ii) by deleting paragraph (c); (b) in subsection (3), by deleting the words "broadcast television" appearing in paragraph (g) and substituting therefor the words "internet, radio or television broadcasting services". 32. Section 17 of the Value Added Tax Act is amended in subsection (5)— (a) by deleting paragraph (c); (b) by deleting paragraph (d) and substituting therefor with the following new paragraph — (d) the registered person lodges the claim for refund of the excess tax within twelve months from the date the tax becomes due and payable; (c) by deleting paragraph (e). 33. Section 31 of the Value Added Tax Act is amended in subsection (1)— Amendment of section of Cap, 476. Cap. 469B. Cap. Amendment of section 8 of 476. Cap. Amendment of section 17 of 476. Amendment of section 31 of Cap. 476.
348 The Finance Bill, 2025 (m)by deleting paragraph 143; (n) by deleting paragraph 144; (0) by inserting the following new paragraphs immediately after paragraph 154— 155. Inputs or raw materials (either produced locally or imported) supplied to pharmaceutical manufacturers in Kenya for manufacturing medicaments as approved from time to time by the Cabinet Secretary in consultation with the Cabinet Secretary for the time being responsible for matters relating to health. 156. Inputs or raw materials locally purchased or imported for the manufacture of animal feeds upon recommendation by the Cabinet Secretary for the time being responsible for agriculture. 157. Transportation of sugarcane from farms to milling factories. 158. The supply of locally assembled and manufactured mobile phones, 159. The supply of motorcycles of tariff heading 8711.60.00. 160. The supply of electric bicycles. 161. The supply of solar and lithium ion batteries. 162. The supply of electric buses of tariff heading 87.02. 163. Bioethanol vapour (BEV) stoves classified under HS Code 7321.12.00 (cooking appliances and plate warmers for liquid fuel). 164. Packaging materials for tea and coffee upon recommendation by the Cabinet Secretary for matters relating to agriculture. 37. The Second Schedule to the Value Added Tax Act is amended in Part A— (a) by deleting paragraph 11; Soe ens Cap.
358 The Finance Bill, 2025 (5A) The Cabinet Secretary may, on the recommendation of the Commissioner, waive the whole or part of any penalty or interest imposed under this Act where the liability to pay the penalty or interest was due to— (a) an error generated by an electronic tax system; (b) a delay in the updating of an electronic tax system; (c) a duplication of a penalty or interest due to a malfunction of an electronic tax system; or (d) the incorrect registration of the tax obligations of a taxpayer. PART VI—MISCELLANEOUS FEES AND LEVIES 57. Section 9B of the Miscellaneous Fees and Levies Act is amended— (a) in the marginal note, by deleting the words "to excess tax refunds"; (b) by deleting the expression "provisions of section 47 of the". 58.The Second Schedule to the Miscellaneous Fees and Levies Act is amended— (a) in Part A— (i) by deleting paragraph (xv); (ii) by deleting paragraph (xva) substituting therefor the following new paragraph— (xva) all parts of chapter 88 and goods of tariff heading 8802.30.00 and 8802.40.00; (b) in Part B— (i) by deleting paragraph (xiii); (ii) by deleting paragraph (xvi) and substituting therefor the following new paragraph — (xvi) all parts of chapter 88 and goods of tariff heading 8802.30.00 and 8802.40.00. 59. The Third Schedule to the Miscellaneous Fees and Levies Act is amended— Amendment of section 9B of Cap 469C. Amendment of the Second Schedule of Cap. 469C. Amendment of the Third Schedule of Cap. 469C.
The Finance Bill, 2025 361 TA; "compensating tax" means the addition to tax imposed under section } "debenture" includes any debenture stock, mortgage, mortgage stock, or any similar instrument acknowledging indebtedness, secured on the assets of the person issuing the debenture; and, for the purposes of paragraphs (d) and (e) of section 7(1) of this Act, includes any loan or loan stock, whether secured or unsecured; "individual retirement fund" means a fund held in trust by a qualified institution for a resident individual for the purpose of receiving and investing funds in qualifying assets in order to provide pension benefits for such an individual or the surviving dependants of such an individual subject to the Income Tax (Retirement Benefit) Rules; "related person" means, in the case of two persons where a person who participates directly or indirectly in the management, control or capital of the business of another person; "royalty" means a payment made as a consideration for the use or the right to use— (a) any copyright of a literary, artistic or scientific work; (b) any software, proprietary or off-the-shelf, whether in the form of licence, development, training, maintenance or support fees; (c) any cinematograph film, including a film or tape for radio or television broadcasting; (d) any patent, trademark, design or model, plan, formula or process; (€) any industrial, commercial or scientific equipment; or (f) information concerning industrial, commercial or scientific equipment or experience, and any gains derived from the sale or exchange of any right or property giving rise to that royalty; "Tribunal" means the tribunal established under section 83; "venture company" means a company incorporated in Kenya in which a venture capital company has invested and which at the time of first investment by the venture capital company has assets with a market value or annual turnover of less than five hundred million Kenya shillings; (2) In relation to any year of income in respect of which an order relating to tax or personal reliefs has been made under the Provisional Collection of Taxes and Duties Act (Cap. 415), reference in this Act to rates of tax and personal reliefs shall, so long as the order remains in force,
362 The Finance Bill, 2025 be construed as references to the rates or reliefs specified in that order; and if, after the order has ceased to have effect, the rates of tax and of personal reliefs in relation to that year of income as specified in this Act as amended are different from those referred to in the order, and assessments have already been made haying regard to those rates in the order, then all necessary adjustments shall be made to the assessments to give effect to the rates of tax and of personal reliefs for that year of income as specified in this Act as amended for that year of income. Section Sof Cap 470, it is proposed to amend— Income from employment, etc. (1) For the purposes of section 3(2)(a)(ii) of this Act, an amount paid to— (a) a person who is, or was at the time of the employment or when the services were rendered,a resident person in respect of any employment or services rendered by him in Kenya or outside Kenya; or (b) a non-resident person in respect of any employment with or services rendered to an employer who is resident in Kenya or the permanent establishment in Kenya of an employer who is not so resident, shall be deemed to have accrued in or to have been derived from Kenya. (2) For the purposes of section 3(2)(a)(ii) "gains or profits" includes— (a) any wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission, bonus, gratuity, or subsistence, travelling, entertainment or other allowance received in respect of employment or services rendered, and any amount so received in respect of employment or services rendered in a year of income other than the year of income in which it is received shall be deemed to be income in respect of that other year of income: Provided that— (i) where any such amount is received in respect of a year of income which expired earlier than four years prior to the year of income in which it was received, or prior to the year of income in which the employment or services ceased, if earlier, it shall be deemed to be income of the year of income which expired five years prior to the year of income in which it was received, or prior to the year of income in which the employment or services ceased as the case may be; and
The Finance Bill, 2025 363 (ii) where the Commissioner is satisfied that subsistence, travelling, entertainment or other allowance represents solely the reimbursement to the recipient of an amount expended by him wholly and exclusively in the production of his income from the employment or services rendered then the calculation of the gains or profits of the recipient shall exclude that allowance or expenditure; (iii) notwithstanding the provisions of subparagraph (ii), where such amount is received by an employee as payment of subsistence, travelling, entertainment or other allowance, in respect of a period spent outside his usual place of work while on official duties, the first two thousand shillings per day expended by him for the duration of that period shall be deemed to be reimbursement of the amount so expended and shall be excluded in the calculation of his gains or profits; and (iv) notwithstanding the provisions of subparagraph (ii), where such an amount is received by an employee as payment of travelling allowance to perform official duties, the standard mileage rate approved by the Automobile Association of Kenya shall be deemed to be reimbursement of the amount so expended and shall be excluded in the calculation of the employee's gains and profits; (b) save as otherwise expressly provided in this section, the value of a benefit, advantage, or facility of whatsoever nature the aggregate value whereof is not less than sixty thousand shillings granted in respect of employment or services rendered; (c) an amount paid by the employer as a contribution to a pension fund, or a registered provident fund or scheme: Provided that— (i) where the contract is for a specified term, any amount received as compensation on the termination of the contract shall be deemed to have accrued evenly over the unexpired period of the contract; (ii) where the contract is for an unspecified term and provides for compensation on the termination thereof, the compensation shall be deemed to have accrued in the period immediately following the termination at a rate equal to the rate per annum of the gains or profits from the contract received immediately prior to termination;
366 The Finance Bill, 2025 (i) where such vehicle is hired or leased from a third party, the employee shall be deemed to have received a benefit in that year of income equal to the cost of hiring or leasing; or (ii), where an employee has restricted use of such motor vehicle, the Commissioner shall, if satisfied of that fact upon proof by the employee, determine a lower rate of benefit depending on the usage of the motor vehicle. (2C) For the purposes of subsection (2B)— "prescribed rate of benefit" means the following rates in respect of each month— (a) in the 1996 year of income, 1% of the initial capital expenditure on the vehicle by the employer; (b) in the 1997 year of income, 1.5% of the initial capital expenditure on the vehicle by the employer; and (c) in 1998 and subsequent years of income, 2% of the initial expenditure on the vehicle by the employer. (3) For the purposes of subsection (2)(e), the value of premises, excluding the value of any furniture or other contents so provided, shall be deemed to be— (a) in the case of a director of a company, other than a whole time service director, an amount equal to the higher of fifteen per centum of his total income excluding the value of those premises and income which is chargeable under section 3(2)(f), the market rental value and the rent paid by the employer; (b) in the case of a whole time service director, an amount equal to the higher of fifteen per centum of the gains or profits from his employment, excluding the value of those premises, and income which is chargeable under section 3(2)(f), the market rental value and the rent paid by the employer; (c) in the case of an agricultural employee required by the terms of employment to reside on a plantation or farm, an amount equal to ten per centum of the gains or profits from his employment: Provided that for the purposes of this paragraph— (i) "plantation" shall not include a forest or timber plantation; and (ii) "agricultural employee" shall not include a director other than a whole time service director;
The Finance Bill, 2025 367 (d) in the case of any other employee, an amount equal to fifteen per centum of the gains or profits from his employment, excluding the value of those premises or the rent paid by the employer if paid under an agreement made at arm's length with a third party, whichever is the higher: Provided that— (i) where the premises are provided under an agreement with a third party which is not at arm's length, the value' of the premises determined under this subsection shall be the fair market rental value of the premises in that year, or the rent paid by the employer, whichever is the higher; or (ii) where the premises are owned by the employer, the fair market rental value of the premises in that year Provided that— (i) where a person occupies premises for part only of a year of income, the value ascertained under the foregoing provisions shall be reduced by that proportion which is just and reasonable having regard to the period of occupation and the yearly rate of gains or profits from employment; (ii) where the employee pays rent to his employer for premises, the value ascertained under the foregoing provisions shall be reduced by the amount of rent; (ili) where part only of any premises is so provided, the Commissioner may reduce the value ascertained under the foregoing provisions to the amount which he considers just and reasonable; (iv) where the gains or profits from a person's employment, excluding the value of the premises provided by the employer, exceed six hundred thousand shillings in the year, the value of the premises determined under this subsection shall be subject to the limit of- (a) the rent paid by the employer or the fair market rental value of the premises in that year where the premises are provided under an agreement with a third party which is not at arm's length, whichever is the higher; or (b) the fair market rental value of the premises in that year where the premises are owned by the employer.
