NATION I. '01.INCI I.

FOR
k P OR TI NC
LIPRAPY
SPECIAL ISSUE

Kenya Gazette Supplement No. 63 (National Assembly Bills No. 19)

REPUBLIC OF KENYA

KENYA GAZETTE SUPPLEMENT

NATIONAL ASSEMBLY BILLS, 2025

NAIROBI, 6th May, 2025

CONTENT

Bill for Introduction into the National Assembly—

PAGE

The Finance Bill, 2025 335

NATIONAL COUNCIL FOR

LAW REPORTING

0 9 MAY 2025

LIBRARY ARCHIVE

PRINTED AND PUBLISHED BY THE GOVERNMENT PRINTER, NAIROBI

 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 Short title and
commencement.
and shall come into operation as follows —
(a) sections 12 and 56, on the 1st of January, 2026;
and
(b) all other sections, on 1st July, 2025.
PART II—INCOME TAX
2. Section 2 of the Income Tax Act is amended— Amendment of
section 2 of Cap.
470.
(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";
336 The Finance Bill, 2025

(vii) by deleting the definition of "related person"

and substituting therefor the following new
definition—
"related person" means, in the case of
two persons, either of the persons who
participates directly or indirectly in the
management, control or capital of the
business of the other person, and in the case
of more than the two persons —
(a) any other person who participates
directly or indirectly in the
management, control or capital of the
business of the two persons; or
(b) an individual who —
(i) participates directly or
indirectly in the management,
control or capital of the
business of the two persons;
(ii) is associated with the two
persons by marriage,
consanguinity or affinity; and
(iii) the two persons participate in
the management, control or
capital of the business of the
individual;
(b) by deleting subsection (2).
3. Section 5 of the Income Tax Act is amended in Amendment of
section 5 of Cap.
item (iii) of the proviso to subsection (2)(a), by deleting the 470.
words "two thousand shillings" and substituting therefor
the words "ten thousand shillings".
4. Section 8 of the Income Tax Act is amended— Amendment of
section 8 of Cap.
470.
(a) in subsection (1), by deleting the word "husband"
and substituting therefor the word "spouse";
(b) by deleting subsection (4);
(c) by deleting subsection (5);
(d) by deleting subsection (6);
 The Finance Bill, 2025 337

(e) by deleting subsection (7);

(f) by deleting subsection (9);
(g) by deleting subsection (9A).
Amendment of
5. Section 10 of the Income Tax Act is amended in section 10 of Cap.
subsection (1), by inserting the following new paragraphs 470.
immediately after paragraph (k)--
(1) supply of goods to a public entity;
(m) sale of scrap.
Amendment of
6. Section 12E of the Income Tax Act is a ended— section 12E of
Cap. 470.
(a) in subsection (1), by inserting the words "the
internet or an electronic network including
through" immediately after the words "carried out
over
(b) in subsection (3), by deleting paragraph (d).
Amendment of
7. Section 12G of the Income Tax Act is amended by Section 120 of
inserting the following new subsection immediately after Cap. 470.
section (3)—
(3A) Minimum top-up tax shall be payable by the
end of the fourth month after the end of the year of
income.
Amendment of
8. Section 15 of the Income Tax Act is amended— section 15 of Cap.
470.
(a) in subsection (2)—
(i) by deleting paragraph (g) and substituting
therefor the following new paragraph-
(g) the amount considered as representing the
diminution in value of any implement,
utensil or similar article, employed in the
production of gains or profits, not being
machinery or plant in respect of which a
deduction may be made under the Second
Schedule, at a rate of one hundred per
cent in that year of income;
(ii) by deleting paragraph (i);
(iii) by deleting paragraph (j);
338 The Finance Bill, 2025

(iv) by deleting paragraph (r);

(v) in paragraph (w), by inserting the words
"expenditure incurred in the construction of a
public sports facility" immediately after the
word "Act";
(vi) by deleting paragraph (z);
(b) in subsection (3)—
(i) in paragraph (b), by inserting the words
"construction of" immediately after the words
"applied to the";
(ii) by deleting paragraph (f);
(c) in subsection (4), by inserting the word "five"
immediately after the word "succeeding";
(d) by deleting subsection (5) that reads —
(5) Notwithstanding subsection (4), the
Cabinet Secretary may, on the recommendation of
the Commissioner, extend the period of deduction
beyond ten years where a person applies through
the Commissioner for such extension, giving
evidence of inability to extinguish the deficit
within that period.
(e) in subsection (7)(a), by deleting the word "seven".
9. Section 16 of the Income Tax Act is amended— Amendment of
section 16 of Cap.
470.
(a) in subsection (2)(c), by deleting the words
"including compensating tax";
(b) by deleting subsection (4).
10. Section 18 of the Income Tax Act is amended by Amendment of
section 18 of Cap.
deleting subsection (6). 470.
11. Section 18D of the Income Tax Act is amended— Amendment of
section 18D of
Cap. 470.
(a) in subsection (8), by deleting the words "as a
surrogate parent entity" and substituting therefor
the words "to file a country-by-country report and
notify the Commissioner by the last day of the
reporting financial year of that group in such form
as the Commissioner may specify";
 The Finance Bill, 2025. 339

(b) by deleting subsection (9).

12. The Income Tax Act is amended by inserting the Insertion of a new
section 18G to
following new section immediately after section 18F— Cap. 470.
Advance pricing
agreement.
18G. (1) The Commissioner may enter
into an advance pricing agreement with a
person who undertakes a transaction
contemplated under section 18(3) or section
18A.
(2) The amount which would have been
expected to accrue if that business had been
conducted by an independent person dealing
at arm's length contemplated under section
18(3) or section 18A, shall be determined in
accordance with the advance pricing
agreement entered into under subsection (1).
(3) The advance pricing agreement
entered into under subsection (1) shall be
valid for a period not exceeding five
consecutive years.
(4) Where the Commissioner
determines that the person referred to in
subsection (1) entered into the advance
pricing agreement through misrepresentation
of facts, the Commissioner shall declare the
agreement void and issue a notice of the
declaration in writing, to the person.
(5) The Cabinet Secretary may make
regulations for the better implementation of
this section.
• 13. Section 19 of the Income Tax Act is. amended Amendment of
section 19 of Cap.
470.
(a) in. subsection (5) — .
(i) in paragraph (a), by deleting. the words "life
fund" and substituting therefor the words "life
insurance fund";
(ii) in paragraph (b), by deleting the words. "life
fund" and substituting therefor the words "life
insurance fund"; •
340 The Finance Bill, 2025

(b) in subsection (5A), by deleting the words "life

fund" and substituting therefor the words "life
insurance fund" wherever it occurs;
(c) in the proviso to subsection (5A), by deleting the
words "life fund" and substituting therefor the
words "life insurance fund";
(d) in subsection (6), by deleting the words "life fund"
appearing in paragraph (b) and substituting
therefor the words "life insurance fund";
(e) in subsection (6A), by deleting the words "life
fund" and substituting therefor the words "life
insurance fund" wherever it occurs;
(f) in the proviso to subsection (6A), by deleting the
words "life fund" and substituting therefor the
words "life insurance fund".
14. Section 21 of the Income Tax Act is amended in Amendment of
section 21 of Cap.
subsection (3), by deleting the definition of "gross 470.
investment receipts".
15. Section 27 of the Income Tax Act is amended by Amendment of
section 27 of Cap.
inserting the following new subsection immediately after 470.
subsection (1C) —
(1D) Where the Commissioner does not
comply with subsection (1C), the application shall
be deemed allowed.
16. Section 35 of the Income Tax is amended— Amendment of
section 35 of Cap.
470.
(a) in subsection (1), by inserting the following new
paragraph immediately after paragraph (t)—
(u) gains or profits which are chargeable to tax
under section 9(1) derived from the business
of a ship owner or charterer;
(b) by deleting subsection (6A);
(c) by deleting subsection (6C);
(d) by deleting subsection (6E).
17. Section 37 of the Income Tax Act is amended— Amendment of
section 37 of Cap.
470.
(a) by inserting the following new subsection
immediately after subsection (1)—
 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).
Amendment of
18. Section 39 of the Income Tax Act is amended in section 39 of Cap.
subsection (1)(a), by deleting the expression "section 17A 470.
(in respect of a person other than an individual)".
Amendment of
19. Section 52B of the Income Tax Act is amended— section 52B of
Cap. 470.

(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).
Repeal of section
20. The Income Tax Act is amended by repealing 54B of Cap. 470.
section 54B.
Repeal of section
21. The Income Tax Act is amended by repealing 72B of Cap. 470.
section 72B.
Repeal of section
22. The Income Tax Act is amended by repealing 72C of Cap. 470.
section 72C.
Amendment of
23. Section 104 of the Income Tax Act is amended by section 104 of
deleting the words "in the manner provided by section 101 Cap. 470.
of this Act".
Amendment of
24. Section 109 of the Income Tax Act is amended in section 109 of
subsection (1)— Cap. 470.

(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);
342 The Finance Bill, 2025

(c) by deleting paragraph (f);

(d) by deleting paragraph (h);
(e) by deleting paragraph (j) and substituting therefor
the following new paragraph —
(j) fails to supply prescribed certificates as is
required by section 37.
25. The Income Tax Act is amended by repealing Repeal of section
131 of Cap. 470.
section 131.
26. The First Schedule to the Income Tax Act is Amendment of the
First Schedule to
amended in Part 1— Cap. 470.

(a) in subparagraph (B) of the first further proviso to

paragraph 10, by deleting the word "sixty" and
substituting therefor the word "ninety";
(b) by deleting paragraph 45A and substituting
therefor the following new paragraph —
45A. All contributions and other payments
into and out of the Social Health Insurance Fund No. 16 of 2023.
established under section 25 of the Social Health
Insurance Act, 2023.
(c) in the proviso to paragraph 53—
(i) by deleting subparagraph (a) and substituting
therefor the following new subparagraph —
(a) payment of gratuity;
(ii) by inserting the following new subparagraph
immediately after subparagraph (a)—
(aa) other allowances paid under a public
pension scheme;
(d) by deleting paragraph 63;
(e) by deleting paragraph 72 and substituting therefor
the following new paragraph —
72. Gains on transfer of property within a
special economic zone by a licensed special
economic zone developer, enterprise or operator.
(f) by inserting the following new paragraphs
immediately after paragraph 73—
 The Finance Bill, 2025 343

74. Gains 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).
75. Dividends paid by a company certified by
the Nairobi International Financial Centre
Authority where the company reinvests at least
two hundred and fifty million shillings in Kenya,
in that year of income.
Amendment of the
27. The Second Schedule to the Income Tax Act is Second Schedule
amended in paragraph 1— to Cap. 470.

(a) by deleting subparagraph (1A);

(b) by deleting subparagraph (1B).
Amendment of the
28. The Third Schedule to the Income Tax Act is Third Schedule to
amended in Head B — Cap. 470

(a) in paragraph 1., by inserting the words "other than

that of the total income comprising fringe benefits
and the qualifying interest" immediately after the
word "tax";
(b) in paragraph 2—
(i) by deleting subparagraph (g)(ii);
(ii) by deleting subparagraph (i);
(iii) by deleting subparagraph (j);
(iv) by inserting the following new subparagraphs
immediately after subparagraph (n)—
(na) in respect of a company certified by
the Nairobi International Financial
Centre Authority, fifteen per cent
for the first ten years from the year
of commencement of its operations
and twenty per cent for the
subsequent ten years of its
operation where —
(i) the company invests at least
three billion shillings in Kenya
in the first three years of
operation;
(ii) the company is a holding company,
at least seventy per cent of its
 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
(iii)—
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 Amendment of the
Act is amended— Eighth Schedule
to Cap. 470.
(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'
 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 III—VALUE ADDED TAX
Amendment of
30. Section 2 of the Value Added Tax Act is amended section of Cap.
in subsection (1), by inserting the following new definition 476.
in proper alphabetical sequence —
Cap. 469B.
"tax invoice" includes an electronic tax invoice
issued in accordance with section 23A of the Tax
Procedures Act.
Amendment of
31. Section 8 of the Value Added Tax Act is section 8 of Cap.
amended — 476.

(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 "interne, radio or
television broadcasting services".
Amendment of
32. Section 17 of the Value Added Tax Act is section 17 of Cap.
amended in subsection (5)— 476.

