JULY 2025 – KENYA
FINANCE ACT, 2025 PUBLISHED
It is important that employers note the following:
Tax changes published in the Finance Act, 2025
Following the 2025/2026 Budget Statement delivered on 12 June 2025, the Finance Act, 2025 was published, giving effect to the proposed tax measures.
The 2025/2026 budget placed strong emphasis on several proposals outlined in the Finance Bill 2025, aiming to implement tax reforms focused on enhancing compliance, promoting equity and improving revenue mobilisation. These reforms are designed to make the tax system more efficient, close existing loopholes and encourage investment across key sectors. With the promulgation of the Finance Act, 2025, the key components relevant to employers and employees include:
- A clarification that all gratuity payments, whether from public or private sources, are exempt from tax;
- A confirmation that fringe benefit tax is payable by the employer at the corporate tax rate;
- An increase in the tax-free daily subsistence allowance for private sector employees from KES 2,000 to KES 10,000 for official duties outside their usual workplace;
- A requirement for employers to consider all eligible tax reliefs and deductions when computing employees’ income tax, thereby reducing the need for employees to claim refunds for amounts that should have already been applied.
The measures apply from 1 July 2025.
To view the Finance Act, 2025, follow the link.