370 The Finance Bill, 2025 purposes of this section, shall be the higher of the cost to the employer or the fair market value of the benefit: Provided that— (a) in the case of an employee share ownership plan, the value of the benefit shall be the difference between the offer price, per share, at the date the option is granted by the employer, and the market value, per share on the date when the employee exercises the option; (b) the Commissioner may, from time to time, prescribe the value where the cost or the fair market value of a benefit cannot be determined. (6) For the purposes of paragraph (a) of the proviso to subsection (5)- (a) the benefits chargeable shall be deemed to have accrued on the date the employee exercises the option; (b) "offer price" means the price at which an employer's shares are initially offered to an employee under an employee share ownership plan; (c) "market value", in relation to a share means— (i) where the shares are fully listed on any securities exchange operating in Kenya, the mid-market value on the date the option was exercised by the employee; or (ii) where the shares are not fully listed, the price which the shares might reasonably be expected to fetch on sale in the open market, when the option is exercised; (d) "share option" means the offer made by an employer to an employee to purchase a fixed number of shares at a fixed price, which may be paid for at the end of the vesting period; (e) "vesting period" means a fixed period of time between the date of offer by the employer and the date after which the option to purchase can be exercised by the employee. (7) Where an employee is offered company shares in lieu of cash emoluments by an eligible start-up, the taxation of the benefit from the shares allocated to that person by virtue of employment shall be deferred and taxed within thirty days of the earlier of— (a) the expiry of five years from the end of the year of the award of the shares;
The Finance Bill, 2025 371 (b) the disposal of the shares by the employee; or (c) the date the employee ceases to be an employee of the eligible start-up: Provided that— (i) this subsection shall not apply to any cash emoluments or other benefits in kind offered to an employee by virtue of the employment; (ii) the benefit shall be deemed to accrue at the earlier of the occurrence of the events contemplated in paragraphs (a), (b) or (c); (iii) the value of the taxable benefit shall be the fair market value of the shares at the earlier of the occurrence of the events contemplated in paragraphs (a), (b) or (c); or (iv) where the fair market value is not available, the Commissioner shall determine the value of the shares based on the last issued financial statements. (8) For the purposes of subsection (7), "eligible start-up company" means a business incorporated in Kenya that— (a) has an annual turnover of not more than one hundred million shillings; (b) does not carry on management, professional or training business; (c) has not been formed as a result of splitting or restructuring of an existing entity; and (d) has been in existence for a period of not more than five years. Section 8 of Cap 470, it is proposed to amend- Income from pensions, etc. (1) For the purposes of section 3(2)(c) of this Act, any pension received by a resident individual from a pension fund or pension scheme established outside Kenya shall be deemed to have accrued in or to have been derived from Kenya to the extent to which it relates to employment or services rendered by the individual, or the husband or parent of the individual, in Kenya and the amount so derived shall be the proportion of the total pension which the length of the employment or services in Kenya, including periods of leave earned thereby, bears to the total length of employment or services in respect of which the pension is paid.
376 The Finance Bill, 2025 (f) an activity by way of supporting, assisting or arranging an appearance or performance referred to in paragraph (e) of this section; (g) winnings; (j) an insurance or reinsurance premium; (k) sales promotion, marketing, advertising services, and transportation of goods (excluding air and shipping transport services the amount thereof shall be deemed to be income which accrued in or was derived from Kenya: Provided that— (i) this subsection shall not apply unless the payment is incurred in the production of income accrued in or derived from Kenya or in connexion with a business carried on or to be carried on, in whole or in part, in Kenya; (ii) this subsection shall not apply to any such payment made, or purported to be made, by the permanent establishment in Kenya of a non-resident person to that non-resident person except for deductions provided for by agreements under section 41; (iii) for the avoidance of doubt, the expression "non-resident person" shall include both head office and other offices of the non-resident person. Section 12E of Cap. 470, it is proposed to amend- Significant economic presence tax (1) Notwithstanding any other provision of this Act, a tax known as significant economic presence tax shall be payable by a non-resident person whose income from the provision of services is derived from or accrues in Kenya through a business carried out over a digital marketplace. (2) For purposes of this section, a non-resident person shall be considered to have significant economic presence where the user of the service is located in Kenya. (3) Subsection (1) shall not apply — (a) to a non-resident person who offers the services through a permanent establishment; (b) to an income chargeable under section 9(2) or section 10;
The Finance Bill, 2025 377 (c) to a non-resident person providing digital services to an airline in which the government of Kenya has at least forty-five per cent shareholding; or (d) to a non-resident person with an annual turnover of less than five million shillings. (4) For the purposes of computing the tax under subsection (1), the taxable profit of a person liable to pay the tax shall be deemed to be ten per cent of the gross turnover. (5) A person subject to tax under this section shall submit a return and pay the tax due to the Commissioner on or before the twentieth day of the month following the end of the month in which the service was offered. (6) The Cabinet Secretary may make Regulations for the better implementation of this section. Section 12G of Cap.470, it is proposed to amend- Minimum top-up tax (1) Notwithstanding any other provision of this Act, a tax known as minimum top-up tax shall be payable by a covered person where the combined effective tax rate in respect of that person for a year of income is less than fifteen per cent. (2) The combined effective tax rate for a covered person shall be the sum of all the adjusted covered taxes, divided by the sum of all net income or loss for the year of income, multiplied by a hundred. (3) The amount of tax payable shall be the difference between fifteen per cent of the net income or loss for the year of income of a covered person, and the combined effective tax rate for the year of income, multiplied by the excess profit of the covered persons. (4) This section shall not apply — (a) to a public entity that is not engaged in business; (b) to a person whose income is exempt from tax under paragraph 10 of the First Schedule; (c) to a pension fund and the assets of that pension fund; (d) to a real estate investment vehicle that is an ultimate parent entity; (e) to a non-operating investment holding company; (f) to an investment fund that is an ultimate parent entity;
380 The Finance Bill, 2025 plant in respect of which a deduction may be made under the Second Schedule, employed in the production of gains or profits; (ga) expenditure incurred by a person carrying on a business in payment of Affordable Housing Levy as provided under section 5(b) of the Affordable Housing Act, 2024; (i) in the case of gains or profits of the owner of any land from the sale of, or the grant of the right to fell, standing timber which was growing on such land at the time such owner acquired such land— (i) where such land was acquired for valuable consideration, so much of the consideration as the Commissioner may determine to be just and reasonable as representing the cost of such standing timber; or (ii) where no valuable consideration was given for the land, so much of such amount as the Commissioner may determine to be just and reasonable as representing the value of such standing timber at the time the owner acquired such land, as is attributable to such timber sold during such year of income; (j) in the case of gains or profits from the sale of standing timber by a person who has purchased the right to fell such timber, so much of the price paid for such right as the Commissioner may determine to be just and reasonable as attributable to the timber sold during such year of income; (1) any expenditure of a capital nature incurred in such year of income by the owner or tenant of any agricultural land, on clearing such land, or on clearing and planting thereon permanent or semipermanent crops; (n) any expenditure incurred by any person for the purposes of a business carried on by him being— (i) expenditure of a capital nature on scientific research; or (ii) expenditure not of a capital nature on scientific research; or (iii) a sum paid to a scientific research association approved for the purposes of this paragraph by the Commissioner as being an association which has as its object the undertaking of scientific research related to the class of business to which such business belongs; or (iv) a sum paid to any university, college, research institute or other similar institution approved for the purposes of this
The Finance Bill, 2025 381 paragraph by such Commissioner for the scientific research as is mentioned in subparagraph (iii) of this paragraph; (o) any sum contributed in such year of income by an employer to a national provident fund or other retirement benefits scheme established for employees throughout Kenya by the provisions of any written law; (p) any expenditure on advertising in connexion with any business to the extent that the Commissioner considers just and reasonable; and for this purpose "expenditure on advertising" includes any expenditure intended to advertise or promote, whether directly or indirectly, the sale of the goods or services provided by that business; (r) an amount equal to one-third of the total gains and profits from employment of an individual who is not a citizen of Kenya and— (i) whose employer is a non-resident company or partnership trading for profit; (ii) who is in Kenya solely for the performance of his duties in relation to his employer's regional office, which office has been approved for the purposes of this paragraph by the Commissioner; (iii) who is absent from Kenya for the performance of those duties for a period or periods amounting in the aggregate to one hundred and twenty days or more in that year of income; and (iv) whose gains and profits from that employment are not deductible in ascertaining the total income chargeable to tax under this Act of his employer or of any company or partnership which controls, or is controlled by, that employer; (t) expenditure incurred by the lessee in the case of a lease or similar transaction as determined in accordance with such rules as may be prescribed under this Act; (w) any donation in that year of income to a charitable organization whose income is exempt from tax under paragraph 10 of the First Schedule to this Act, or to any project approved by the Cabinet Secretary responsible for matters relating to finance; (x) expenditure of a capital nature incurred in that year of income, with the prior approval of the Cabinet Secretary, by a person on