(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).
Amendment of
33. Section 31 of the Value Added Tax Act is section 31 of Cap.
amended in subsection (1)— 476.
346 The Finance Bill, 2025

(a) in paragraph (a), by deleting the words "three

years" and substituting therefor the words "two
years";
(b) in the proviso —
(i) by inserting the following new paragraph
immediately after paragraph (c)—
(ca) the amount may be used to offset any
other value added tax liability, upon
approval by the Commissioner;
(ii) by deleting paragraph (d);
(iii)by deleting paragraph (e).
34. Section 42 of the Value Added Tax Act is Amendment of
section 42 of Cap.
amended in subsection (1), by deleting the word "taxable". 476.
35. The Value Added Tax Act is amended by inserting Insertion of a new
section 66A in
the following new section immediately after section 66— Cap. 476.
Liability to pay tax
for exempt and zero-
66A. Where a person imports or
rated supplies. purchases goods or services which are
exempt or zero-rated and the person
subsequently disposes of, or uses, the goods
or services supplied in a manner inconsistent
with the purpose for which the goods or
services were exempted or zero rated, the
person shall be liable to pay tax on the
goods or services at the applicable rate at the
time of disposal or inconsistent use.
36. Section A of Part I of the First Schedule to the Amendment of
First Schedule to
Value Added Tax Act is amended— Cap. 476.

(a) by deleting paragraph 49;

(b) in paragraph 51, by inserting the words "excluding
fuels, lubricants and tyres for vehicles"
immediately after the words "funded project";
(c) by deleting paragraph 58;
(d) by deleting paragraph 62:
Provided that an exemption that had been
approved pursuant to paragraph 62 before the
 The Finance Bill, 2025 347

deletion of paragraph 62 came into effect shall

continue to apply until the 30th June, 2026;
(e) by deleting paragraph 63:
Provided that an exemption that had been
approved pursuant to paragraph 63 before the
deletion of paragraph 63 came into effect shall
continue to apply until the 30th June, 2026;
(f) in paragraph 89, by deleting the words "other
aircraft spare" and substituting therefor the word
"aircraft";
(g) by deleting paragraph 91;
(h) by deleting paragraph 109:
Provided that an exemption that had been
approved pursuant to paragraph 109 before the
deletion of paragraph 109 came into effect shall
continue to apply until the 30th June, 2026;
(i) by deleting paragraph 112:
Provided that an exemption that had been
approved pursuant to paragraph 112 before the
deletion of paragraph 112 came into effect shall
continue to apply until the 30th June, 2026;
0) by deleting paragraph 113:
Provided that an exemption that had been
approved pursuant to paragraph 113 before the
deletion of paragraph 113 came into effect shall
continue to apply until the 30th June, 2026;
(k) by deleting paragraph 128:
Provided that an exemption that had been
approved pursuant to paragraph 128 before the
deletion of paragraph 128 came into effect shall
continue to apply until the 30th June, 2026;
(1) by deleting paragraph 129:
Provided that an exemption that had been
approved pursuant to paragraph 129 before the
deletion of paragraph 129 came into effect shall
continue to apply until the 30th June, 2026;
 348 The Finance Bill, 2025

(m)by deleting paragraph 143;

(n) by deleting paragraph 144;
(o) 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 Amendment of
is amended in Part A — First Schedule to
Cap. 476.
(a) by deleting paragraph 1 1 ;
 The Finance Bill, 2025 349

(b) by deleting paragraph 21;

(c) by deleting paragraph 29;
(d) by deleting paragraph 30;
(e) by deleting paragraph 31;
(f) by deleting paragraph 32;
(g) by deleting paragraph 33;
(h) by deleting paragraph 34;
(i) by deleting paragraph 35.
PART IV—EXCISE DUTY
Amendment of the
38. Section 2 of the Excise Duty Act is amended— section 2 of Cap.
472.
(a) in subsection (1)—
(i) by deleting the definition of "digital lender"
and substituting therefor the following new
definition —
"digital lender" means a person extending Cap. 488.
credit through an electronic medium but does Cap. 490.
not include a bank licenced under the Banking Cap. 493C,

Act, a Sacco society registered under the Co-

operative Societies Act or a microfinance
institution licensed under the Microfinance
Act;
(ii) by inserting the following new definition in
proper alphabetical sequence —
"digital marketplace" means an online
platform which enables users to sell goods or
provide services to other users;
(b) by inserting the following new subsection
immediately after subsection (2)—
(3) In this Act, goods shall be classified by
reference to the tariff codes set out in Annex 1 to
the Protocol on the Establishment of the East
African Community Customs Union and in
interpreting that Annex, the general rules of
interpretation set out in the Annex shall apply.
350 The Finance Bill, 2025

39. Section 5 of the Excise Duty Act is amended— Amendment of the

section 5 of Cap.
472.
(a) in subsection (1), by deleting the words "through a
digital platform" and substituting therefor the
words "over the internet, an electronic network or
through a digital marketplace" appearing in
paragraph (d);
(b) by inserting the following new subsection—
(4) For the purposes of this section —
"non-resident person" means a person outside
Kenya.
40. Section 13 of the Excise Duty Act is amended— Amendment of the
section 13 of Cap.
472.
(a) by renumbering the existing provision as
subsection (1);
(b) by inserting the following new subsection —
(2) If the place of business of the supplier is
outside Kenya, the supply of services shall be
deemed to be made in Kenya if the services are
consumed by a person in Kenya through the
internet, an electronic network or a digital
marketplace.
41. Section 17 of the Excise Duty Act is amended in Amendment of the
section 17 of Cap.
subsection (1), by inserting the following words "within 472.
fourteen days of receipt of the required documents"
immediately after the words "the Commissioner shall".
42. Part 1 of the First Schedule to the Excise Duty Act Amendment of the
First Schedule to
is amended— Cap. 472.

(a) in the second table—

(i) in the description "Coal", by deleting the
word "customs" appearing in the
corresponding rate of excise duty and
substituting therefor the word "excisable";
(ii) by deleting the description "Imported Self-
adhesive plates, sheets, film, foil, tape, strip
and other flat shapes, of plastics, whether or
not in rolls of tariff number 3919.90.90,
3920.10.90, 3920.43.90, 3920.62.90 and
 The Finance Bill, 2025 351

3921.19.90 but excluding those originating

from East African Community Partner States
that meet the East African Community Rules
of Origin" and the corresponding rate of
Excise Duty;
(iii) in the description "Imported Float glass and
surface ground or polished glass, in sheets,
whether or not having an absorbent, reflecting
or non-reflecting layer, but not otherwise
worked of tariff 7005 but excluding those
originating from East African Community
Partner States that meet the East African
Community Rules of Origin" by deleting the
corresponding rate of Excise Duty and
substituting therefor the new rate of Excise
Duty "35% of excisable value or KSh.200 per
kg, whichever is higher";
(iv) by deleting the description "Printed paper or
paperboard of tariff heading 4811.41.90 or
4811.49.00 but excluding those originating
from East African Community Partner States
that meet the East African Community Rules
of Origin" and the corresponding rates of
Excise Duty, appearing immediately after the
description "Imported cartons, boxes and
cases of corrugated paper or paper board and
imported folding cartons, boxes and case of
non-corrugated paper or paper board and
imported skillets, free-hinge lid packets of
tariff heading 4819.10.00, 481920.10 and
481920.90";
(v) by deleting the description "Printed paper or
paperboard of tariff heading 4811.41.90 or
4811.49.00 but excluding those originating
from East' African Community Partner States
that meet the East African Community Rules
of Origin" and the corresponding rates of
Excise Duty, appearing immediately after the
description "Imported paper or paper board,
labels of all kinds whether or not printed of
tariff heading 4821.10.00 and 482190.00 but
excluding those originating from East African
352 The Finance Bill, 2025

Community Partner States that meet the East

African Community Rules of Origin";
(vi) by inserting the following new descriptions
and corresponding rates of excise duty—
Tariff Description Rate of excise
duty
Imported other self-adhesive plates, 25% of
sheets, film, foil, tape, strip and other flat excisable
shapes, of plastics, whether or not in rolls value or
of tariff number 3919.90.90, but excluding Kshs. 200 per
those originating from East African Kilogramme,
Community Partner States that meet the whichever is
East African Community Rules of Origin. higher.
Imported printed polymers of ethylene 25% of
of other plates, sheets, film, foil and strip, excisable
of plastics, noncellular and not reinforced, value or
laminated, supported or similarly combined Kshs. 200 per
with other materials of tariff number Kilogramme,
3920.10.90, but excluding those originating whichever is
from East African Community Partner higher.
States that meet the East African
Community Rules of Origin.
Imported printed polymers of vinyl 25% of
chloride containing by weight not less than excisable
6% of other plates, sheets, film, foil and value or
strip, of plastics, noncellular and not Kshs. 200 per
reinforced, laminated, supported or Kilogramme,
similarly combined with other materials of whichever is
tariff number 3920.43.90, but excluding higher.
those originating from East African
Community Partner States that meet the
East African Community Rules of Origin.
Imported printed poly (ethylene 25% of
terephthalate) of polycarbonates, alkyd excisable
resins, polyallyl esters or other polyesters value or Ksh.
of other plates, sheets, film, foil and strip, 200 per
of plastics, noncellular and not reinforced, Kilogramme,
laminated, supported or similarly of tariff whichever is
number 3920.62.90, but excluding those higher.
originating from East African Community
 The Finance Bill, 2025 353

Partner States that meet the East African

Community Rules of Origin.
Imported printed cellular of other 25% of
plastics of other plates, sheets, film, foil and excisable
strip of tariff number 3921.19.90, but value or
excluding those originating from East Kshs. 200 per
African Community Partner States that Kilogramme,
meet the East African Community Rules of whichever is
Origin. higher.
Printed self-adhesive paper of tariff 25% of
number 4811.41.90, but excluding those excisable
originating from East African Community value or Ksh.
Partner States that meet the East African 200 per
Community Rules of Origin. Kilogramme,
whichever is
higher.
Gummed paper and paperboard of 25% of
tariff number 4811.49.00 but excluding excisable
those originating from East African value or Ksh.
Community Partner States that meet the 200 per
East African Community Rules of Origin. Kilogramme,
whichever is
higher.
Spirits of undenatured extra neutral Ksh. 500 per
alcohol of alcoholic strength exceeding litre
90% purchased by licensed manufacturers
of spirituous beverages.
PART VII—TAX PROCEDURES
Amendment of
43. Section 23A of the Tax Procedures Act is amended section 23A of
by deleting subsection (4) and substituting therefor the Cap. 469B.
following new subsection —
(4) The electronic tax invoice referred to in
subsection (3) may exclude payments of emoluments,
payments for imports, payments of interest,
transactions for accounting for investment allowances,
airline passenger ticketing, and payments subject to
withholding tax that is a final tax.
Amendment of
44. Section 31 of the Tax Procedures Act is amended section 31 of Cap.
by inserting the following new subsection immediately 469B.
after subsection (8)—
354 The Finance Bill, 2025

(8A) Where the Commissioner has made an

amended assessment, the Commissioner shall include
in the notification under subsection (8) the reasons for
the amended assessment.
45. Section 39A of the Tax Procedures Act is amended Amendment of
section 39A of
by — Cap. 469B.
(a) renumbering the existing provision as subsection
(1);
(b) inserting the following new subsection
immediately after subsection (1)—
(2) Despite subsection (1), a person who does
not deduct, withhold or remit tax on a payment
shall not be required to pay the principal tax not
deducted, withheld or remitted where the recipient
of the payment has paid and accounted for the full
principal tax and the tax not deducted, withheld or
remitted.
46. Section 40 of the Tax Procedures Act is Amendment of
section 40 of Cap.
amended — 469B.
(a) in subsection (2), by inserting the words "or stamp
duty" immediately after the word "fee";
(b) by deleting the proviso to subsection (5) and
substituting therefor the following new proviso—
Provided that —
(a) 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; and
(b) the transfer of the property shall be
exempt from stamp duty.
47. Section 42 of the Tax Procedures Act is Amendment of
section 42 of Cap.
amended — 469B.
(a) in subsection (1), by inserting the words "or a non-
resident person who is subject to tax in Kenya"
immediately after the word "taxpayer";
(b) in subsection (2)—
 The Finance Bill, 2025 355

(i) in the opening statement, .by inserting the

words "or the non-resident person who is
subject to tax in Kenya" immediately after the
word "taxpayer";
(ii) in paragraph (a), by inserting the words "or
the non-resident person who is subject to tax
in. Kenya" immediately after the word
"taxpayer";
(iii) in paragraph (b), by inserting the words "or
the non-resident person who is subject to tax
in Kenya" immediately after the word
"taxpayer";
(iv) in paragraph (c), by inserting the words "or
the non-resident person who is subject to tax
in Kenya" immediately after the word
"taxpayer";
(v) in paragraph (d), by inserting the words "or
the non-resident person who is subject to tax
in Kenya" immediately after the word
"taxpayer" wherever it occurs;
(c) in subsection (3), by inserting the words "or the
non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer";
(d) in subsection (4)(b), by inserting the words "or the
non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer";
(e) in subsection (5), by deleting the words "taxpayer
becomes due to the taxpayer, or held on the
taxpayer's behalf" and substituting therefor the
words "taxpayer or non-resident person who is
subject to tax in Kenya, becomes due to the
taxpayer or non-resident person who is subject to
tax in Kenya, or held on behalf of the taxpayer or
non-resident person .who is subject to tax in.
Kenya";
(f) in subsection (6), by inserting the words "or the
non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer";
356 The Finance Bill, 2025

(g) in subsection (8), by inserting the words "or the

non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer";
(h) in subsection (9), by inserting the words "or the
non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer";
(i) in subsection (10), by inserting the words "or the
non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer"
wherever it occurs;
(j) in subsection (11), by inserting the words "or the
non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer";
(k) in subsection (12), by inserting the words "or the
non-resident person who is subject to tax in
Kenya" immediately after the word "taxpayer"
wherever it occurs;
(1) in subsection (13), by deleting the word "taxpayer"
and substituting therefor the expression "agent
under subsection (2) or the non-resident person
who is subject to tax in Kenya";
(m)in subsection (14)— •
(i) in paragraph (a), by inserting the words "or
the non-resident person who is subject to tax
in Kenya" immediately after the word
"taxpayer";
(ii) in paragraph (b), by inserting the words "or
the non-resident person who is subject to tax
in Kenya" immediately after the word
"taxpayer";
(iii) in paragraph (c), by inserting the words "or
the non-resident person who is subject to tax
in Kenya" immediately after the word
"taxpayer";
(iv) in paragraph (d), by inserting the words "or
the non-resident person who is subject to tax
in Kenya" immediately after the word
"taxpayer ;
 The Finance Bill, 2025 357

(v) by deleting paragraph (e).