384 The Finance Bill, 2025 such extension, giving evidence of inability to extinguish the deficit within that period. (5) (a) A person to whom this subsection applies who has succeeded to any business, or to a share therein, either as a beneficiary under the will or on the intestacy of a deceased person who carried on, solely or in partnership, that business shall be entitled to a deduction in the yearof income in which he so succeeds in respect of such part of any deficit in the total income of the deceased for his last year of income as is attributable to any losses incurred. by the deceased in the business in that year of income or in earlier years of income. (b) This subsection applies to a person who is the widow, widower or child, of the deceased person and to a person who was an employee or partner of the deceased person in that business; and, where there are two or more such persons, each such person shall be entitled to a deduction of so much of the whole amount deductible as his share in the business under the will or on the intestacy bears to the sum of the shares of all such persons. (SA) For the purpose of section 3(2)(g). the amount of the net gain to be included in income chargeable to tax is— (b) the amount computed according to the following formula— Ax B/C Where— A is the amount of the net gain; B is the value of the interest derived, directly or indirectly, from immovable property in Kenya; and C is the total value of the interest. (6) For the purposes of this section— (a) "scientific research" means any activities in the fields of natural or applied science for the extension of human knowledge, and when applied to any particular business includes— (i) any scientific research which may lead to, or facilitate, an extension of that business or of businesses in that class; (ii) any scientific research of a medical nature which has a special relation to the welfare of workers employed in that business, or in businesses of that class:
The Finance Bill, 2025 385 (b) expenditure of a capital nature on scientific research does not include any expenditure incurred in the acquisition of rights in, or arising out of scientific research but, subject thereto, does include all expenditure incurred for the prosecution of, or the provision of facilities for the prosecution of, scientific research. (7) Notwithstanding anything contained in this Act— (a) the gains or profits of a person derived from any one of the seven sources of income respectively specified in paragraph (e) of this subsection (and in this subsection called "specified sources") shall be computed separately from the gains or profits of that person derived from any other of the specified sources and separately from any other income of that person; (b) where the computation of gains or profits of a person in a year of income derived from a specified source results in a loss, that loss may only be deducted from gains or profits of that person derived from the same specified source in the following year and, in so far as the loss has not already been so deducted, in subsequent years of income; (c) the subparagraphs of paragraph (e) of this section shall be construed so as to be mutually exclusive; (d) gains chargeable to tax under section 3(2)(f) of this Act and losses referred to in subsection (3)(f) of this section shall not be deemed income or losses derived or resulting from specified sources for the purposes of this subsection; (e) the specified sources of income are— (i) rights granted to other persons for the use or occupation of immovable property; ; (ii) employment (including former employment) of personal services for wages, salary, commissions or similar rewards (not under an independent contract of service), and a selfemployed professional vocation; (iv) agricultural, pastoral, horticultural, forestry or similar activities, not falling within subparagraphs (i) and (ii) of this paragraph; (ivA) surplus funds withdrawn by or refunded to an employer in respect of registered pension or registered provident funds which are deemed to be the income of the employer under section 8(10);
The Finance Bill, 2025 389 (ja) an amount of deemed interest where the person is controlled by a non-resident person alone or together with not more than four other persons and where the company is not a bank or a financial institution licensed under the Banking Act (Cap. 488). (3) For the purposes of subsection (2), the expressions— "all loans" means loans, overdrafts, ordinary trade debts, overdrawn current accounts or any other form of indebtedness for which the company is paying a financial charge, interest, discount or premium but shall not include local loans; (4) For the avoidance of doubt, the expression "revenue reserves" under subsection (2) includes accumulated losses. (5) The Commissioner shall prescribe the form and manner in which the deemed interest shall be computed and the period for which it shall be applicable. Section 18 of Cap. 470, it is proposed to amend- Ascertainment of gains or profits of business in relation to certain non-resident persons (1) Where a non-resident person carries on any business in Kenya which consists of manufacturing, growing, mining, or producing, or harvesting, whether from the land or from the water, any product or produce, and sells outside, or for delivery outside Kenya, such product or produce, whether or not the contract of sale is made within or without Kenya, or utilizes that product or produce in any business carried on by him outside Kenya, then the gains or profit from such business carried on in Kenya shall be deemed to be income derived from Kenya and to be gains or profits such amount as would have accrued if such product or produce had been sold wholesale to the best advantage. (2) Where a bank which is a permanent establishment of a nonresident person holds outside Kenya any deposits, assets or property acquired from its operations in Kenya, the gains or profits accruing from such deposits, assets or other property held outside Kenya shall be deemed to be income accrued in or derived from Kenya. (3) Where a non-resident person carries on business with a related resident person and the course of such business is such that it produces to the resident person or through its permanent establishment either no profits or less than the ordinary profits which might be expected to accrue from that business if there had been no such relationship, then the gains or profits of such resident person or through its permanent establishment
The Finance Bill, 2025 391 (a) the ultimate parent entity is not obligated to file a country-bycountry report in its jurisdiction of tax residence; (b) the jurisdiction in which the ultimate parent entity is resident has a current international tax agreement which Kenya is a party to but does not have a competent authority agreement with Kenya at the time of filing the country-by-country report for the reporting financial year; or (c) there has been a systemic failure of the jurisdiction of tax residence of the ultimate parent entity that has been notified by the Commissioner to the constituent entity resident in Kenya. (1B) The provisions of subsections (1) and (1A) shall apply to a multinational enterprise group whose total consolidated group turnover, including extraordinary or investment income, is at least ninety-five billion shillings during the financial year immediately preceding the reporting financial year as reflected in its consolidated financial statements for such preceding financial year. (2) An ultimate parent entity or a constituent entity shall file the country-by-country report referred to under subsection (1) not later than twelve months after the last day of the reporting financial year of the group. (3) An ultimate parent entity or a constituent entity of a multinational enterprise group shall file a master file and a local file to the Commissioner in such manner as the Commissioner may specify. (4) The master file and the local file shall be filed not later than six months after the last day of the reporting financial year of the multinational enterprise group. (5) A country-by-country report filed under subsection (1) shall consist of— (a) the information relating to the identity of each constituent entity, its jurisdiction of tax residence, if different, jurisdiction where such entity is organized, and the nature of the main business activity or activities of such entity; (b) the group's aggregate information including information relating to the amount of revenue, profit or loss before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees and tangible assets other than cash or cash equivalents with regard to each jurisdiction where the group has taxable presence; and
392 The Finance Bill, 2025 (c) any other information as may be required by the Commissioner. (6) A master file under subsection (3) shall (a) a detailed overview of the group; (b) the group's growth engines; (c) a description of the supply chain of the key products and services; (d) the group's research and development policy; (e) a description of each constituent entity's contribution to value creation; (f) information about intangible assets and the group intercompany agreements associated with them; (g) information on any transfer of intangible assets within the group during the tax period, including the identity of the constituent entities involved, the countries in which those intangible assets are registered and the consideration paid as part of the transfer: (h) information about financing activities of the group; (i) the consolidated financial statements of the group; (j) tax rulings, if any, made in respect of the group; and (k) any other information that the Commissioner may require. (7) A local file under subsection (3) shall contain— (a) details and information on the resident constituent entity's activities within the multinational enterprise group; (b) management structure of the resident constituent entity; (c) business strategies including structuring, description of the material-controlled transactions, the resident constituent entity's business and competitive environment; (d) the international transactions and amounts paid to the resident constituent entity or received by the entity; and (e) any other information that the Commissioner may require. (8) Where there are more than one constituent entities of the same multinational enterprise group that are resident in Kenya, the multinational enterprise group may designate one of such constituent entities as a surrogate parent entity. contain—
The Finance Bill, 2025 393 (9) A resident surrogate parent entity of a multinational enterprise group shall not be required to file a country-by-country report with the Commissioner with respect to the reporting financial year of the group, if- (a) the ultimate parent entity is obligated to file a country-by-country report in its jurisdiction of tax residence; (b) the jurisdiction in which the ultimate parent entity is resident for tax purposes has an international agreement and a competent authority agreement in force; and (c) the Commissioner has not notified the resident constituent entity in Kenya of a systemic failure, if any. (10) A resident constituent entity of a multinational enterprise group shall not be required to file a country-by-country report with the Commissioner with respect to the reporting financial year of the group, if entity (a) a non-resident surrogate parent files the country-by-country report on the group with the competent authority of the tax jurisdiction of the entity; (b) the jurisdiction in which the non-resident surrogate parent entity is resident requires the filing of country-by-country reports; (c) the competent authority of the jurisdiction in which the nonresident surrogate parent entity is resident and Kenya have a competent authority agreement for the exchange of information; (d) the competent authority in the jurisdiction where the non-resident surrogate parent is resident has not notified Kenya of a systemic failure; or (e) the non-resident parent entity has notified the competent authority in the jurisdiction of its tax residence that the entity is the designated surrogate parent entity of the group. (11) The Commissioner shall maintain the confidentiality of the information contained in a return submitted in accordance with section 6(1) and section 6A(2) of the Tax Procedures Act (Cap. 469B). Section 19 of Cap.470, it is proposed to amend— Ascertainment of income of insurance companies (1) Notwithstanding anything in this Act, this section shall apply for the purpose of computing the gains or profits of insurance companies from insurance business which is chargeable to tax; and for the purposes of this Act a mutual insurance company shall be deemed to carry on an insurance
394 The Finance Bill, 2025 business the surplus from which shall be ascertained in the manner provided for in this section for ascertaining gains or profits and which shall be deemed to be gains or profits which are charged to tax under this Act. (2) Where an insurance company carries on life insurance business in conjunction with insurance business of any other class, the life insurance business of the company shall be treated as a separate business from any other class of insurance business carried on by the company. (3) The gains or profits for any year of income from the insurance business, other than life insurance business, of a resident insurance company, whether mutual or proprietary, shall be the amount arrived at after— (a) taking, for such year of income, the sum of— (i) the amount of the gross premiums from such business (less such premiums returned to the insured and such premiums paid on reinsurance as relate to such business); and (ii) the amount of other income from such business, including any commission or expense allowance received or receivable from re-insurers and any income derived from investments held in connexion with that business; and (b) deducting from the sum arrived at under paragraph (a) a reserve for unexpired risks referable to that business at the percentage adopted by the company at the end of that year of income and adding thereto the reserve deducted for unexpired risks at the end of the previous year of income: Provided that the reserves are estimated on the basis of actuarial principles, including discounting of ultimate costs; and (c) deducting from the figure arrived at under paragraphs (a) and (b) of this subsection— (i) the amount of the claims admitted in such year of income in connexion with such business (provided that claims incurred but not paid or not reported before the end of the accounting period are estimated on the basis of actuarial principles including the discounting of ultimate costs); less any amount recoyered in respect thereof under reinsurance; and (ii) the amount of agency expenses incurred in such year of income in connection with such business; and |
396 The Finance Bill, 2025 including the discounting of ultimate costs); less any amount recovered in respect thereof under reinsurance; and (ii) the amount of agency expenses incurred in such year income in connexion with such business; and of (iii) an amount being such proportion as the Commissioner may determine to be just and reasonable of those expenses of the head office of that company as would have been allowable as a deduction in that year of income in computing its gains or profits if the company had been a resident company in so far as those amounts relate to policies the premiums in respect of which are received or receivable in Kenya. (5) The gains or profits for a year of income from the long term insurance business of a resident insurance company, whether mutual or proprietary, shall be the sum of the following— (a) the amount of actuarial surplus, as determined under the Insurance Act and recommended by the actuary to be transferred from the life fund for the benefit of shareholders; (b) any other amounts transferred from the life fund for the benefit of shareholders; and (c) thirty per centum of management expenses and commissions that are in excess of the maximum amounts allowed by the Insurance Act (Cap. 487). (SA) Where the actuarial valuation of the life fund results in a deficit for a year of income and the shareholders are required to inject money into the life fund, the amount of money so transferred shall be treated as a negative transfer for the purposes of subsection (5)(a): Provided that the amount of negative transfer shall be limited to the actuarial surplus recommended by the actuary to be transferred from the life fund for the benefit of shareholders in previous years of income. (6) The gains or profits for a year of income from the long term insurance business of a non-resident insurance company, whether mutual or proprietory, shall be the sum of the following— (a) the same proportion of the amount of actuarial surplus recommended by the actuary to be transferred to the shareholders as the actuarial liability in respect of its long term insurance business in Kenya bears to the actuarial liability in respect of its total long term insurance business; and
The Finance Bill, 2025 397 (b) the same proportion of any other amounts transferred from the life fund for the benefit of shareholders as the actuarial liability in respect of its long term insurance business in Kenya bears to the actuarial liability in respect of its total long term insurance business; and (c) the same proportion of thirty per cent of management expenses and commissions that are in excess of the maximum amounts allowed by the Insurances Act (Cap. 487) as the actuarial liability in respect of its long term insurance business in Kenya bears to the actuarial liability in respect of its total long term insurance business. (6A) Where the actuarial valuation of the life fund results in a deficit for a year of income and the shareholders are required to inject money into the life fund, the proportionate amount of the money so transferred shall be treated as a negative transfer for the purposes of subsection (6)(a): Provided that the amount of negative transfers shall be limited to the amount of actuarial surplus recommended by the actuary to be transferred from the life fund for the benefit of the shareholders in previous years on income. (6B) For the avoidance of doubt, the gains arising from the transfer of property by an insurance company other than property connected to life insurance business shall be taxed in accordance with the provisions of the Eighth Schedule. (7) In this section— "annuity fund" means, where an annuity fund is not kept separately from the life insurance fund of the company such part of the life insurance fund as represents the liability of the company under its annuity contracts; "company" includes a body of persons; "exempt investment income" means dividends chargeable to tax under section 3(2)(a)(i) plus income from disposal of investment shares traded in any securities exchange operating in Kenya; "investment income" does not include— (a) dividends chargeable to tax under section 3(2)(a)(i); and (b) income from the disposal of investment shares traded in any securities exchange operating in Kenya; "life insurance fund" does not include the annuity fund, if any, nor such part of the life insurance fund as represents the liability of the
404 The Finance Bill, 2025 (6A) Where any person who is required under subsection (3A) to deduct tax— (a) fails to make the deduction or fails to deduct the whole amount of the tax which he should have deducted; or (b) fails to remit the amount of any deduction to the Commissioner on or before the twentieth day of the month following the month in which such deduction was made or ought to have been made, any Collector of Stamp Duties appointed under section 4 of the Stamp Duty Act (Cap. 480), shall not stamp the instrument of which the property is the subject matter under the Stamp Duty Act, and Registrars of Title or Land Registrars appointed under any written law shall not register the property under any written law, until such tax has been duly accounted for: Provided that the transferee of chargeable property may pay such tax and be entitled to recover the amount of the tax from any consideration for the transfer in his possession, by action in a court or by any other lawful means at his disposal. (6C) Subject to subsection (6B), the provisions of this Act relating to appeals to local committees against assessment shall apply mutatis mutandis to appeals under this section. (6D) A person aggrieved by the imposition, by the Commissioner, of a penalty under this section may,by notice in writing to the Commissioner, object to the imposition within thirty days of the date of service of the notice of the imposition. (6E) The provisions of this Act in respect of objections shall, mutatis mutandis, apply to objections under this section. (7) The Cabinet Secretary may, by notice in the Gazette, exempt from the provisions of subsection (3) of this section any payment or class of payments made by any person or class of persons resident or having a permanent establishment in Kenya. (8) The Cabinet Secretary may, by notice in the Gazette, amend or add to the Fourth Schedule in respect of financial institutions resident or having a permanent establishment in Kenya. Section 37 of Cap.470, it is proposed to amend- Deductions of tax from emoluments (1) An employer paying emoluments to an employee shall deduct therefrom, and account for tax thereon, to such extent and in such manner as may be prescribed.
The Finance Bill, 2025 405 (2) If an employer paying emoluments to an employee (a) to deduct tax thereon; (b) to account for tax deducted thereon; or (c) to supply the Commissioner with a certificate provided by rules prescribing the certificate, the Commissioner may impose a penalty equal to twenty-five per cent of the amount of tax involved or ten thousand shillings whichever is greater, and the provisions of this Act relating to the collection and recovery of such tax shall also apply to the collection and recovery of such penalty as if it were tax due from the employer: Provided that, instead of the Commissioner imposing a penalty under this subsection, a prosecution may be instituted for an offence under section 109(1)(j). (4) Any tax deducted under this section from the emoluments of an employee shall be deemed to have been paid by that employee and shall be set-off for the purposes of collection against tax charged on that employee in respect of those emoluments in any assessment for the year of income in which such emoluments are received. (5) Where a person who is required under this section to deduct tax fails to remit the amount of any deduction to such person as the Commissioner may direct within the time limit specified in rules made under section 130, the provisions of this Act relating to the collection and recovery of tax, and the payment of interest thereon, shall apply to the collection and recovery of that amount as if it were tax due and payable by that person, the due date for the payment of which is the date specified in rules made under section 130 by which that amount should have been remitted to the payee. (5A) An employer aggrieved by the imposition of a penalty by the Commissioner or any other decision taken by the Commissioner under this section may, by notice in writing to the Commissioner, within thirty days, object to such imposition or decision. (5B) The provisions of this Act in respect of objections shall, mutatis mutandis, apply to objections under this section. Section 39 of Cap.470, it is proposed to amend- Set-off of tax (1) An amount of tax which— fails—
408 The Finance Bill, 2025 (vi) cessation or sale of business, all relevant information regarding liquid ation or details of new ownership. Section 72B of Cap. 470, it is proposed to amend- Penalty for the negligence of authorized tax agent (1) Where the additional tax charged under sections 72 and T2A results from the failure, omission, claim, statement or deduction which arises due to the negligence or disregard of law by a person who is an authorised tax agent, such a per'son shall be liable to a penalty equal to one half of such additional tax but in any case not less than one thousand shillings and not exceeding fifty thousand shillings with respect to each such return, statement or other document as shall be the subject of such additional tax. Section 72C of Cap.470, it is proposed to amend- Penalty on underpayment of instalment tax (1) Subject to the Twelfth Schedule, a penalty of twenty per cent of the difference between the amount of instalment tax payable in respect of a year of income as specified in section 12, and the instalment tax actually paid multiplied by one hundred and ten per cent shall be payable. (2) Where the Commissioner is satisfied that the difference referred to in subsection (1) was due to reasonable cause, he may remit the whole or part of the penalty payable under this section, and where for a year of income the difference arises wholly or partly from an estimate of tax to be charged made before any change in any allowance, relief or rate of tax, the Commissioner may remit the interest charged thereon to the extent to which it is attributable to such a change: Provided that— (a) the Commissioner may remit up to a maximum of one million five hundred thousand shillings per person per annum of the penalty or interest; and (b) the Commissioner may remit any amount of penalty or interest in excess of one million five hundred thousand shillings with the prior written approval of the Cabinet Secretary; and (c) the Commissioner shall make a quarterly report to the Cabinet Secretary of all penalties and interest remitted during that quarter. Section 104 of Cap. 470, it is proposed amend- Collection of tax from ship owner, etc. (1) In addition to any other powers of collection of tax provided in this Act, the Commissioner may, in a case where tax recoverable in the