48. Section 42A of the Tax Procedures Act is amended Amendment of
section 42A of
by deleting subsection (4D). Cap. 469B.

49. The Tax Procedures Act is amended by repealing Repeal of section

42B of Cap.
section 42B. 469B.

50. Section 47 of the Tax Procedures Act is Amendment of

section 47 of Cap.
amended — 469B.

(a) in subsection (1)(a) by deleting the words "and

input value added tax";
(b) in subsection (2), by deleting the words "ninety
days" and substituting therefor the words "one
hundred and twenty days";
(c) in subsection (4A), by deleting the words "one
hundred and twenty days" and substituting therefor
the words "one hundred and eighty days".
51. Section 51 of the Tax Procedures Act is amended Amendment of
section 51 of Cap.
by inserting the following new subsection immediately 469B.
after subsection (7A)
(7B)Where the Commissioner has allowed the
application for late objection and the objection has
been validly lodged, the period within which the
Commissioner may make and objection decision shall
be computed on the day the objection is lodged.
52. Section 59A of the Tax Procedures Act is amended Amendment of
section 59A of
by deleting subsection (1B). Cap. 469B.

53. Section 66 of the Tax Procedures Act is amended Amendment of

section 66 of Cap.
in subsection (1), by deleting paragraph (a)(iii). 469B.

54. Section 77 of the Tax Procedures Act is amended Amendment of

section 77 of Cap.
by deleting subsection (2). 469B.

55. Section 83 of the Tax Procedures Act is amended Amendment of

section 83 of Cap.
in subsection (1), by inserting the words "fails to submit a 469B.
tax return or" immediately after the words "person who".
56. Section 89 of the Tax Procedures Act is amended Amendment of
section 89 of Cap.
by inserting the following new subsection immediately 469B.
after subsection (5)—
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 Amendment of
section 9B of Cap
Act is amended— 469C.

(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 Amendment of the
Second Schedule
and Levies Act is amended— of Cap. 469C.

(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 Amendment of the
Third Schedule of
Levies Act is amended— Cap. 469C.
 The Finance Bill, 2025 359

(a) in tariff description "Semi-finished products of

iron or non-alloy steel containing, by weight,
<0.25% of carbon; of rectangular (including
square) cross-section, the width measuring less
than twice the thickness", by deleting the
expression "17.5%" appearing in the
corresponding export and investment promotion
levy rate and substituting therefor the expression
"10%";
(b) in tariff description "Bars and rods of iron or non-
alloy steel, hot-rolled, in irregularly wound coils of
circular cross-section measuring less than 14 mm
in diameter of cross section measuring less than 8
mm", by deleting the expression "17.5%"
appearing in the corresponding export and
investment promotion levy rate and substituting
therefor the expression "10%";
(c) in tariff description "Bars and rods of iron or non-
alloy steel, hot-rolled, in irregularly wound coils of
circular cross-section measuring less than 14mm in
diameter; other", by deleting the expression
"17.5%" appearing in the corresponding tariff
number and export and investment promotion levy
rate and substituting therefor the expression "10
%"
PART VII- MISCELLANEOUS
Amendment of
60. Section 117 of the Stamp Duty Act is amended in section 117 of
subsection (1) by inserting the following new paragraph Cap.480.
immediately after paragraph (q)-
(r) the transfer of property by a company to its
shareholders as part of an internal
reorganisation:
Provided that —
(a) the property is transferred to the
shareholders in proportion to their
shareholding in the company
immediately before the transfer; and
(b) where the property consists of shares,
such shares should be in a subsidiary
of the company undertaking the
transfer.
360 The Finance Bill, 2025

MEMORANDUM OF OBJECTS AND REASONS

The Finance Bill, 2025, has been submitted by the Cabinet Secretary
for the National Treasury and Economic Planning and formulates
proposals relating to revenue raising measures including liability to, and
collection of taxes.
The Bill proposes to amend the Income Tax Act (Cap. 470), the
Value Added Tax Act (Cap. 476), the Excise Duty Act (Cap. 472), the Tax
Procedures Act (Cap. 469B) and the Miscellaneous Fees and Levies Act
(Cap. 469C).
The Bill also amends the Stamp Duty Act to exempt from stamp duty
the transfer of property by a company to its shareholders as part of an
internal reorganisation.
Dated the 6th May, 2025.

KURIA KIMANI,
Chairperson,
Departmental Committee on Finance and National Planning.
 The Finance Bill, 2025 361

Section 2of Cap 470, it is proposed to amend—

"compensating tax" means the addition to tax imposed under section
7A;
"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;
(e) 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 having 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.
(I) 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;
364 The Finance Bill, 2025

(iii) where the contract is for an unspecified term and does not
provide for compensation on the termination thereof, any
compensation paid on the termination of the contract shall be
deemed to have accrued evenly in the three years
immediately following such termination;
(d) any balancing charge under Part II of the Second Schedule;
(e) the value of premises provided by an employer for occupation by
his employee for residential purposes;
(0 an amount paid by an employer as a premium for an insurance on
the life of his employee and for the benefit of that employee or
any of his dependants:
Provided that this paragraph shall not apply where such an
amount is paid—
(i) to a registered or unregistered pension scheme, pension
fund, or individual retirement fund; or
(ii) for group life policy cover, unless such a cover confers a
benefit to the employee or any of his dependants.
(fa) club entrance and subscription fees allowed against the
employer's income;
(2A) (a) Where an individual is a director or an employee or is a
relative of a director or an employee and has received a loan including a
loan from an unregistered pension or provident fund by virtue of his
position as a director or his employment, or the person to whom he is
related, he shall be deemed to have received a benefit in that year of
income equal to the greater of—
(i) the difference between the interest that would have been
payable on the loan received if calculated at the
prescribed rate of interest and the actual interest paid on
the loan; and
(ii) zero:
Provided that where the term of the loan extends for a period
beyond the date of termination of employment, the provisions of
this subsection shall continue to apply for as long as the loan
remains unpaid.
(b) For the purposes of this subsection—
"employee" means any person who is not a beneficial owner of or
able either directly or indirectly or through the medium of other
 The Finance Bill, 2025 365

companies or by any other means to control more than five per cent of the
share capital or voting power of that company;
"market lending rates" means the average 91-day treasury bill rate of
interest for the previous quarter;
"prescribed rate of interest" means the following:
(i) in the year of income commencing on the 1st January, 1990,
6 per cent;
(ii) in the year of income commencing on the 1st January, 1991,
8 per cent;
(iii) in the year of income commencing on the 1st January, 1992,
10 per cent;
(iv) in the year .of income commencing on the 1st January, 1993,
12 per cent:
(v) in the year of income commencing on the 1st January, 1994,
15 per cent; and
(vi) in the year of income commencing on or after the 1st
January, 1995, 15% or such interest rate based on the market
lending rates as the Commissioner may from time to time
prescribe, to cover a period of not less than six months but
not more than one year, whichever is the lower.
"relative of a director or an employee" means-
(i) his spouse;
(ii) his son, daughter, brother, sister, uncle, aunt, nephew, niece,
stepfather, step-mother, step-child, or in the case of an
adopted child his adopter or adopters; or
(iii) the spouse of any such relative as is mentioned in
subparagraph (ii).
(2B) Where an employee is provided with a motor vehicle by his
employer, he shall be deemed to have received a benefit in that year of
income equal to the higher of—
(a) such value as the Commissioner may, from time to time,
determine; and
(b) the prescribed rate of benefit:
Provided that—
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;
(iii) 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.
368 The Finance Bill, 2025

(4) Notwithstanding anything to the contrary in subsection (2) "gains

or profits" do not include—
(a) the expenditure on passages between Kenya and any place outside
Kenya borne by employer:
Provided that this paragraph shall not apply to expenditure
other than expenditure on the provision of passages for the benefit
of an employee recruited or engaged outside Kenya and who is in
Kenya solely for the purpose of serving the employer and is not a
citizen of Kenya;
(aa) expenditure on vacation trips to destinations in Kenya paid
by the employer on behalf of an employee:
Provided that—
(i) this paragraph shall cease to apply on the 1st July, 2015;
(ii) the period of vacation shall not exceed seven days; and
(iii) the term "employee" shall include the immediate family
members of the employee;
(b) in the case of a full-time employee or his beneficiaries (which
expression includes a whole time service director, or a director
who controls more than five per cent of the share capital or
voting power of a company) the value of any medical services
provided by the employer or medical insurance provided by an
insurance provider approved by the Commissioner of Insurance
and paid for by the employer on behalf of a full-time employee or
his beneficiaries:
Provided that in the case of a director other than a whole
time service director, the value of the services shall be subject to
such limit as the Cabinet Secretary may, from time to time,
prescribe;
(c) an amount paid by the employer as a contribution to a registered
or unregistered pension fund, provident fund, individual
retirement fund or scheme:
Provided that this paragraph shall not apply to any
contributions paid by an employer who is not a person
chargeable to tax—
(i) to an unregistered pension scheme, unregistered provident
fund or unregistered individual retirement fund; or
 The Finance Bill, 2025 369

(ii) to a registered pension scheme, a registered provident

fund or a registered individual retirement fund in excess
of the amount specified in section 22A or 22B;
(d) educational fees of employee's dependants or relatives disallowed
under section 16(2(a)(iv) which have been taxed in the hands of
the employer;
(e) fringe benefits subject to tax under section 12B;
(f) the first sixty thousand shillings on the value of meals served by
the employer, whether the meals are supplied by the employer or
not, within his premises to employees in a canteen or cafeteria
operated or established by the employer or provided by a third
party who is a registered taxpayer, whether the meals are supplied
in the premises of the employer or the premises of the third party,
shall be excluded in the calculation of his gains or profits subject
to such conditions as the Commissioner may specify;
(fa) any amount paid or granted to a public officer pursuant to any
written law or statutory instrument, with effect from 27th
July, 2022, to reimburse an expenditure incurred for the
purpose of performing official duties, notwithstanding the
ownership or control of any assets purchased;
(g) an amount paid by an employer as a gratuity or similar payment
in respect of employment or services rendered, which is paid into
a registered pension scheme:
Provided that—
(a) this paragraph shall only apply in respect of amounts not
exceeding three hundred and sixty thousand shillings for each
year of service;
(b) this paragraph shall not apply to any person who is eligible for
deductions under section 22A.
(h) For the purposes of this subsection —
(i) "beneficiaries" means the full time employee's spouse and not
more than four children whose age shall not exceed twenty-
one years; and
(ii) "low income employee" deleted by Act No 16 of 2014,
5(c).
(5) Notwithstanding any other provision of this Act, the value of the
benefit (excluding the value of premises as determined under subsection
(3) and the value of benefit determined under subsection (2B) for the
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.
372 The Finance Bill, 2025