The Finance Bill, 2025 409 ——— manner provided by section 101 of this Act has been charged on income of a person who carries on the business of shipowne:r, cfrarterer or air transport operator, issue to the proper officer of Custcoms by' whom clearance may be granted a certificate containing the name. of that pfs? and the amount of the tax due and payable and on receipt o'f that certific At¢ the proper officer of Customs shall refuse clearance from any port or" airport in Kenya to any ship or aircraft owned by that per-son until the tax has been paid. the (2) No civil or criminal proceedings shall be instituted or maintained against the proper officer of Customs or any other authority in respect of a refusal of clearance under this section, nor shall the fact that a ship or aircraft is detained under this section affect the liability of the owner. charterer or agent to pay harbour or airport dues and charges for the period of detention. Section 109 of Cap.470, it is proposed to amend- Failure to comply with notice, ete. (1) Any person shall be guilty of an offence if he, without reasonable excuse— (a) fails to furnish a return or give a certificate as required by section 35 (5) of this Act; or (b) fails to furnish a full and true return in accordance with the requirements of any notice served on him under this Act or fails to give notice to the Commissioner as required by section 52 (3) of this Act; or (c) fails to furnish within the required time to the Commissioner or to any other person any document which under this Act, or under a notice served on him under this Act, he is required so to furnish; or (d) fails to keep records, books or accounts in accordance with the requirements of a notice served on him under section 55(1) of this Act, or fails to keep those records, books or accounts in the language specified in the notice; or (e) fails to preserve a record, document or book of account in contravention of section 55 (2) of this Act; or
412 The Finance Bill, 2025 (B) shall, where an applicant has complied with all the requirements of this paragraph, be issued within sixty days of the lodging of the application. Provided further that in this paragraph, "institution, body of persons or irrevocable trust, of a public character" means an entity established to benefit the public in a transparent and accountable manner without restriction or discrimination regardless of the level of charges or fees levied for services rendered, and which utilises its assets or income exclusively to carry out the purpose for which the entity was established without conferring a private benefit to an individual. 11. The income of any person from any management or professional fee, royalty or interest when the Cabinet Secretary certifies that it is required to be paid free of tax by the terms of an agreement to which the Government is a party either as principal or guarantor and that it is in the public interest that such income shall be exempt from tax. 12. The income of any registered pension scheme. 13. The income of any registered trust scheme. 14. The income of any registered pension fund. 15. The income of a registered provident fund. 16. The income from the investment of an annuity fund, as defined in section 19 of this Act, of an insurance company. 17. Pensions or gratuities granted in respect of wounds or disabilities caused in war and suffered by the recipients of such pensions or gratuities. 22. That part of the income of any officer of the Government or of the Community accrued in or derived from Kenya which consists of foreign allowances paid to such officer from public funds in respect of his office: Provided that, where any person to whom such an allowance is paid is granted a deduction under section 15 of this Act in respect of any expenditure incurred in relation to an activity for which the allowance ispaid, then the exemption conferred by this paragraph shall not apply to so much of such allowance as is equal to the amount of such deduction. 23. The income of the East African Development Bank and of Corporations established under Article 71 of the Treaty for East African Co-operation together with the income of subsidiary companies wholly owned by that Bank or by any of the said Corporations.
The Finance Bill, 2025 413 26. The emoluments— (b) of any person in the public service of the Government of that country in respect of his office under that Government where such person is resident in Kenya solely for the purpose of performing the duties of his office, where such emoluments are payable from the public funds of such country and are subject to income tax in such country. 27. The emoluments payable out of foreign sources in respect of duties performed in Kenya in connexion with a technical assistance or other agreement for developmental services or purpose to which the Government or the Community is a party to any non-resident person or to a person who is resident solely for the purposes of performing those duties, in any case where the agreement provides for the exemption of such emoluments, 35. Interest on a savings account held with the Kenya Post Office Bank. Savings 36. Such part of the income of an individual, chargeable to tax under section 3(2)(f) as consists of a gain derived from the transfer of (c) a private residence if the individual owner has occupied the residence continuously for the three year period immediately prior to the transfer concerned: Provided that— (i) in determining whether or not a person has occupied a residence continuously for three years, any period during which he was temporarily absent from the residence shall be ignored; (ii) references to a private residence include the immediately surrounding land utilized exclusively for personal purposes as an adjunct to the residence and not for the production of income, but does not include any part of the residence and land utilized for business purposes; (iii) no individual may claim or be taken to have used more than one residence as his residence at the same time for the purposes of this Act; (iv) no individuals may claim or be taken to have used more than one residence as their residence for the purposes of this Act at any time when they were husband and wife living together;
416 The Finance Bill, 2025 58. Income earned by an individual who is registered under the Ajira Digital Program for three years beginning Ist January, 2020; Provided that— (a) the individual shall qualify for the exemption upon payment of registration fee of ten thousand shillings per annum; and (b) the Cabinet Secretary shall, in consultation with the Cabinet Secretary for the ministry responsible for information communication technology, issue regulations for the better carrying out of this provision. 58. Any capital gains relating to the transfer of title of immovable property to a family trust. 59. The amount withdrawn from the National Housing Development Fund to purchase a house by a contributor who is a first-time home-owner, 60. Interest income accruing from all listed bonds, notes or other similar securities used to raise funds for infrastructure, projects and assets defined under Green Bonds Standards and Guidelines, and other social services: Provided that such bonds, notes or securities shall have a maturity of at least three years. 61. Deemed interest in respect of an interest free loan advanced to a company undertaking the manufacture of human vaccines. 62. Payments made to non-resident service providers not having a permanent establishment in Kenya in respect of services provided to a company undertaking the manufacture of human vaccines. 63. Compensating tax accruing to a company undertaking the manufacture of human vaccines. 64. Dividends paid by a company undertaking the manufacture of human vaccines to any non-resident person. 66. Dividends paid by Special Economic Zone enterprises, developers and operators licensed under the Special Economic Zones Act (Cap. 517A). 67. Dividends paid by Special Economic Zone enterprises, developers and operators to any non-resident person. 68. Royalties paid to a non-resident person by a company undertaking the manufacture of human vaccines. j :
The Finance Bill, 2025 417 69. Interest paid to a resident person or nonresident person by a company undertaking the manufacture of human vaccines. 70. Investment income from a post-retirement medical fund, whether or not the fund is part of a retirement benefits scheme. 71. Income earned by a non-resident contractor, sub-contractor, consultant or an employee involved in the implementation of a project financed through a one hundred per cent grant under an agreement between the Government and a development partner, to the extent provided for in the Agreement: Provided that— (a) the non-resident contractor, subcontractor, contractor or employee shall maintain this status for the tenure of the agreement; (b) any other income not directly related to the project earned by that non-resident contractor, subcontractor, consultant or employee shall be subject to tax. 72. Gains on transfer of property within a special economic zone enterprise, developer and operator. 73. Royalties, interest, management fees, professional fees, training fees, consultancy fee, agency or contractual fees paid by a special economic zone developer, operator or enterprise, in the first ten years of its establishment, to a non-resident person. Second Schedule of Cap. 470, it is proposed to amend- Part Il — SECURITIES, THE INTEREST ON WHICH IS EXEMPT FROM TAX SECOND SCHEDULE [ss. 4, 5 and 15] INVESTMENT ALLOWANCE (1A) Notwithstanding paragraph 1, the investment deduction shall be one hundred per cent where- (a) the cumulative investment value in the preceding three years outside Nairobi City County and Mombasa County is at least one billion shillings: Provided that where the cumulative value of investment for the preceding three years of income was one billion shillings on or before the 25th April, 2020, and the applicable rate of investment deduction was one hundred and fifty per cent, that rate shall continue to apply for the investment made on or before the 25th April, 2020 or the investment deduction shall be one hundred and fifty per cent where the cumulative
420 The Finance Bill, 2025 (f) an export processing zone enterprise which does not engage in any commercial activities shall be exempted from paying any corporation tax for a period of ten years commencing with the year in which production, sales or receipts relating to the activities for which that enterprise has been licensed as an export processing zone enterprise commence; but the corporation rate of tax will be twenty-five per cent for the period of ten years commencing immediately thereafter: Provided that for purposes of this subparagraph, "commercial activities" includes trading in, breaking bulk, grading, repacking or relabelling of goods and industrial raw materials. (ii) a gain on transfer of securities traded on any securities exchange licensed by the Capital Markets Authority is not chargeable to tax under section 3(2) (f); (h) in the case of a special economic zone enterprise, whether the enterprise sells its products to markets within or outside Kenya developer and operator, ten percent for the first ten years from date of first operation and thereafter fifteen per cent for another ten years: (i) in the case of a company that constructed at least four hundred residential units annually, fifteen per cent for that year of income, subject to approval by the Cabinet Secretary responsible for housing, Provided that where a company is engaged in multiple activities which include the ones specified in subparagraph (i), the rate of fifteen per cent shall be applied proportionately to the extent of the turnover arising from the housing activity G) in the case of company whose business is local assembling of motor vehicles, fifteen per cent for the first five years from the year of commencement of its operations: Provided that— (i) the rate of fifteen per cent shall be extended for a further period of five years if the company achieves a local content equivalent to fifty per cent of the ex-factory value of the motor vehicles; and (ii) in this paragraph, "local content" means parts designed and manufactured in Kenya by an original equipment manufacturer operating in Kenya.