(2) For the purposes of this Act any pension or retirement annuity
received by a non-resident individual from a pension fund or pension
scheme established in Kenya or under an annuity contract made in Kenya
shall be deemed to have accrued in or to have been derived from Kenya.
(3) For the purposes of this Act, any pension received in respect of
employment by or services rendered to the Community or one of its
corporations shall be deemed to have accrued in or to have been derived
from. Kenya—
(a) if received by a resident individual; or(b)if received by a non-
resident individual if the person making payment of the pension
was resident in Kenya.
(4) Notwithstanding section 3(2)(c), the first three hundred thousand
shillings of the total pensions and retirement annuities received by a
resident individual from a registered fund or the National Social Security
Fund in a year of income shall be deemed to be income not charged to tax.
(5) Notwithstanding section 3(2)(c), the following sums shall, subject
to such rules as the Commissioner may prescribe, be deemed to be income
not chargeable to tax—
(a) in the case of a lump sum commuted from a registered pension or
individual retirement fund, the first six hundred thousand
shillings; or
(b) in the case of a withdrawal from a registered pension or individual
retirement fund upon termination of employment, the lesser of—
(i) the first sixty thousand shillings per full year of pensionable
service with that employer starting on the later of the date the
pensionable service began, or, where the employee had
previously received a lump sum payment from that same
employer, the date the employee's pensionable service
recommenced after receipt of that lump sum; or
(ii) the first six hundred thousand shillings; or
(c) in the case of a lump sum paid out of a registered provident fund
(or a defined contribution registered fund deemed by the
Commissioner to be a provident fund for the purposes of
assessing under this paragraph accumulations for the payment of
lump sums other than out of a pension) the total of—
(i) the lesser of the first six hundred thousand shillings or the first
sixty thousand shillings per full year of pensionable service
with that employer starting on the later of the date the
 The Finance Bill, 2025 373

pensionable service began or, where the employee had

previously received a lump sum payment from that same
employer, the date the employee's pensionable service
recommenced after receipt of that lump sum; and
(ii) where the registered fund receives no further contributions
after 1990 year of income, or where the accumulated funds
based on contributions prior to the 1st January, 1991 and
contributions after the 31st December, 1990 are segregated,
all lump sum payments based on the contributions made prior
to 1st January, 1991, or, in any other case, all benefits based
on amounts accumulated in the fund on the 31st December,
1990:Provided that the trustees or provident fund managers
shall have informed the Commissioner in writing by 31st
December, 1991 of the accumulated balances and the
members of the provident funds as of 31st December, 1990,
the names of the registered funds, the names and addresses of
such members, the name and address of their employer, and
whether the registered provident fund has ceased receiving
contributions as of 1st January, 1991 or whether the
registered provident fund has segregated its funds;
(d) in the case of a benefit paid out of the National Social Security
Fund, the first six hundred thousand shillings; and
(e) in the case of a lump sum paid out of a registered home ownership
savings plan, the amount used for the purchase of an interest in or
for the construction of a permanent house for occupation by the
depositor within twelve months immediately following the year
of withdrawal;
(f) the total pensions or individual retirement and retirement annuities
received by a resident individual from an unregistered pension or
individual retirement fund or scheme—
(i) the contributions to which have not been allowed as a
deduction under any other provisions of this Act; and
(ii) the income thereof has been taxed.
(5A) For the purposes of subsection 5(c)(ii), accumulated funds are
segregated where—
(a) the accumulated funds based on contributions prior to the 1st
January 1991 are accounted for separately from contributions
after 31st December, 1990; and
374 The Finance Bill, 2025

(11) the net accumulated funds on each account earn the average rate
of return on all the assets in the fund at the accounting date for a
year of income; and
(c) the net accumulated funds based on contributions prior to 1st
January, 1991, are made up of the accumulated balances as at
31st December, 1990, less any withdrawals from the fund plus
any investment income earned on the fund up to the accounting
date for a year of income.
(6) Upon the death of an employee who is a member or beneficiary of
a registered fund—
(a) the widow, widower or dependants shall qualify as a group for the
same tax exempt amounts out of pension income and lump sums
as are available under subsections (4) and (5) respectively as if
such amounts had been received by the employee; and
(b) where the registered fund provides for no payment of retirement
benefits other than the payment of a lump sum to an estate, the
first one million four hundred thousand shillings of such a lump
sum payment shall be deemed to be income not chargeable to tax
as income of the estate or its direct beneficiaries.
(7) Upon the death of the beneficiary of a registered individual
retirement fund or registered home ownership savings plan the balance of
funds shall be deemed to have been withdrawn immediately preceding the
time of his death and shall be included in his income for that year, except—
(a) where such funds have been bequeathed to the spouse, the
ownership of the fund may be transferred to the spouse; or
(b) where funds are bequeathed to his children under the age of
eighteen years at the time of his death, such funds shall be
included in the income of such children;
(c) where the funds of a depositor under a registered home ownership
savings plan are bequeathed to another depositor, the funds may
be transferred to that depositor.
(8) Upon dissolution of the marriage of the beneficiary of a registered
individual retirement fund, or registered home ownership savings plan, as
part of a written agreement, all or part of the balance of funds of that
beneficiary may be transferred to a registered individual retirement fund or
registered house ownership savings plan, in the name of the former spouse
of that beneficiary.
 The Finance Bill, 2025 375

(9) Where the Commissioner determines that an individual retirement

fund no longer complies with the registration rules, the fund shall be
deemed to be no longer an individual retirement fund and the balance of
the fund shall be included in the income of the beneficiary in the year of
income in which the fund ceased to comply with the rules.
(9A) Where the Commissioner withdraws the registration of a home
ownership savings plan, then the balance of the funds held in each
depositor's account shall be included in that depositor's income with
effect from the beginning of the year of income in which the grounds for
the withdrawal arose, except where such funds are transferred to a similar
plan in an approved institution within twelve months of the withdrawal of
the registration with the prior written approval of the Commissioner in
which case such funds shall not be included in the depositor's income.
(10) For the purposes of this subsection—
(a) pension and lumpsums paid from a public pension scheme, shall
be deemed to be received from a registered pension fund or a
registered provident fund, as the case may be;
(b) any surplus funds in respect of a registered pension fund or a
registered provident fund withdrawn by or refunded to an
employer shall be deemed to be the income of that employer.
(11) In subsection (10), the expression "surplus funds" means surplus
funds identified through an actuarial valuation carried out in accordance
with this Act or any rules made thereunder.
Section 10, it is proposed to amend-
Income from management or professional fees, royalties, interest
and rents
(1) For the purposes of this Act, where a resident person or a person
having a permanent establishment in Kenya makes a payment to any other
person in respect of—
(a) a management or professional fee or training fee;
(b) a royalty or natural resource income;
(c) interest and deemed interest;
(d) the use of property;
(e) 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; or
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;
378 The Finance Bill, 2025

(g) to a sovereign wealth fund; or

(h) to an intergovernmental or supranational organisation including a
wholly owned agency or organ of the intergovernmental or
supranational organisation.
(5) In this section —
"adjusted covered taxes" means taxes recorded in the financial
accounts of a covered person for the income, profits, or share of the
income or profits of a covered person where the covered person owns an
interest, and includes taxes on distributed profits, deemed profit
distributions under this Act subject to such adjustments as may be
prescribed;
"covered person" means a resident person or a person with a
permanent establishment in Kenya who is a member of a multinational
group and the group has a consolidated annual turnover of seven hundred
and fifty million Euros or more in the consolidated financial statements of
the ultimate parent entity in at least two of the four years of income
immediately preceding the tested year of income;
"net income or loss" means the sum net income or loss for the year of
income after deducting the sum of the losses of a covered person as
determined under a recognised accounting standards in Kenya; and
"excess profit" means the net income or loss of a covered person for
the year of income less —
(a) ten per cent for the employee costs; and
(b) eight per cent for the net book value of tangible assets:
Provided that the employee cost and book value of tangible assets
may be adjusted as prescribed in regulations.
Section 15 of Cap.470, it is proposed to amend-
Deductions allowed
(1) For the purpose of ascertaining the total income of any person for
a year of income there shall, subject to section 16 of this Act, be deducted
all expenditure incurred in such year of income which is expenditure
wholly and exclusively incurred by him in the production of that income,
and where under section 27 of this Act any income of an accounting
period ending on some day other than the last day of such year of income
is, for the purpose of ascertaining total income for any year of income,
taken to be income for any year of income, then such expenditure incurred
during such period shall be treated as having been incurred during such
year of income.
 The Finance Bill, 2025 379

(2) Without prejudice to sub-section (1) of this section, in computing

for a year of income the gains or profits chargeable to tax under section
3(2)(a) of this Act, the following amounts shall be deducted:
(a) bad debts incurred in the production of such gains or profits which
the Commissioner considers to have become bad, and doubtful
debts so incurred to the extent that they are estimated to the
satisfaction of the Commissioner to have become bad, during
such year of income and the Commissioner may prescribe such
guidelines as may be appropriate for the purposes of determining
bad debts under this subparagraph;
(13) amounts to be deducted under the Second Schedule in respect of
that year of income;
(bb) amounts to be deducted under the Ninth Schedule in respect
of that year of income;
(c) any expenditure of a capital nature incurred during that year of
income by the owner or occupier of farm land for the prevention
of soil erosion;
(d) any expenditure of a capital nature incurred in that year of income
by any person on legal costs and stamp duties in connexion with
the acquisition of a lease, for a period not in excess of, or
expressly capable of extension beyond, ninety-nine years, of
premises used or to be used by him for the purposes of his
business;
(e) any expenditure, other than expenditure referred to in paragraph
(f) of this section, incurred in connection with any business
before the date of commencement of that business where such
expenditure would have been deductible under this section if
incurred after such date, so, however, that the expenditure shall
be deemed to have been incurred on the date on which such
business commenced;
(f) in the case of the owner of premises, any sums expended by him
during such year of income for structural alterations to the
premises where such expenditure is necessary to mainta the
existing rent:
Provided that no deduction shall be made for the cost of an
extension to, or replacement of, such premises;
(g) the amount considered by the Commissioner to be just and
reasonable as representing the diminution in value of any
implement, utensil or similar article, not being machinery or
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 semi-
permanent 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
382 The Finance Bill, 2025

the construction of a public school, hospital, road or any similar

kind of social infrastructure;
(z) expenditure incurred in that year of income by a person
sponsoring sports, with the prior approval of the Cabinet
Secretary responsible for sports;
(aa) expenditure incurred in that year of income on donations to
the Kenya Red Cross, county governments or any other
institution responsible for the management of national
disasters to alleviate the effects of a national disaster
declared by the President.
(ac) in the case of an employee, the amount deducted in
accordance with section 5(1)(a) of the Affordable Housing
Act, 2024;
(ad) a contribution to a post-retirement medical fund subject to a
limit of fifteen thousand shillings per month;
(ae) contributions made to the Social Health Insurance Fund in
accordance with section 27(a) and
(b) of the Social Health Insurance Act, 2023;
(3) Without prejudice to subsection (1), in ascertaining the total
income of a person for a year of income the following amounts shall be
deducted:
(a) the amount of interest paid in respect of that year of income by the
person upon money borrowed by him and where the
Commissioner is satisfied that the money so borrowed has been
wholly and exclusively employed by him in the production of
investment income which is chargeable to tax under this Act:
Provided that —
(i) the amount of interest which may be deducted under this
paragraph shall not excee the investment income chargeable
to tax for that year of income, and where the amount of that
interest paid in that year exceeds the investment income of
that year, the excess shall be carried forward to the next
succeeding year and deducted only from investment income
and, in so far as the interest has not already been so deducted,
from investment income of the subsequent years of income;
and
 The Finance Bill, 2025 383

(ii) for the purposes of this paragraph, 'investment income"

means dividends and interest but excludes qualifying
dividends and qualifying interest;
(b) the amount of interest not exceeding three hundred and sixty
thousand shillings paid by him in respect of that year of income
upon money borrowed by him from one of the first six financial
institutions specified in the Fourth Schedule and applied to the
purchase or improvement of premises occupied by him during
that year of income for residential purposes:
Provided that—
(i) if any person occupies any premises for residential purposes
for part only of a year of income the deduction under this
paragraph shall be reduced accordingly; and
(ii) no person may claim a deduction under this paragraph in
respect of more than one residence;
(d) in the case of a partner, the amount of the excess, if any, of his
share of any loss incurred by the partnership, calculated after
deducting the total of any remuneration and interest on capital
payable to any partner by the partnership and after adding any
interest on capital payable by any partner to the partnership, over
the sum of any remuneration and such interest so payable to him
less any such interest so payable by him;
(f) the amount of any loss realized in computing, in accordance with
paragraph 5(2), of the Eighth Schedule, gains chargeable to tax
under section 3(2)(f); but the amount of any such loss incurred in
a year of income shall be deducted only from gains under section
3(2)(f) in that year of income and, in so far as it has not already
been deducted, from gains in subsequent years of income;
(g) in the case of a business which is a sole proprietorship, the cost of
medical expenses or medical insurance cover incurred for the
benefit of the proprietor, subject to a limit of one million shillings
per year.
(4) Where the ascertainment;of the total income of a person results in
a deficit for a year of income, the amount of that deficit shall be an
allowable deduction in ascertaining the total income of such person for
that year and the succeeding years of income.
(5) Notwithstanding subsection (4), the Cabinet Secretary may, on
the recommendation of the Commissioner, extend the period of deduction
beyond ten years where a person applies through the Commissioner for
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.
(5A) For the purpose of section 3(2)(g), the amount of the net gain to 4
be included in income chargeable to tax is—
(b) the amount computed according to the following formula—
A x 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 self-
employed 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);
386 The Finance Bill, 2025

(ivB) income of a licensee from one licence area or a contractor

from one contract area as determined in accordance with
the Ninth Schedule; and
(vi) other sources of income chargeable to tax under section
3(2)(a), not falling within subparagraph (i), (ii), (iii) or (iv)
of this paragraph.
Section 16 (),f Cap. 370, it is proposed to amend—
Deductions not allowed
(1) Save as otherwise expressly provided, for the purposes of
ascertaining the total income of a person for any year of income, no
deduction shall be allowed in respect of—
(a) any expenditure or loss which is not wholly and exclusively
incurred by him in the production of the income;
(b) any capital expenditure, or any loss, diminution or exhaustion of
capital;
(c) any expenditure or loss where the invoices of the transactions are
not generated from an electronic tax invoice management system
except where the transactions have been exempted in accordance
with the Tax Procedures Act (Cap. 469B).
(2) Notwithstanding any other provision of this Act, no deduction
shall be allowed in respect of—
(a) expenditure incurred by a person in the maintenance of himself,
his family or establishment or for any other personal or domestic
purpose including the following—
(i) entertainment expenses for personal purposes; or
(ii) hotel, restaurant or catering expenses other than for meals or
accommodation expenses incurred on business trips or during
training courses or work related conventions or conferences,
or meals provided to employees on the employer's premises;
(iii) vacation trip expenses except those customarily made on
home leave as provided in the proviso to section 5(4)(a) and
(aa); or
(iv) educational fees of employee's dependants or relatives;
(b) any expenditure or loss which is recoverable under any insurance,
contract, or indemnity;
 The Finance B111,2025 387

(c) any income tax or tax of a similar nature, including compensating

tax paid on income:
Provided that, save in the case of foreign tax in respect of
which a claim is made under section 41, a deduction shall be
allowed in respect of income tax or tax of a similar nature,
including compensation tax paid on income which is charged to
tax in a country outside Kenya to the extent to which that tax is
payable in respect of and is paid out of income deemed to have
accrued in or to have been derived from Kenya;
(d) any sums contributed to a registered or unregistered pension,
saving, or provident scheme or fund, except as provided in
section 15(2)(o), or any sum paid to another person as a pension;
(e) a premium paid under an annuity contract;
(f) any expenditure incurred in the production of income deemed
under section 10 of this Act to have accrued in or to have been
derived from Kenya where such expenditure was incurred by a
non-resident person not having a permanent establishment within
Kenya;
(fa) any expenditure incurred in the production of dividend
income deemed under paragraph (a) of subsection (1), of
section 7 to have been derived from Kenya where such
expenditure was incurred by a non-resident person not
having a permanent establishment within Kenya;
(h) any loss incurred in any business which, having regard to the
nature of the business, to the principal occupation of the owner,
partners, shareholders or other persons having a beneficial
interest therein, to the relationship between any such persons or
to any other relevant factor, the Commissioner considers it
reasonable to regard as not being carried on mainly with a view to
the realization of profits; and, without prejudice to the generality
of the foregoing, a business shall be deemed not to be carried on
for any year of income with a view to the realization of profits
where more than one quarter of the amount of the revenue
expenditure incurred in such business in such year relates to
goods, services, amenities or benefits, or to the production of
goods, services, amenities or benefits, which are of a personal of
domestic nature enjoyed by the owner, partners, shareholders or
other persons having a beneficial interest in the business or a
member of the family or the domestic establishment of any such
person;
388 The Finance Bill, 2025

(j) gross interest paid or payable to a non-resident in excess of thirty

per cent of earnings before interest, taxes, depreciation and
amortization of the borrower in any financial year:
Provided that—
(i) any income which is exempt from tax shall be excluded from
the calculation of earnings before interest, taxes, depreciation
and amortization; and
(ii) this paragraph shall apply to—
(A) interest on all loans;
(B) payments that are economically equivalent to interest; and
(C) expenses incurred in connection with raising the finance.
(iii) this paragraph shall not apply to-
(A) banks or financial institutions licensed under the Banking
Act (Cap. 488);
(B) micro and small enterprises registered under the Micro
and Small Enterprises Act (Cap. 493C);
(C) microfinance institutions licensed and non-deposit taking
microfinance businesses under the Microfinance Act (Cap
493C);
(D) entities licensed under the Hire Purchase Act (Cap. 507);
(E) non-deposit taking institutions involved in lending and
leasing business;
(F) companies undertaking the manufacture of human
vaccines;
(I) holding companies that are regulated under the Capital
Markets Act
(iv) any interest in excess of thirty per cent of earnings before
interest, taxes, depreciation and amortization shall be an
allowable deduction in ascertaining the total income of a
person in the subsequent three years of income to the extent
that the deduction of interest on loans from non-resident
persons does not exceed the thirty percent threshold
provided under this section; and
(v) this provision shall not apply where the interest is exempt
from tax under this Act.
 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 non-
resident 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
390 The Finance Bill, 2025

from such business shall be deemed to be of such an amount as might have

been expected to accrue if the course of that business had been conducted
by independent persons dealing at arm's length
(5) When a non-resident person carries on a business in Kenya
through a permanent establishment in Kenya the gains or profits of the
permanent establishment shall be ascertained without any deduction in
respect of interest, royalties or management or professional fees paid or
purported to be paid by the permanent establishment to the non-resident
person and by disregarding any foreign exchange loss or gain with respect
to net assets or liabilities purportedly established between the permanent
establishment in Kenya and the non-resident person.
Provided that for the avoidance of doubt, the expression "non-
resident person" shall include both the head office and other offices of the
non-resident person.
(6) For the purposes of subsection (3), a person is related to another
if—
(a) either person participates directly or indirectly in the management,
control or capital of the business of the other;
(b) a third person participates directly or indirectly in the
management, control or capital of the business of both; or
(c) an individual, who participates in the management, control or
capital of the business of one, is associated by marriage,
consanguinity or affinity to an individual who participates in the
management, control or capital of the business of the other.
(8) The Cabinet Secretary may, by rules published in the Gazette—
(a) issue guidelines for the determination of the arm's length value of
a transaction for purposes of this section; or
(b) specify such requirements as he may consider necessary for the
better carrying out of the provisions of this section.
Section 18D of Cap. 470, it is proposed to amend—
Filing of country-by-country report, master file and local file
(I) Each ultimate parent entity that is resident in Kenya shall file a
country-by-country report with the Commissioner in accordance with
subsection (3).
(I A) A constituent entity that is resident in Kenya shall file a
country-by-country report with the Commissioner in accordance with
subsection (1B), if one of the following conditions applies—
 The Finance Bill, 2025 391

(a) the ultimate parent entity is not 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 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 contain-
(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.
 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

(a) a non-resident surrogate parent entity 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 non-
resident 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
recovered in respect thereof under reinsurance; and
(ii) the amount of agency expenses incurred in such year of
income in connection with such business; and
 The Finance Bill, 2025 395

(iii) the amount of any other expenses allowable as a deduction

(excluding costs and expenses attributable to earning exempt
income) as determined by the ratio of exempt investment
income to the sum of investment and exempt investment
income in that year of income in computing the gains or
profits of that business under this Act.
(4) The gains or profits for any year of income from the insurance
business, other than life insurance business, of a non-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 received or receivable in Kenya of the gross
premiums from such business (less such premiums returned to
the insured and such premiums paid on reinsurance, other
than to the head office of such company, as relates to such
business); and
(ii) the amount of other income from such business, not being
income from investments, received or receivable in Kenya
including any commission or expense allowance received or
receivable from reinsurance, other than from the head office
of such company, of risks accepted in Kenya; and
(iii) such amount of income from investments as the
Commissioner may determine to be just and reasonable as
representing income from investment of the reserves referable
to such business done in Kenya; and
(b) deducting from the sum arrived at under paragraph (a) a reserve
for unexpired risks outstanding at the end of that year of income
in respect of policies for which the premiums are received or
receivable in Kenya at the percentage adopted by the company in
relation to its insurance business as a whole, other than life
insurance, but adding to that sum the reserve deducted for similar
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)—
(i) the amount of the claims admitted in that year of income in
connection with that business (Provided that claims incurred
but not paid or not reported before the endof the accounting
period are estimated on the basis of actuarial principles
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 of
income in connexion with such business; and
(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).
(5A) 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
398 The Finance Bill, 2025

company under any registered annuity contract, registered trust scheme,

registered pension scheme or registered pension fund;
"life insurance premiums" means premiums referable to the life
insurance business other than annuity business;
"life insurance expenses" means expenses referable to the life
insurance business other than annuity business.
(8) The amount of the gains or profits from insurance business, both
from life insurance and from other classes of insurance business, arrived at
under this section shall be taken into account together with any other
income of the company charged to tax in ascertaining the total income of
that company.
Section 21of Cap.470, it is proposed to amend-
Members' clubs and trade associations
(1) A body of persons which carries on the activities of a members'
club or trade association shall be deemed to be carrying on a business and
the gross receipts on revenue account (excluding joining fees, welfare
contributions and subscriptions) shall be deemed to be income from a
business.
(3) In this section—
"member" means—
(a) in relation to a members' club, a person who, while he is a
member, is entitled to an interest in all the assets of such club in
the event of its liquidation;
(b) in relation to a trade association, a person who is entitled to vote
at a general meeting of such trade association;
"members' club" means a club or similar institution all the assets of
which are owned by or held in trust for the members thereof;
"gross investment receipts" means gross receipts in respect of
interest, dividends, royalties, rents, other payments for rights granted for
use or occupation of property, or gains of a kind referred to in paragraph
(f) of subsection (2) of section 3.
Section 27 of Cap. 470, it is proposed to amend-
Accounting periods not coinciding with year of income, etc.
(1) Where any person usually makes up the accounts of his business
for a period of twelve months ending on any day other than 31st
December, then, for the purpose of ascertaining his total income for any
 The Finance Bill, 2025 399

year of income, the income of any such accounting period ending on such
other date shall, subject to such adjustment as the Commissioner may
consider appropriate, be taken to be income of the year of income in which
the accounting period ends—
(a) in the case of a person other than an individual, as regards all
income charged under section 3 of this Act; and
(b) in the case of an individual, as regards all income charged under
that section other than gains or profits from any employment or
services rendered.
(1A) A person carrying on an incorporated business may subject to
the prior written approval of the Commissioner alter the date to which the
accounts of the business are made up.
(1B) A person seeking the approval of the Commissioner under
subsection (1A) shall apply in writing to the Commissioner at least six
months before the date to which the accounts are intended to be made up.
(1C) The Commissioner shall within six months from the date of
receipt of the application communicate his decision in writing to the
applicant.
(2) Where a person makes up the accounts of his business for a
period greater or less than twelve months, the Commissioner may, subject
to such adjustments as he may consider appropriate, including the
assessment for a year of income which, but for any alteration in the date to
which the accounts of the business are made up, would have been assessed
for that year of income, treat the income of that accounting period as
income of the year of income in which the accounting period ends, and tax
shall be charged accordingly.
(3) The accounting period of a person carrying on any unincorporated
business shall be the period of twelve months ending on 31st December in
each year; and
(4) Any person to whom subsection (3) applies shall not later than
31st December, 1998 change the accounting date to comply with the
provisions of that subsection.
Section 35 of Cap.470, it is proposed to amend-
Deduction of tax from certain income
(1) Every person shall, upon payment of any amount to any non-
resident person not having a permanent establishment in Kenya in respect
of—
(a) a management or professional fee or training fee except—
400 The Finance Bill, 2025

(i) a commission paid to a non-resident agent in respect of

flowers, fruits or vegetables exported from Kenya and
auctioned in any market outside Kenya and audit fees for
analysis of maximum residue limits paid to a non-resident
laboratory or auditor; or
(ii) a commission paid by a resident air transport operator to a
non-resident agent in order to secure tickets for international
travel;
(b) a royalty or natural resource income;
(c) a rent, premium or similar consideration for the use or occupation
of property, except aircraft or aircraft engines, locomotives or
rolling stock:
Provided that—
(i) where the bond, loan, claim, obligation or other evidence of
indebtedness is acquired by a person exempt under the First
Schedule or a financial institution specified in the Fourth
Schedule from a non-resident person, such an exempt person
or financial institution shall deduct tax from the difference
between the acquisition price and the original issue price; and
(ii) where a non-resident person disposes of a bond, loan, claim,
obligation or other evidence of indebtedness acquired from a
person exempt under the First Schedule or a financial
institution specified in the Fourth Schedule, tax shall be
deducted upon final redemption from the difference between
the final redemption price and the acquisition price, if the
exempt person or financial institution certifies the acquisition
price to the satisfaction of the Commissioner;
(d) a dividend;
(e) interest and deemed interest;
(0 a pension or retirement annuity:
(g) any appearance at, or performance in, a place (whether public or
private) for the purpose of entertaining, instructing, taking part in
any sporting event or otherwise diverting an audience;
(h) any activity by way of supporting, assisting or arranging any
appearance or performance referred to in paragraph (g) of this
subsection,
(i) winnings;
 The Finance Bill, 2025 401