422 The Finance Bill, 2025 Provided that the rate applicable to citizens of the East African Community Partner States in respect of dividend shall be five per cent of the gross sum payable; (e) (i) in respect of interest arising from a Government bearer bond of at least two years duration and interest and deemed interest, discount or original issue discount, fifteen per cent of the gross sum payable; (ia) in respect of interest and deemed interest arising from a bearer bond issued outside Kenya of at least two years duration and interest, discount or original issue discount, seven and a half per cent of the gross sum payable; (ii) in respect of interest, arising from bearer instrument other than a Government bearer bond of at least two years duration, twenty-five per cent of the gross amount payable: (iii) in respect of interest paid by any Special Economic Zone Enterprise, Developer or Operator to a non-resident persons, 5% of the gross amount payable. (f) in respect of a pension or retirement annuity, five per cent of the gross amount payable; (g) in respect of an appearance at, or performance in, any place (whether public or private) for the purpose of entertaining, instructing, taking part in any sporting event or otherwise diverting an audience, twenty per cent of the gross amount payable; (h) in respect of an activity by way of Supporting, assisting or arranging any appearance or performance mentioned in subparagraph (g) of this paragraph, twenty per cent of the gross amount payable; (i) in respect of winnings, twenty percent; (ia) in respect of interest and deemed interest arising from a bearer bond issued outside Kenya of at least two years' duration and interest, discount or original issue discount, seven and a half per cent of the gross sum payable; (k) in respect of gains or profits from the business of a ship-owner which is chargeable to tax under section 9(1) of the Act, two and a half per cent of the gross amount received: (I) in respect of gains and profits from the business of transmitting messages by cable or radio communication, optical fibre,
426 The Finance Bill, 2025 12. The rate of tax in respect of significant economic presence tax charged under section 12E shall be thirty per cent of the deemed taxable profit. 13. The rate of tax in respect of digital asset tax shall be three per cent of the transfer or exchange value of the digital asset. 14. The rate of tax in respect of capital gains charged under section 3 (2) (f) shall be fifteen per cent which shall be a final tax: Provided that where the Nairobi International Financial Centre Authority certifies that— (a) a firm has invested at least three billion shillings in at least one entity incorporated or registered in Kenya within a period of two years; and — (b) the transfer of the investment is to be made after five years of the date of the investment, the applicable rate shall be five per cent. Eighth Schedule of Cap. 470, it is proposed to amend- EIGHTH SCHEDULE [ss. 3 and 15] ACCRUAL AND COMPUTATION OF GAINS FROM PROPERTY OTHER THAN INVESTMENT SHARES TRANSFERRED BY INDIVIDUALS Part I 1. Interpretation (1) In this Part of the Schedule, except where the context otherwise requires— "adjusted cost" has the meaning assigned thereto in paragraph 8 of this Schedule; "company" includes— (a) a members' club deemed under section 21(1) to be carrying on a business; (b) a trade association that elects under section 21(2) to be deemed to carry on a business; "consideration" means consideration in money or money's worth; "individual" includes more than one individual or an unincorporated association or body of individuals including trustees and partners;
430 The Finance Bill, 2025 (2) Where a person entitled to property by way of security or to the benefit of a charge or encumbrance on property, deals with the property for the purpose of enforcing or giving effect to the security, charge or encumbrance, his dealings with it shall be treated as if they were done through him as nominee by the person entitled to the property subject to the security, charge or encumbrance, and this subparagraph shall apply to the dealings of any person appointed to enforce or give effect to the security, charge or encumbrance as receiver and manager as it applies to the dealings of the person so entitled. 6. Meaning of transfer (1) Subject to this Schedule there is a transfer of property for the purposes of this Schedule— (a) where property is sold, exchanged, conveyed or otherwise disposed of in any manner whatever (including by way of gift), whether or not for consideration; or (b) on the occasion of the loss, destruction or extinction of property whether or not a sum by wayof compensation or otherwise, or under a policy of insurance, is received in respect of the loss, destruction or extinction of the property unless such sum is utilized to reinstate the property in essentially the same form and in the same place within one year of the loss, destruction or extinction of the property or within a longer period of time approved by the Commissioner; or (c) on the abandonment, surrender, cancellation or forfeiture of, or the expiration of substantially all rights to, property, including the surrender of shares or debentures on the dissolution of a company. (2) There is no transfer of property for the purposes of this Schedule— (a) in the case of the transfer of property for the purpose only of securing a debt or a loan, or on any transfer by a creditor for the purpose only of returning property used as security for a debt or a loan; (b) in the case of the issuance by a company of its own shares or debentures; (c) by the vesting in the personal representative of a deceased person by operation of law of the property of that deceased person;
The Finance Bill, 2025 4st He (d) by the transfer by a personal representative of any property to a person as legatee in the course of the administration of the estate of a deceased person. For this purpose "Iegatee" includes a person taking under a devise or other testamentary disposition or on an intestacy or partial intestacy whether he takes beneficially or as a trustee; (e) by the vesting in the liquidator by an order of a court of the property of a company under section 240 of the Companies Act (Cap. 486); (f) by the vesting in the official receiver or other trustee in bankruptcy of the property of a bankrupt under section 57 of the Bankruptcy Act (Cap. 53); (g) by the transfer by a trustee of property, which is shown to the satisfaction of the Commissioner to be subject to a trust, to a beneficiary on his becoming absolutely entitled thereto; (h) by the transfer of assets— (i) between spouses; (ii) between former spouses as part of a divorce settlement or a bona fide separation agreement; (iii) to immediate family; (iv) to immediate family as part of a divorce or bona fide separation agreement; or (v) to a company where spouses or a spouse and immediate family hold 100% shareholding; (3) For the purposes of this paragraph, "immediate family" means children of the spouses or former spouses. 7. Transfer value (1) Subject to this Schedule, the transfer value of property shall be computed by reference to such of the following amounts (if any) as are appropriate having regard to the manner of the transfer, namely— (a) the amount of or the value of the consideration for the transfer of the property; (b) sums received in return for the abandonment, forfeiture or surrender of the property; (c) sums received as consideration for the use of exploitation of the property;
434 The Finance Bill, 2025 to the market value of the property at the time of the acquisition or to the amount of the consideration used in computing stamp duty payable on the transfer by which the property was acquired, whichever is the lesser. (2) Property is acquired or transferred by way of a bargain at arms length only if the consideration is determined as between an independent willing buyer and an independent willing seller. (3) The Commissioner may determine the market value of any property, and a reference in this paragraph to the market value of property is a reference to the price which the property would fetch if sold in the open market as so determined. 10. Incidental costs For the purposes of paragraphs 7(2) and 8(1)(d) of this Schedule, the incidental costs of the acquisition or transfer of property shall consist of expenditure wholly and exclusively incurred by the person acquiring the property or the transferor for the purposes of the acquisition or transfer, as the case may be, of the property being— (a) fees, commission or remuneration paid for the professional services of any surveyor, valuer, accountant, agent or legal adviser; (b) costs of transfer (including stamp duty); (c) in the case of an acquisition, the cost of acquisition (including mortgage costs) and the cost of advertising to find a seller, and costs reasonably incurred for the purposes of this Schedule in making any valuation or in ascertaining market value; (d) in the case of a transfer, the cost of advertising to find a buyer and costs reasonably incurred for the purposes of this Schedule in making any valuation or in ascertaining market value; and (e) any other costs which the Commissioner may allow as being just and reasonable. 11. Amounts not allowable in computing transfer value or adjusted cost No amount shall be allowed— (a) under paragraph 7(2) of this Schedule as part of the incidental costs of making a transfer; or (b) under paragraph 8 of this Schedule as part of the adjusted cost of any property, if that amount has been or is otherwise allowed as a
The Finance Bill, 2025 435 deduction in computing gains or profits chargeable to tax under section 3(2)(a) of this Act. 11A. The due date for tax payable in respect of property transferred under this Part shall be the earlier of— (a) receipt of the full purchase price by the vendor; or (b) registration of the transfer. 12. Transfer or acquisition of property with other property Where property is transferred or acquired together with other property in pursuance of one bargain, then, notwithstanding that separate prices are, or purport to be, agreed for separate items of that property, the Commissioner may determine what part of the adjusted cost or the transfer value is reasonably attributable to each of the properties involved, which determination shall be binding on both the transferor and the transferee of the property. 13. Exemption No gain or loss shall be included in the computation of income under section 3(2)(f) in the case of a transfer of property that is necessitated by a transaction involving the incorporation, recapitalization,acquisition, amalgamation, separation, dissolution or similar restructuring of a corporate entity, where such transfer is— (a) a legal or regulatory requirement; (b) as a result of a directive or compulsory acquisition by the government; (c) an internal restructuring which does not involve a transfer of property to a third party within a group which has existed for at least twenty-four months; or (d) in the public interest and approved by the Cabinet Secretary. Part I -ACCRUAL AND COMPUTATION OF GAINS FROM INVESTMENT SHARES 14. Interpretation In this Part of this Schedule— "consideration" means consideration in money or money's worth; "investment shares" means shares of companies, municipal or Government authorities or a body created by such authorities, as are listed and traded on the Nairobi Stock Exchange;