(1) gains or profits from the business of transmitting messages which

is chargeable to tax under section 9 (2);
(n) insurance or reinsurance premium, except insurance or
reinsurance premium paid in respect of aircraft;
(o) sales promotion, marketing, advertising services, and
transportation of goods (excluding air and shipping transport
services);
(p) gains from'finanCial derivatives;
(q) digital content monetisation;
(r) supply of goods to a public entity;
(s) making or facilitating payment on a digital marketplace; and
(t) sale of scrap,
which is chargeable to tax, deduct therefrom tax at the appropriate
resident withholding tax.
(1A) Subsection (1) shall not apply to payments made by filming
agents and filming producers approved by the Kenya Film Commission to
actors and crew members approved for purposes of paragraphs (g) and (h).
(3) Subject to subsection (3A), a person shall, upon payment of an
amount to a person resident or having a permanent establishment in Kenya
in respect of—
(a) a dividend;
(b) interest, other than interest paid to a financial institution specified
in the Fourth Schedule which is resident or which has a
permanent establishment in Kenya, including interest arising from
a discount upon final satisfaction or redemption of a debt, bond,
loan, claim, obligation or other evidence of indebtedness
measured as the original issue discount, other than interest or
discounts paid to a person exempt under the First Schedule or a
financial institution specified in the Fourth Schedule:
Provided that—
(i) where the bond, loan, claim, obligation or other evidence of
indebtedness is acquired by 'a person exempt under the First
Schedule or a financial institution specified in the Fourth
Schedule from the resident person, such an exempt person or
financial institution shall deduct tax from the difference
between the acquisition price and the original issue price; and
402 The Finance Bill, 2025

(ii) where the resident person disposes of a bond, loan, claim,

obligation or other evidence of indebtedness acquired from a
person exempt under the First Schedule or a financial
institution specified in the Fourth Schedule, tax shall be
deducted upon final redemption from the difference between
the final redemption price and the acquisition price, if the
exempt person or financial institution certifies the acquisition
price to the satisfaction of the Commissioner;
(c) an annuity payment excluding that portion of the payment which
represents the capital element;
(d) a commission or fee paid or credited by an insurance company to
any person for the provision, whether directly or indirectly, of an
insurance cover to any person or group of persons (except a
commission or fee paid or credited to another insurance
company);
(e) a pension or a lump sum commuted or withdrawn from a
registered pension fund or a lump sum out of a registered
provident fund in excess of the tax exempt amounts specified in
section 8(4) and (5), or any amount paid out of a registered
individual retirement fund, or a benefit paid out of the National
Social Security Fund in excess of the tax exempt amount
specified in section 8(5);
(ee) surplus funds withdrawn from or paid out of registered
pension or provident funds;
(f) management or professional fee or training fee, the aggregate
value of which is twenty-four thousand shillings or more in a
month:
Provided that for the purposes of this paragraph, contractual fee
within the meaning of "management or professional fee" shall mean
payment for work done in respect of building, civil or engineering
works;
(g) a royalty or natural resource income;
(h) winnings;
(j) rent, premium or similar consideration for the use or occupation of
immovable property;
(k) sales, promotion, marketing and adverttising services;
(1) digital content monetisation;
(m) supply of goods to a public entity;
 The Finance Bill, 2025 403

(n) making or facilitating payment on a digital marketplace; and

(o) sale of scrap,
which is chargeable to tax, deduct therefrom tax at the appropriate
resident withholding tax.
(3A) Notwithstanding the provisions of subsection (3), only a person
appointed for that purpose by the Commissioner, in writing, shall deduct
tax under paragraph (j) of that subsection.
(3AA) A person who receives rental income on behalf of the owner
of the premises shall deduct tax therefrom:
Provided that only a person appointed by the Commissioner in
writing for that purpose may deduct tax under this section.
(3AB) A person who deducts rental income tax under this section
shall, within five working days after the deduction was made, remit the
amount so deducted to the Commissioner together with a return in writing
of the tax deducted and such other information as the Commissioner may
require.
(3AC) The Commissioner shall, upon receipt of the amount remitted
under subsection (3AB), furnish the person from whom the rental income
tax was withheld with a certificate stating the amount of the rent and tax
deducted therefrom.
(4) No deduction shall be made under subsection (1) or (3) from a
payment which is income exempt from tax under this Act, or to which an
order made under this Act, or to which an order made under subsection (7)
or (8) applies.
(5) Where a person deducts tax under this section he shall, within five
working days after the deduction was made—
(a) remit the amount so deducted to the Commissioner together with
a return in writing of the amount of the payment the amount of
tax deducted, and such other information as the Commissioner
may specify; and
(b) furnish the person to whom the payment is made with a certificate
stating the amount of the payment and the amount of the tax
deducted.
(5A) The Commissioner shall pay the tax deducted from winnings
under subsection (1)(i) and (3)(h) into the Sports, Arts and Social
Development Fund established under section 24 of the Public Finance
Management Act, (Cap 412A).
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 fails—

(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—
 406 The Finance Bill, 2025

(a) has been deducted under section 17A (in respect of a person other
than an individual), sections 35,36 or 37;
(b) has been borne by a trustee, executor or administrator in his
capacity as such on an amount paid as income to a beneficiary; or
(c) has been paid by a person under section 12A, shall be deemed to
have been paid by the person chargeable with that tax and shall be
set off for the purposes of collection against the tax charged on
that person for the year of income in respect of which it was
deducted, and where an assessment is made by the Commissioner
on a person for a year of income under section 73 the amount of
tax which has already been paid under a provisional assessment
on that person for that year of income shall be set off for the
purposes of collection against the tax charged in the assessment
made under section 73;
(2) If any citizen of Kenya chargeable to tax in Kenya for any year of
income on employment income or income in respect of any activity under
section 10 (1)(e) of this Act accrued in or derived from another country
proves to the satisfaction of the Commissioner that he has paid tax in such
other country for such year of income in respect of the same income, he
shall be entitled to set-off by way of credit of the same tax against the tax
charged in Kenya on such income.
(3) The tax chargeable on the income of any person in respect of
which set-off is to be allowed under this section shall be taken to be the
amount by which the tax chargeable (before set-off under this section) in
respect of his employment income or income specified under section 10
(1)(e) is increased by the inclusion of such income in his employment
income or income specified under section 10(1)(e).
(2) Credit under this section shall not exceed the amount of tax
payable in Kenya on such employment income or income in respect of any
activity under section 10(1)(e).
Section 52B of Cap.470, it is prop , used to amend-
Final return with self-assessment
(1) Notwithstanding any other provision of this Act—
(a) every individual chargeable to tax under this Act shall for any
year of income commencing with the year of income 1992,
furnish to the Commissioner a return of income, including a self-
assessment of his tax from all sources of income, not later than
the last day of the sixth month following the end of his year of
income; and
 The Finance Bill, 2025 407

(b) every person, other than an individual chargeable to tax under the
Act, shall for any accounting period commencing on or after 1st
January, 1992, furnish to the Commissioner a return of income,
including a self-assessment of his tax on such income, not later
than the last day of the sixth month following the end of the year
of income.
(2) The return of income together with the declared self-assessment
of tax on the declared income, shall be prepared on such a form or forms
as shall be prescribed by the Commissioner.
(3) The declared self-assessment shall be calculated by reference to
the appropriate relief and rates of tax in force for the year of income.
(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 compensating tax due with respect to such tax year and the
compensating tax so calculated shall be payable at the due date for the
self-assessment.
(5) The Commissioner may, where he considers appropriate, send to
any person to whom this section applies in respect of any year of income a
form or forms to enable that person to furnish the required return; and
failure by the Commissioner to send the return form or forms shall not
affect the obligation of that person to furnish the required return by the
date specified in this section.
Section 54B of Cap.470, it is proposed -
Supply of information upon change in particulars
Every person carrying on a business shall notify the Commissioner of
any changes in the following particulars within thirty days of the
occurrence of the change—
(a) the place of business, trading name and contact address;
(b) in the case of—
(i) an incorporated person, of the persons with shareholding of ten
per cent or more of the issued share capital;
(ii) a nominee ownership, to disclose the beneficial owner of the
shareholding;
(iii) a trust, full identity and address details of trustees, settlors
and beneficiaries of the trust;
(iv) a partnership, the identity and address of all partners; or
408 The Finance Bill, 2025

(vi) cessation or sale of business, all relevant information

regarding liquidation 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 72A
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 person 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 the
income of a person who carries on the business of shipowner, charterer or
air transport operator, issue to the proper officer of Customs by whom
clearance may be granted a certificate containing the name of that person
and the amount of the tax due and payable and on receipt of that certificate
the proper officer of Customs shall refuse clearance from any port or
airport in Kenya to any ship or aircraft owned by that person until the tax
has been paid.
(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, etc.

(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
 410 The Finance Bill, 2025

(f) fails to produce a document for the examination of the

Commissioner in accordance with the requirements of a notice
served on him under this Act; or
(g) destroys, damages or defaces any accounts or other documents in
contravention of a notice served on him under section 56 (1) of
this Act; or
(h) fails to attend at a time and place in accordance with the
requirements of a notice served on him under this Act; or
(i) fails to answer any question lawfully put to him, or to supply any
information lawfully required from him, under this Act; or
(j) fails to deduct and account, or fails to account for tax, as provided
by section 37 of this Act, or fails to supply prescribed certificates
as is required by that section; or
(k) when requested by the Commissioner, fails to furnish the
identifying number required under section 132, or fails to include
in any return, in a statement or in other documents the identifying
number when required to do so.
(2) No prosecution for an offence under this section shall be
instituted at any time subsequent to two years after the date of the
commission of the offence or, in the case of the contravention of
paragraph (d), (e) or (g) of subsection (1) after the date on which the fact
of the commission of that offence came to the knowledge of the
Commissioner.
Section 131 of Cap. 470, it is proposed to amend-
Exemption from stamp duty
All securities of whatsoever nature over property, movable or
immovable, and all transfers of such property in favour of or by the
Commissioner shall be exempt from stamp duty.
First Schedule of Cap.470, it is proposed to amend-
Part I — INCOME ACCRUED IN, DERIVED FROM OR RECEIVED
IN KENYA WHICH IS EXEMPT FROM TAX
1. So much of the income of a person as is expressly exempted from
income tax by or under the provisions of any Act of Parliament for the
time being in force, to the extent provided by such Act.
2. The income of any person who, or organization which, is exempt
from income tax by or under any Act of Parliament for the time being in
force, to the extent provided by such Act.
 The Finance Bill, 2025 411

6. The income, other than income from investments, of an amateur

sporting association, that is to say, an association—
(a) whose sole or main object is to foster and control any outdoor
sport; and
(b) whose members consist only of amateurs or affiliated associations
the members of which consist only of amateurs; and
(e) whose memorandum of association or by-laws have provisions
defining an amateur or a professional and providing that no
person may be or continue to be a member of such association if
such person is not an amateur.
8 The income of any county government.
10. Subject to section 26, the income of an institution, body of
persons or irrevocable trust, of a public character established solely for the
purposes of the relief of the poverty or distress of the public, or for the
advancement of religion or education—
(a) established in Kenya; or
(b) whose regional headquarters is situated in Kenya, in so far as the
Commissioner is satisfied that the income is to be expended either
in Kenya or in circumstances in which the expenditure of that
income is for the purposes which result in the benefit of the
residents of Kenya:
Provided that any such income which consists of gains or profits
from a business shall not be exempt from tax unless such gains or profits
are applied solely to such purposes and either—
(i) such business is carried on in the course of the actual
execution of such purposes;
(ii) the work in connexion with such business is mainly carried on
by beneficiaries under such purposes; or
(iii) such gains or profits consist of rents (including premiums or
any similar consideration in the nature of rent) received from
the leasing or letting of land and any chattels leased or let
therewith; and provided further that an exemption under this
paragraph—
(A) shall be valid for a period of five years but may be revoked by
the Commissioner for any just cause; and
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
Savings Bank.
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;
414 The Finance Bill, 2025

(v) no individual shall claim or be taken to have used a residence

as a residence at any time when he was a dependant of either
or both of his parents;
(vi) where a residence is used in part for business purposes, or is
transferred in a single transaction together with land and
other property used for the production of income, the taxable
value of such property used for residential purposes shall be
separately determined from that used for business purposes
or for the production of income;
(d) property (being land) transferred by an individual where—
(i) the transfer value is not more than three million shillings; or
(ii) agricultural property having an area of less than fifty acres
where such property is situated outside a municipality,
gazetted township or an area that is declared by the Cabinet
Secretary, by notice in the Gazette, to be an urban area for
the purposes of this Act;
(f) property (including investment shares) which is transferred or
sold for the purpose of administering the estate of a deceased
person where the transfer or sale is completed within two years of
the death of the deceased or within such extended time as the
Commissioner may allow in writing:
Provided that where there is a court case regarding such estate the
period of transfer or sale under this paragraph shall be two years from the
date of the finalization of such court case.
(g) property, including investment shares, which is transferred or sold
for the purpose of transferring the title or the proceeds into a registered
family trust.
42. The income of a non-resident person who carries on the business
of aircraft owner, charterer or air transport operator, from such business
where the country in which such non-resident person is resident extends a
similar exemption to aircraft owners, charterers or air transport operators
who are not resident in such country but who are resident in Kenya.
43. The income of a registered individual retirement fund.
45. Income of the National Social Security Fund provided that the
Fund complies with such conditions as may be prescribed.
45A. The income of the National Hospital Insurance Fund established
under the National Hospital Insurance Fund Act, 1998 consisting of —
(a) all contributions and other payments into and out of the Fund; and
 The Finance Bill, 2025 415

(b) monies invested under section 34 of the Act.