438 The Finance Bill, 2025 (b) the registered supplier has not declared the sales invoice in a return, the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation: Provided that the input tax shall be allowable for a deduction within six months after the end of the tax period in which the supply or importation occurred. (3) The documentation for the purposes of subsection (2) shall be— (a) an original tax invoice issued for the supply or a certified copy; (b) a customs entry duly certified by the proper officer and a receipt for the payment of tax; (c) a customs receipt and a certificate signed by the proper officer stating the amount of tax paid, in the case of goods purchased from a customs auction; and (d) a credit note in the case of input tax deducted under section 16(2); (e) a debit note in the case of input tax deducted under section 16(5); or (f) in the case of a participant in the Open Tender System for the importation of petroleum products that have been cleared through a non-bonded facility, the custom entry showing the name and PIN of the winner of the tender and the name of the other oil marketing company participating in the tender: Provided that the input tax that may have been incurred by an oil marketing company participating in the Open Tender System before the coming into force of this provision shall be claimed within twelve months after this provision comes into force. (4) A registered person shall not deduct input tax under this Act if the tax relates to the acquisition, leasing or hiring of— (a) passenger cars or mini buses, and the repair and maintenance thereof including spare parts, unless the passenger cars or mini -buses are acquired by the registered person exclusively for the purpose of making a taxable supply of that automobile in the ordinary course of a continuous and regular business of selling or dealing in or hiring of passenger cars or mini buses; or (b) entertainment, restaurant and accommodation services unless— (i) the services are provided in the ordinary course of the business carried on by the person to provide the services and the services are not supplied to an associate or employee; or
The Finance Bill, 2025 439 (ii) the services are provided while the recipient is away from home for the purposes of the business of the recipient or the recipient's employer: Provided that no tax shall be charged on the supply where no input tax deduction was allowed on that supply under this subsection. (5) Where the amount of input tax that may be deducted by a registered person under subsection (1) in respect of a tax period exceeds the amount of output tax due for the period, the amount of the excess shall be carried forward as input tax deductible in the next tax period: Provided that any such excess shall be paid to the registered person by the Commissioner where— (a) such excess arises from making zero rated supplies; or (b) such excess arises from tax withheld by appointed tax withholding agents; and (c) such excess arising out of tax withheld by appointed tax withholding agents may be applied against any tax payable under this Act or any other written law, or is due for refund pursuant to section 47(4) of the Tax Procedures Act (Cap. 469B); (d) the registered person lodges the claim for the refund of the excess tax within twenty-four months from the date the tax becomes due and payable; and Provided further that, notwithstanding section 17(5)(d), a registered person who, within a period of thirty-six months prior to the commencement of section 17(5)(b) and (c), has a credit arising from withholding tax, may make an application for a refund of the excess tax within twelve months from Ist July 2022. (e) such excess arises from input tax under subsection (8): Provided that a registered person who, since the commencement of subsection (8) but before the commencement of this provision, has a credit arising from input tax under subsection (8) may apply for the refund of excess tax within twelve months from Ist July 2022; (ea) in the case of a taxable supply that is zero-rated or exempted, such excess arose on account of permanent credit position in favour of a registered person due to the difference between the rate applicable on the Ist July, 2022 and a lower rate of tax and that such credit position existed on the date that the taxable supply became zero-rated or exempted:
442 The Finance Bill, 2025 Provided that notwithstanding this subparagraph, any approval granted by the Cabinet Secretary before the commencement thereof in respect of the supply of taxable goods and which is in force at such commencement shall continue to apply until the supply of the exempted taxable goods is made in full. 89. Any other aircraft spare parts imported by aircraft operators or persons engaged in the business of aircraft maintenance upon recommendation by the competent authority responsible for civil aviation. 91. Specially designed locally assembled motor vehicles for transportation of tourists, purchased before clearance through Customs by tour Operators upon recommendation by the competent authority responsible for tourism promotion, provided the vehicles meet the following conditions— (i) the vehicles shall at all times be registered and operated by a company that is licenced under the Tourism Vehicle Regime; (ii) the vehicles shall be used exclusively for the transportation of tourists; (iii) the vehicles shall have provisions for camping, rescue and first aid equipment, luggage compartments and communication fittings; and (iv) any other condition the Commissioner may impose: Provided that tax shall become payable upon change of use or disposal of the vehicle for other use. 109 . Goods imported or purchased locally for the direct and exclusive use in the construction of houses under an affordable housing scheme approved by the Cabinet Secretary on the recommendation of the Cabinet Secretary responsible for matters relating to housing. 112. Taxable goods, excluding motor vehicles, imported or purchased for direct and exclusive use in geothermal, oil or mining prospecting or exploration by a company granted a prospecting or exploration license in accordance with the Energy Act (Cap. 314), production sharing contracts in accordance with the Petroleum Act (Cap. 308) or a mining license in accordance with the Mining Act (Cap. 306) upon recommendation by the Cabinet Secretary responsible for matters relating to energy, the Cabinet Secretary responsible for matters relating to petroleum, or the Cabinet Secretary responsible for matters relating to mining, as the case may be.
The Finance Bill, 2025 443 113. Specialized equipment for the development and generation of solar and wind energy, including photovoltaic modules, direct current charge controllers, direct current inverters and deep cycle batteries that use or store solar power, upon recommendation to the Commissioner by the Cabinet Secretary responsible for matters relating to energy. 128. Discs, tapes, solid-state non-volatile storage devices, "smartcards" and other media for the recording of sound or of other phenomena, whether or not recorded of tariff heading85.23, including matrices and masters for the production of discs, but excluding products of Chapter 37 upon approval by the Cabinet Secretary responsible for matters relating to health. 129. Weighing machinery (excluding balances of a sensitivity of 5 cg or better), of tariff number 8423.10.00 purchased or imported by registered hospitals upon approval by the Cabinet Secretary responsible for matters relating to health. 143. Inputs and raw materials used in the manufacture of passenger motor vehicles. 144. Locally Manufactured passenger motor vehicles: Provided that in this paragraph— "locally manufactured passenger motor vehicle" means a motor vehicle for the transportation of passengers which is manufactured in Kenya and whose ex-factory value comprises at least thirty percent of local content; and "Jocal content" means parts designed and manufactured in Kenya by an original equipment manufacturer operating in Kenya. Second Schedule to Cap.476, it is proposed to amend- SECOND SCHEDULE [s. 7(2)] ZERO-RATING Part A— ZERO RATED SUPPLIES 11. Inputs or raw materials (either produced locally or imported) supplied to pharmaceutical manufacturers in Kenya for manufacturing medicaments, as approved from time to time by the Cabinet Secretary in consultation with the Cabinet Secretary responsible for matters relating to health. 21. Transportation of sugarcane from farms to milling factories. 29. The supply of locally assembled and manufactured mobile phones.
The Finance Bill, 2025 447 Section 23A of Cap.469B, it is proposed to amend- Electronic tax invoices (1) The Commissioner may establish an electronic system through which electronic tax invoices may be issued and records of stocks kept for the purposes of this Act. (2) A person who carries on business shall — (a) issue an electronic tax invoice through the system established under subsection (1); and (b) maintain a record of stocks in the system established under subsection (1). (2A) An electronic tax invoice issued under subsection (2) shall contain the following information— (a) the words "TAX INVOICE"; (b) the name, address and Personal Identification Number of the supplier; (c) the name, address and Personal Identification Number, if any, of the purchaser; (d) the serial number of the tax invoice; (e) the date and time which the tax invoice was issued and the date and time which the supply was made, if it is different from the date the tax invoice was issued; (f) the description of the supply including quantity of the goods or the type of services; (g) the details of any discount allowed at the time of supply; (h) the consideration for the supply; (i) the tax rate charged and total tax amount of tax charged; and (j) any other prescribed information. (3) Where an electronic tax invoice required to ascertain tax liability is issued by a resident person or the permanent establishment of a nonresident person, that invoice shall be generated through the system established under subsection (1). (3A) Without prejudice to subsection (3), where a supply is received from a small business or a smallscale farmer, whose annual turnover does not exceed five million shillings, the purchaser shall issue a tax invoice for the purpose of ascertaining tax liability.
450 The Finance Bill, 2025 (9) Despite any notification to a taxpayer under this section, the due date for the payment of the tax payable under assessment (referred to as the "original due date') shall not be altered and the late payment penalty and late payment interest shall also remain payable based on the original due date. Section 39A of Cap.469B, it is proposed to amend- Penalty for failure to deduct or withhold tax Where a person who is required under a tax law to deduct or withhold tax and remit the tax to the Commissioner fails to do so, the provisions of this Act relating to the collection and recovery of tax, and the payment of penalties and interest thereon, shall apply to the collection and recovery of that tax not deducted or withheld as if it were tax due and payable by that person and the due date for the payment shall be the date on which the amount of tax should have been remitted to the Commissioner. Section 40 of Cap.469B , it is proposed to amend- Security on property for unpaid tax (1) Where a taxpayer, being the owner of property in Kenya, fails to pay a tax by the due date, the Commissioner may notify the Registrar in writing that the property, to the extent of the taxpayer's interest in the property, shall be the subject of a security for the unpaid tax specified in the notification: Provided that the Commissioner shall, within seven days from the date of the notification to the Registrar, by notice in writing inform the taxpayer and any other person who may have an interest in the property about the notification. (2) Where the Registrar has been notified by the Commissioner under subsection (1), the Registrar shall, without levying or charging a fee, register the Commissioner's notification as if it were an instrument of of restraint on the disposal, mortgage on, or charge, as the case may be, the property specified in the notification. (3) A registration under subsection (2) shall, subject to any prior restraint on disposal, mortgage or charge, operate as a legal restraint on the disposal, mortgage, or charge on, the property to secure the amount of the unpaid tax, and any prior restraint shall supersede the Commissioner's notification. (4) The Commissioner shall, upon the payment of the whole of the amount of unpaid tax secured under this section, direct the Registrar in writing to cancel the notification made under subsection (2), and the
The Finance Bill, 2025 45] Registrar shall, without levying or charging a fee, record the cancellation of the notification and the notification shall cease to apply. (5) Where the taxpayer fails to pay the tax liability described in the notification under subsection (1) within two months after receipt of the notification, the Commissioner or authorised officer may, at the cost of the taxpayer, dispose of the property that is the subject of the restraint on disposal, mortgage or charge, by public auction or private treaty, or as provided for under the relevant Act for the recovery of the tax: Provided that where a plan has been agreed between the taxpayer and the Commissioner, the liability shall be settled within the agreed payment plan before the notification by the Commissioner is lifted. (6) Subject to section 34, where the property is subject to a prior restraint, that prior restraint shall haye priority if the property is disposed of under subsection (5). (7) For the purpose of this section— "property" means land or building, aircraft, ship, motor vehicle, or any other property which the Commissioner may deem sufficient to serve as security for unpaid taxes; "Registrar" includes— (a) the Land Registrar defined in section 3 of this Act; (b) the Registrar of Ships appointed under section 14 of the Kenya Maritime Authority Act (Cap. 370); (c) the Director-General of the Kenya Civil Aviation Authority appointed under section 19 of the Civil Aviation Act (Cap. 394); (d) the Director-General of the National Transport and Safety Authority appointed under section 15 of the National Transport and Safety Authority Act (Cap. 404); or (e) any other person who the Commissioner is satisfied has authority to hold property sufficient to serve as security for unpaid taxes; "relevant Act" includes the Kenya Maritime Authority Act (Cap. 370), Merchant Shipping Act (Cap. 389), Civil Aviation Act (Cap. 394), Land Registration Act (Cap. 300), Land Act (Cap. 280), National Transport and Safety Act (Cap. 404), or any other Act that provides for the registration of property. Section 42 of 469B it is proposed to amend- Power to collect tax from person owing money to a taxpayer (1) This section applies when a taxpayer is, or will become liable to pay a tax and —
The Finance Bill, 2025 453 (7) When the Commissioner is notified by an agent under subsection (6) that an agent is unable to pay the amount due, the Commissioner shall within a period of thirty days, in writing to the agent— (a) accept the notification and cancel or amend the notice issued under subsection (2); or (b) reject the notification. (8) The Commissioner shall notify the agent in writing of a revocation or amendment of a notice given under subsection (2) where the taxpayer pays the whole or part of the tax due or has made an arrangement satisfactory to the Commissioner for the payment of the tax. (9) The Commissioner shall serve the taxpayer with a copy of a notice under this subsection (2), when serving the agent. (10), A payment made by an agent to the Commissioner in accordance with a notice issued under this section is treated as having been made on behalf of the taxpayer and shall discharge the agent of any liability to the taxpayer or any other person. (11) The Commissioner shall credit any amount paid by an agent under this section against the tax owed by the taxpayer. (12) The Commissioner may require, in writing, any person, within a period of at least thirty days, to provide a return to the Commissioner showing any monies which may be held by that person for a taxpayer referred to in subsection (1) or monies held by that person which are due to a taxpayer referred to in subsection (1). (13) A taxpayer who without reasonable cause fails to comply with a notice or a requirement by the Commissioner under this section shall be personally liable for the amount specified in the notice or requirement. (14) The Commissioner shall not issue a notice under this section unless — (a) the taxpayer has defaulted in paying an instalment under section 3 . + (b) the Commissioner has raised an assessment and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period; (c) the taxpayer has not appealed against an assessment specified in an objection decision within the prescribed timelines; (d) the taxpayer has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; or
456 The Finance Bill, 2025 (4) The Commissioner may, for purposes of ascertaining the validity of an application under subsection (1), subject the application to an audit, (4A) Where an application under subsection (1) has been subjected to an audit under subsection (4), the Commissioner shall ascertain and determine the application within one hundredand twenty-days failure to which, the application shall be deemed to have been ascertained and approved. (5) Where the application is for a refund of tax under subsection (1)(b), the Commissioner shall apply the Overpayment in the following order— (a) in payment of any other tax owing by the taxpayer under the specific tax law; (b) in payment of a tax owing by the taxpayer under any other tax law; and (c) any remainder shall be refunded to the taxpayer, (6) Where the Commissioner fails to refund the Overpaid tax within the period specified in subsection (2)(b), the amount due shall attract interest of one per cent for each month or part thereof during which the amount remains unpaid. (7) Where the Commissioner notifies a taxpayer that an application under subsection (1)(a) has been ascertained and applies the overpaid tax liability to offset an outstanding tax in accordance with subsection (2)(a), interest or penalties shall not accrue on the amount applied to offsetting the outstanding tax liability from the date of the notification. (8) Where the Commissioner has applied the overpaid tax to offset an outstanding tax liability under subsection (2)(a), any outstanding tax after such application shall accrue interest and penalties in accordance with this Act. (9) Notwithstanding any other provision of this section, where a person overpay an instalment tax due under section 12 of the Income Tax Act (Cap. 470), the Commissioner shall apply the overpaid tax to offset the taxpayer's future instalment tax liability. (10) Where, after the application of the overpaid tax under subsection (9), the Commissioner later determines that there was no overpayment of instalment tax, the amount of the tax that was used to offset the taxpayer's future instalment tax liabilities under subsection (9) shall be treated as a tax due to the Commissioner in the subsequent tax period.
The Finance Bill, 2025 457 (11) The amount due under subsection (10) shall be due from the date that the Commissioner applied that amount to offset an instalment tax liability. (12) The Commissioner shall notify the taxpayer in writing of the amount due under subsection (10) and specify in the notification— (a) the interest on the amount due; and any due in respect of the amount due. (b) penalties (13) A person aggrieved by a decision of the Commissioner under this section may appeal to the Tribunal within thirty days after being notified of the decision. Section 51 of Cap.469B, it is proposed to amend- Objection to tax decision (1) A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law. (2) A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision. (3) A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if— (a) the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments; (b) in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1); and (c) all the relevant documents relating to the objection have been submitted (4) Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall within a period of fourteen days notify the taxpayer in writing that the objection has not been validly lodged and request the taxpayer to submit the information specified in the notice within seven days after the date of the notice. (4A) Despite subsection (3), where a taxpayer fails to provide the information required under subsection (4) or fails to provide the
460 The Finance Bill, 2025 (i) the names and addresses of each person to whom a payment was made; (li) where the payment is for services, the amount of the payment specifying whether the payment is a commission of any kind or is for expenses incurred in connection with rendering the services; (iii) where the payment is in any form of valuable consideration other than money, the particulars of the consideration: and (iv) such other particulars as the Commissioner may specify; (b) references to payments for services include references to payments in the nature of commission of any kind and references to payments. in respect of expenses incurred in connection with the rendering of services; and (c) references to the making of payments include references to the giving of any form of valuable consideration, and the requirement imposed by paragraph (a)(ili) to state the amount of a payment shall, in relation to any consideration given otherwise than in the form of money, be construed as a requirement to give particulars of the consideration. (5) A person who fails to comply with the notice given under subsection (1A) commits an offence and shall be liable, on conviction, to a penalty not exceeding one hundred thousand shillings for every month or part thereof that the failure continues. (6) A person who fails to comply with the notice given under subsection (2) commits an offence and shall be liable, on conviction, to a penalty not exceeding one hundred thousand shillings for every month or part thereof that the failure continues. Section 66 of Cap.469B, it is proposed to amend- Refusing an application for a private ruling s (1) The Commissioner may refuse an application for a private ruling ifs (a) the Commissioner has already decided the question that is the subject of the application in— (i) a notice of an assessment served on the applicant; (ii) a public ruling made under section 63 that is in existence; or (iii) a ruling published under section 69 that is in existence;
The Finance Bill, 2025 461 (b) the application relates to a matter that is the subject of a tax audit in relation to the applicant or an objection lodged by the applicant; (c) the application is frivolous or vexatious; (d) the transaction to which the application relates has not been carried out and there are reasonable grounds to believe that the transaction will not be carried out; (e) the applicant has not provided the Commissioner with sufficient information to make a private ruling; (f) in the opinion of the Commissioner, it would be unreasonable to make a private ruling in relation to the application, having regard to the resources needed to make the private ruling and any other matter the Commissioner considers relevant; or (g) the making of the ruling involves the application of a tax avoidance provision. (2) If the Commissioner decides not to make a private ruling under this section, the Commissioner shall notify the applicant in writing of the decision. Section 77 of Cap.469B, it is proposed to Due date for submission and payment (1) If the date for— (a) submitting or lodging a tax return, application, notice, or other document; (b) the payment of a tax; or (c) taking any other action under a tax law, falls on a Saturday, Sunday, or public holiday in Kenya, the due date shall be the previous working day: Provided that where a person who submits a notice of objection in electronic form or a tax returnin electronic form, or pays the tax electronically, the due date shall remain the date specified in the relevant tax law. (2) In computing the period for the lodgement of an objection to the Commissioner under section 51, an appeal to Tax Appeals Tribunal under section 52, an appeal to the High Court under section 53 or an appeal to the Court of Appeal under section 54, the computation shall not include Saturdays, Sundays or public holidays. amend-
The Finance Bill, 2025 465 irregularly wound coils of circular cross-section measuring less than 14mm in diameter; other Section 117 of Cap 480, it is proposed to amend- Exemptions from stamp duty (1) There shall be exempt from stamp duty under this Act— (a) an instrument executed by or on behalf of or in favour of the Government in any case in which, but for this exemption, the Government would be liable to pay the duty; (b) a bill of exchange, cheque or promissory note drawn or made in Uganda or in Tanzania and accepted and paid or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in Kenya, if the bill of exchange, cheque or promissory note has previously been duly stamped in Uganda or Tanzania; (c) a power, warrant or letter of attorney granted or to be granted by the Managing Director of the Kenya Posts and Telecommunications Corporation, and a power, warrant or letter of attorney given by any depositor in the post office savings bank established under the provisions of the Kenya Post Office Savings Bank Act (Cap. 493B)(hereinafter referred to as the savings bank) to any other person, authorizing him to make a deposit of a sum of money in the savings bank on behalf of the depositor or to sign any document or instrument required by the rules of the savings bank to be signed on making the deposit or to receive back any sum of money deposited in the savings bank, or the interest arising therefrom; a receipt or an entry in a book of receipts for money deposited in the savings bank, or for any money received by a depositor or his executors or administrators, assigns, attorneys or agents, from the funds thereof; and a draft or order, or an appointment of an agent, or any certificate or other instrument or document whatsoever, required or authorized to be given, issued, signed, made or produced in pursuance of that Act or of any rules made thereunder; (d) a transfer of shares in the stock or funds of the Government, the Organization, the Authority, the Government of Uganda or the Government of Tanzania;