48. Gains arising from trade in securities listed on any securities
exchange operating in Kenya by any dealer licensed under the Capital
Markets Authority Act (Cap. 485A):
Provided that such securities have been held for a period not
exceeding twenty-four months from the date of acquisition.
49. Interest income accrued in or derived from Kenya under financial
arrangements made or guaranteed by the Export-Import Bank of the
United States, an agency of the United States of America.
50. (1) Investment income of a pooled fund or other kind of
investment consisting of retirement schemes, provided that all the
constituent schemes of the pooled fund are registered by the
Commissioner.
(2) For the purposes of this paragraph, "pooled fund" has the meaning
assigned to it under the Retirement Benefit Act, 1997
51. Interest income accruing from all listed bonds, notes or other
similar securities used to raise funds for infrastructure and other social
services, provided that such bonds, notes or securities shall have a
maturity of at least three years.
53. Payment of pension benefits from a registered pension fund,
registered provident fund, registered individual retirement fund, public
pension scheme or National Social Security Fund, upon attainment of the
retirement age determined in accordance with the rules of the fund or the
scheme:
Provided that this exemption shall also apply to—
(a) payment of gratuity or other allowances paid under a public
pension scheme;
(b) payment of a retirement annuity; or
(c) withdrawals from the fund prior to attaining the retirement age
due to ill health; or withdraws from the fund after the twenty
years from the date of registration as a member of the fund.
54. Interest income on bonds issued by the East African Development
Bank.
57. The income of the National Housing Development Fund.
57. The principal sum of a registered family trust.
416 The Finance Bill, 2025

58. Income earned by an individual who is registered under the Ajira

Digital Program for three years beginning 1st 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.
 The Finance Bill, 2025 417

69. Interest paid to a resident person or non- resident 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 II — 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
418 The Finance Bill, 2025

investment value for the preceding four years from the date that this
provision comes into force or the cumulative investment for the
succeeding three years outside Nairobi City County or Mombasa County
is at least one billion shillings;
(b) the investment value outside Nairobi City County and Mombasa
County in that year of income is at least two hundred and fifty
million shillings; or
(c) the person has incurred investment in a special economic zone.
(113) Paragraph (1A) shall apply to items listed under paragraphs 1(1)(a)(i)
and (ii), and (1) (b) (i).
Third Schedule of Cap. 470, it is proposed to amend—
THIRD SCHEDULE [ss. 29, 30, 31, 32, 33, 34 and 35]
RATES OF PERSONAL RELIEFS AND TAX
HEAD B — RATES OF TAX
1. The individual rates of tax shall be —
Rate in each shilling
On the first KSh. 288,000 10%
On the next KSh. 100,000 25%
On the next KSh. 5,612,000 30%
On the next KSh. 3,600,000 32.5%
On all income over 9,600,000 35%
2. The corporate rate of tax shall be—
(a) in the case of a resident company—
Rate in each twenty shillings
(i) for the year of income 1974 and each subsequent year of
income up to and including the year of income 1990 9.00
(ii) for the year of income 1990 8.50
(iii) for the year of income 1991 8.00
(iv) for the year of income 1992 7.50
(v) for the year of income 1993 upto and including the year of
income 1997 7.00
 The Finance Bill, 2025 419

(vi) for the year of income 1998 up to and including the year of
income 1999 6.50
(vii) for the year of income 2000 and each subsequent year of
income 6.00
(viii) for the year of income 2020 and each subsequent year of
income 5.00
(ix) for the year of income 2021 and each subsequent year of
income. 6.00
Provided that this provision shall apply to the income earned from the
1st January, 2021.

Provided that for a resident company with an accounting period

ending between the 1st July, 1994 and the 30th June, 1995 the corporation
rate of tax shall be increased by one-half shilling in each twenty shillings
(b) In the case of a non-resident company having a permanent
establishment in Kenya—
Rate in each twenty shillings
(i) for the year of income 1974 and each subsequent year of
income up to and including the year of income 1989 10.50
(ii) for the year of income 1990 10.00
(iii) for the year of income 1991 9.50
(iv) for the year of income 1992 and each subsequent year of
Income 9.00
(v) for the year of income 1993 up to and including the year of
income 1997 8.50
(vi) for the year of income 1998 up to and including 1999 8.00
(vii) for the year of income 2000 and each subsequent year of
income 7.50
(viii) for the year of income 2024 and each subsequent year of
Income 6.00
Provided that for a non-resident company having a permanent
establishment in Kenya with an accounting period ending between the 1st
July, 1994 and the 30th June, 1995, the corporation rate of tax shall be
increased by one-half shilling in each twenty shillings—
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
(j) 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.
 The Finance Bill, 2025 421

(m)in respect of a company engaged in business under a special

operating framework arrangement with the Government, the rate
of tax specified in the Agreement shall continue to apply for the
unexpired period as provided under the Agreement;
(n) in respect of a company operating a carbon market exchange or
emission trading system that is certified by the Nairobi
International Financial Centre Authority, fifteen per cent for the
first ten years from the year of commencement of its operations;
(o) in respect of a company operating a shipping business in Kenya,
fifteen per cent for the first ten years from the year of
commencement of its operations;
(p) in respect of a company undertaking the manufacture of human
vaccines, ten per cent.
3. The non-resident tax rates shall be—
(a) in respect of management or professional fees or training fees,
consultancy, agency or contractual fee, twenty per cent of the
gross sum payable:
Provided that—
(i) the rate applicable to any payments made by Special
Economic Zone Enterprise, Developer or Operator to a non-
resident person shall be 5% of the gross amount payable;
(ii) the rate applicable to the citizen of the East African
Community Partner States in respect of consultancy fee shall
be fifteen per cent of the gross sum payable;
(b) in respect of a royalty or natural resource income, twenty per cent
of the gross amount payable;
Provided that the rate applicable to any royalty paid by any Special
Economic Zone Enterprise, Developer or Operator to a non-resident
person shall be 5% of the gross amount payable;
(c) (i) in respect of a rent premium or similar consideration for the
use or occupation of immovable property, thirty per cent of
the gross amount payable;
(ii) in respect of a rent, premium or similar consideration for the
use of property other than immovable property, fifteen per
cent of the gross amount payable;
(d) in respect of a dividend, fifteen per cent of the amount payable:
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;
(1) in respect of gains and profits from the business of transmitting
messages by cable or radio communication, optical fibre,
 The Finance Bill, 2025 423

television broadcasting, Very Small Aperture Terminal (VSAT),

internet and satellite or any other similar method of
communication which is chargeable to tax under section 9(2), five
per cent of the gross amount received;
(n) in the case of a special economic zones enterprise, developer and
operator in respect of payments other than dividends made to
non-residents at the rate of ten percent;
(p) an insurance or reinsurance premium, five per cent of the gross
amount payable;
(q) in the case of sales promotion, marketing, advertising services,
and transportation of goods (excluding air and shipping transport
services twenty percent of the gross amount;
Provided that with regard to transportation of goods, the rate shall not
be applicable to East African Community citizens;
(r) in the case of gains from financial derivatives, fifteen per cent of
such gains;
(s) in the case of repatriated income under section 7B, fifteen per
cent;
(t) in the case of digital content monetisation, twenty percent of the
gross amount;
(u) in respect of a payment made by a public entity for supply of
goods to the public entity, five per cent;
(v) in respect of income deemed to have accrued in or been derived
from a digital marketplace, twenty per cent;
(w) in respect of the sale of scrap, one and a half percent of the gross
amount.
5. The resident withholding tax rates shall be—
(a) in respect of a dividend, fifteen per cent of the amount payable;
(b) in respect of interest, discount or original issue discount arising
from—
(i) bearer instrument other than a Government bearer bond of at
least two years duration, twenty-five per cent;
(ii) Government Bearer Bond of at least two years duration and
other sources, fifteen per cent;
(iii)bearer bonds with a maturity of ten years and above, ten per
cent of the gross amount payable, of the gross amount payable;
424 The Finance Bill, 2025

(c) in respect of a commission or fee, paid or credited by an

insurance company to any person for the provision, whether
directly or indirectly, of an insurance cover to any person or
group of persons, five per cent of the gross amount payable to
brokers, and ten percent of the gross amount payable to brokers,
and ten percent pfthe gross amount payable to all others;
(ii) in respect of a withdrawal before the expiry of twenty years from
the date of joinin the fund made from a registered pension fund,
registered provident fund, the National Social Security Fund or a
registered individual retirement fund in excess of the tax free
amounts specified under section 8(4) and 8(5) in any one year—
Rate in each shilling
On the first KSh. 288,000 10%
On the next KSh.100,000 25%
On all income over KSh. 388,000 30%
(iii) in respect of surplus funds withdrawn by or refunded to an
employer in respect of registered pension or registered
provident funds, thirty per cent of the gross sum payable;
(e) in respect of a qualifying dividend, five per cent of the amount
payable;
(f) (i) in respect of management or professional fee or training fee,
other than contractual fee, the aggregate value of which is twenty-
four thousand shillings in a month or more, five per cent of the
gross amount payable;
(ii) in respect of contractual fee the aggregate value of which is
twenty-four thousand shillings in a month or more, three per
cent of the gross amount payable;
(g) in respect of a royalty or natural resource income, five per cent of
the gross amount payable;
(h) in respect of qualifying interest—
(i) ten per cent of the gross amount payable in the case of
housing bonds; and
(ii) twenty per cent of the gross amount payable in the case of
bearer instrument; and
(iii) fifteen per cent of the gross amount payable in any other
case;
(i) in respect of winnings, twenty percent;
 The Finance Bill, 2025 425

Provided that the tax paid under this subparagraph is final.

(ja) in respect of a rent, premium or similar consideration for the
use or occupation of immovable property, seven point five percent of
the gross amount payable;
(jb) in respect to the disbursement of deemed income to
beneficiaries under section 11(3)(c) the rate of twenty five percent;
(1) in respect of payments for sales promotion, marketing, advertising
services, five per cent of the gross amount;
(m)in respect of payments relating to digital content monetisation,
five per cent;
(n) in respect of a payment made by a public entity for supply of
goods to the public entity, zero point five per cent;
(o) in respect of income deemed to have accrued in or been derived
from a digital marketplace, five percent;
(p) in respect of sale of scrap, one point five percent of the gross
amount.
7. The rate of presumptive income tax in respect of agricultural
produce under subsection (1) of section 17A shall be two per cent of the
gross amount of payment or the gross value of export.
8. The rate of advance tax under section 12A shall be—
(a) for vans, pick-ups, trucks, prime movers, trailers and lorries, two
thousand five hundred shillings per tonne of load capacity per
year or five thousand shillings per year, whichever is higher;
Provided that advance tax shall not be imposed on the tractors or
trailers used for agricultural purposes;
(b) for saloons, station-wagons, mini-buses, buses and coaches, one
hundred shillings per passenger capacity per month or five
thousand shillings per year, whichever is higher;
9. The rate of turnover tax shall be one point five percent of the
gross receipts of the business of a taxable person under section 12C.
10. The rate of tax in respect of residential rental income shall be
seven point five percent of the gross rental receipts of a taxable resident
person under section 6A
11. The rate of tax in respect of minimum tax under section 12D shall
be one per cent of the gross turnover.
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;
 The Finance Bill, 2025 427

"land" includes—
(a) buildings on land and anything attached to land or permanently
fastened to anything attached to land (whether on or below the
surface);
(b) standing timber, trees, crops and other vegetation growing on
land; and
(c) land covered by water;
"marketable security" includes a security of such a description as to
be capable of being sold and stock as defined in section 2 of the Stamp
Duty Act (Cap. 480);
"property"—
(a) in the case of a company has the meaning assigned thereto in the
Interpretation and General Provisions Act (Cap. 2), and includes
property acquired or held for investment purposes but does not
include a road vehicle;
(b) in the case of an individual means—
(i) land situated in Kenya and any right or interest in or over that
land; and
(ii) a marketable security situated in Kenya, other than an
investment share as defined in Part II of this Schedule;
"transfer" has the meaning assigned thereto in paragraph 6 of this
Schedule;
"transfer value" has the meaning assigned thereto in paragraph 7 of
this Schedule.
(2) For the purposes of this schedule—
(a) a reference to a transfer of property includes a reference to a part
transfer of property; and
(b) there is a part transfer of property where, on a person making a
transfer, any description of property derived from the transferred
property remains undisposed of.
(3) For the purposes of this Schedule two persons are "related
persons" if—
(a) either person participates directly or indirectly in the management,
control or capital of the business of the other; or
428 The Finance Bill, 2025

(b) any third person participates directly or indirectly in the

management, control or capital of the business of both.
(4) For the purposes of subparagraph (3) of this paragraph a reference
to "person" includes—
(a) in the case of an individual, a reference to a relative (as defined in
section 26(5) of that person; and
(b) a reference to a company.
(5) For the purposes of this Schedule—
(a) shares or securities being marketable securities issued by a
municipal or a Government authority, or by a body created by
such an authority, are situated in the country of that authority; and
(b) subject to paragraph (a) of this paragraph, shares or securities
(being marketable securities) are situated where they are
registered and, if registered in more than one register, where the
principal register is situated.
2. Taxation of gains
Subject to this Schedule, income in respect of which tax is chargeable
under section 3(2)(f) is—
(a) the whole of the gains which accrued to a company, an individual
or partnership on or after the 1st January, 2015, on the transfer of
property situated in Kenya, whether or not the property was
acquired before 1st January, 2015, or
(b) gains derived from the alienation of shares or comparable
interests, including interests in a partnership or trust, if, at any
time during the three hundred and sixty-five days preceding the
alienation, the shares or comparable interests derived more than
twenty per cent of their value directly or indirectly from
immovable property situated in Kenya, or
(c) gains, other than those to which subparagraph (a) applies, derived
from the alienation of shares of a company resident in Kenya if
the alienator, at any time during the three hundred and sixty-five
days preceding such alienation, held directly or indirectly at least
twenty per cent of the capital of that company:
Provided that for the purposes of this paragraph, the person alienating
the shares shall notify the Commissioner in writing where there is a
change of at least twenty per cent in the underlying ownership of the
property
 The Finance Bill, 2025 429

3. Income not chargeable

(1) Income is not chargeable to tax under section 3(2)(f) of this Act
where, and to the extent that, it is chargeable to tax under any other
provision of this Act.
(2) The gain accruing to a company on any transfer of machinery
classified in paragraph 1(b) of the Second Schedule is not chargeable to
tax under section 3(2)(f).
(3) The gain which is exempted from tax under paragraph 36 of the
First Schedule is not chargeable to tax under section 3(2)(0.
4 Computation of gains
(1) The gain which accrues to a person on the transfer of any property
is the amount by which the transfer value of the property exceeds the
adjusted cost of the property.
(2) Where, in computing the gain accruing to a person on the transfer
of any property, it is found that the adjusted cost of the property exceeds
the transfer value of the property, the amount of the excess is the loss
realized by the person on the transfer of the property.
(3) Any gain or loss realized by a person on the transfer of property
shall be deemed to be realized by the person at the time of the transfer,
whether or not the consideration is payable by instalments but a payment
by way of interest on any part of the consideration not immediately
payable shall not be treated as part of the transfer value of the property.
(4) Debts incurred on the transfer of prOperty which the
Commissioner considers to have become bad shall be deemed to be a loss
for the purposes of section 15(3)(f) and those provisions shall apply
accordingly.
(5) Section 15(2)(e) does not apply in relation to a loss realized by a
person on the transfer of property.
5. Dealings by nominees, trustees and liquidators, and for the enforcement
of securities
(1) In relation to any property held by a person as nominee for
another person or as trustee for a person absolutely entitled as against the
trustee (or for two or more persons who are so entitled in possession,
whether as joint tenants or tenants in common), or as liquidator for any
company, this Schedule shall apply as if the property were vested in, and
the acts of the nominee, trustee or liquidator in relation to the property
were the acts of the person or persons for whom the person is nominee,
430 The Finance Bill, 2025

trustee or liquidator (transfers between the person or persons and the

nominee, trustee or liquidator being disregarded accordingly).
(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 431

(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 "legatee" 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;
432 The Finance Bill, 2025

(d) sums received by way of compensation for damage or injury to

the property or for the loss of the property;
(e) sums received under a policy of insurance in respect of damage or
injury to, or the loss or destruction of, the property;
(f) any amount by which the liability of a person to another person
entitled to property by way of security or to the benefit of a
charge or encumbrance is reduced as a result of dealings with the
property for the purposes of enforcing or giving effect to the
security, charge or encumbrance, together with any amount
received by the person out of the proceeds of such dealings.
(2) Subject to this Schedule, for the purpose of computing the transfer
value of any property there shall be deducted the incidental costs to the
transferor of making the transfer.
(3) In any case where no amount is ascertainable under this Schedule
as the transfer value of any property the transfer value of the property shall
be the market value as determined by the Commissioner.
8. Adjusted cost
(1) Subject to this Schedule, the adjusted cost of any property is—
(a) the amount of or value of the consideration for the acquisition or
construction of the property;
(b) the amount of expenditure wholly and exclusively incurred on the
property at any time after its acquisition by or on behalf of the
transferor for the purpose of enhancing or preserving the value of
the property at the time of the transfer;
(c) the amount of expenditure wholly and exclusively incurred at any
time after the acquisition of the property by the transferor
establishing, preserving or defending the title to, or a right over,
the property; and
(d) the incidental costs to the transferor of acquiring the property.
(2) For the purpose of computing the adjusted cost of any property,
an amount computed shall be reduced by such amounts as have been
allowed as deductions under section 15(2).
(3) Where a company issues to any of its shareholders shares—
(a) that do not constitute a dividend under section 7 (1) (d) or (e), the
cost of the shares—
(i) shall be the sum paid for the shares; or
 The Finance Bill, 2025 433

(ii) if no sum is paid for the shares, shall be deemed to be nil,

and the shareholder shall allocate, in the manner prescribed, the
cost of his existing shares between such old shares and such new
shares; or
(b) that constitute, wholly or partly, a dividend under either of those
paragraphs, the amount which constitutes a dividend shall be
treated as part of the cost of the shares, and the shareholder shall
allocate, in the manner prescribed, the cost of the existing shares
between such old shares and such new shares.
(4) Where there is a part transfer of property the adjusted cost of the
property shall be allocated to the part transferred in accordance with a
method approved by the Commissioner.
(4A) Where property is transferred in a transaction that is not subject
to capital gains tax, and the property is subsequently transferred in a
taxable transaction within a period of less than five years, then the
adjusted cost in the subsequent transfer shall be based on the original
adjusted cost as determined in the first transfer.
(5) The Commissioner may make rules for the purposes of
subparagraph (3) prescribing the manner of allocation to be prescribed
under that subparagraph.
8A. Notwithstanding any other provision of this Act, the
deduction of costs of property shall not apply in the case of
securities listed on any securities exchange approved under the.
Capital Markets Act (Cap. 485A).
9. Market value
(1) Where property is acquired or transferred—
(a) otherwise than by way of a bargain made at arms length'
(b) by way of a gift in whole or in part;
(c) for a consideration that cannot be valued; or
(d) as the result of a transaction between persons who are related
then, for the purposes of—
(i) paragraph 7 of this Schedule, the amount of the consideration
for the transfer of the property shall be deemed to be equal to
the market value of the property at the time of the transfer;
and
(ii) paragraph 8 of this Schedule, the amount of the consideration
for the acquisition of the property shall be deemed to be equal
 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 II - 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;
436 The Finance Bill, 2025

15. Computation of gains

The gain subject to tax under this Part is the gross consideration
payable and shall be subject to the withholding tax rate under paragraph
(3) and (5) of the Third Schedule.
18. Collecting of tax
A stockbroker who conducts the transfer of investment shares on
behalf of a transferor shall collect and remit tax to the Commissioner in
accordance with section 35(5).
Provided that this paragraph shall also apply to shares transferred
under Part I of this Schedule.
19. Remittance of tax
The remittance of money by a stockbroker under paragraph 18 of this
Schedule shall be a full and final discharge to the stockbroker as against
all persons from liability in respect of such money.
20. Failure to collect and remit
A stockbroker who fails to collect and remit as required under
paragraph 18 of this Schedule, the amount of income tax out of the
proceeds (over which he has control) accruing as a result of the transfer of
investment shares is jointly and severally liable with the transferor of the
shares for payment of the tax.
21. Exemption
(1) Where the transferor of investment shares is an unincorporated
association or body of individuals of a public character which has been
exempted from income tax under paragraph 10 of the First Schedule no
deduction of income tax shall be made under this Part of this Schedule.
(2) Gains from a transfer of investment shares for or in connexion
with a pension fund, trust scheme, or provident fund registered w with the
Commissioner shall not be subject to deduction of income tax under this
Part of this Schedule.
Section 8 of Cap. 476, it is proposed to be amended-
Place of supply of services
(1) A supply of services is made in Kenya if the place of business of
the supplier from which the services are supplied is in Kenya.
(2) If the place of business of the supplier is not in Kenya, the supply
of services shall be deemed to be made in Kenya if the recipient of the
supply is a registered or unregistered person—
 The Finance Bill, 2025 437

(a) the services are physically performed in Kenya by a person who

is in Kenya at the time of supply;
(b) the services are directly related to immovable property in Kenya;
(c) the services are radio or television broadcasting services received
at an address in Kenya;
(d) the services are electronic services delivered to a person in Kenya
at the time of supply; or
(e) the supply is a transfer or assignment of, or grant of a right to use,
a copyright, patent, trademark, or similar right in Kenya.
(3) In this section—
"electronic services" means any of the following services, when
provided or delivered on or through a telecommunications network—
(a) websites, web-hosting, or remote maintenance of programs and
equipment;
(b) software and the updating of software;
(c) images, text, and information;
(d) access to databases;
(e) self-education packages;
(f) music, films, and games, including games of chance; or
(g) political, cultural, artistic, sporting, scientific and other broadcasts
and events including broadcast television.
Section 17 of Cap.476, it is proposed to amend-
Credit for input tax against output tax
(1) Subject to the provisions of this Act and the regulations, input tax
on a taxable supply to, or importation made by, a registered person may, at
the end of the tax period in which the supply or importation occurred, be
deducted by the registered person in a return for the period, subject to the
exceptions provided under this section, from the tax payable by the person
on supplies by him in that tax period, but only to the extent that the supply
or importation was acquired to make taxable supplies.
(2) lf, at the time when a deduction for input tax would otherwise be
allowable under subsection (1)—
(a) the person does not hold the documentation referred to in
subsection (3), and
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 1st 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 1st 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 1st 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:
440 The Finance Bill, 2025

Provided that notwithstanding the provisions of subsection (5), a

registered person who incurred such a credit shall apply to the
Commissioner for relief within six months after the commencement
of this provision.
(6) Subject to this Act, if a taxable supply to, or a taxable import by, a
registered person during a tax period relates partly to making taxable
supplies and partly for another use, the input tax deductible by the person
for acquisitions made during the tax period shall be determined as
follows—
(a) full deduction of all the input tax attributable to taxable supplies;
(b) no deduction of any input tax which is directly attributable to
other use; and
(c) deduction of input tax attributable to both taxable supplies and
other uses calculated according to the following formula:
A x BC
where—
A is the total amount of input tax payable by the person during the tax
period on acquisitions that relate partly to making taxable supplies and,
partly for another use;
B is the value of all taxable supplies made by the registered person during
the period; and
C is the value of all supplies made by the registered person during the
period in Kenya.
(9) Where a bona fide owner of taxable supplies, who has deducted
input tax under subsection (1), is compensated for the loss of the taxable
supplies, the compensation shall be treated as a taxable supply and—
(a) if the compensation includes value added tax, the compensation
shall be declared and the nvalue added tax thereon remitted to the
Commissioner; or
(b) if the compensation does not include value added tax, the
compensation shall be declared and subjected to value added tax
and the tax remitted to the Commissioner.
Section 42 of Cap.476, it is proposed to amend-
Tax invoice
(1) Subject to subsection (2), a registered person who makes a taxable
supply shall, at the time of the supply furnish the purchaser with the tax
invoice containing the prescribed details for the supply.
 The Finance Bill, 2025 441

(2) No invoice showing an amount which purports to be tax shall be

issued on any supply—
(a) which is not a taxable supply; or
(b) by a person who is not registered.
(3) Any person who issues an invoice in contravention of this
subsection commits an offence and any tax shown thereon shall become
due and payable to the Commissioner within seven days of the date of the
invoice.
(4) A registered person shall issue only one original tax invoice for a
taxable supply, or one original credit note or debit note, but a copy clearly
marked as such may be provided to a registered person who claims to have
lost the original.
First Schedule to Cap.476, it is proposed to amend-
FIRST SCHEDULE [s. 2(1)]
EXEMPT SUPPLIES
Part I GOODS
SECTION A
2106.90.91 Food supplements
3003.40.00 Medicaments containing alkaloids or derivative thereof but
not containing hormones or other products of heading No. 29.37or
antibioticS, not put up in measured doses or in forms or packings for
retail sale.
49. All goods and parts thereof of chapter 88;
51. Taxable goods, imported or purchased for direct and exclusive use in
the implementation of official aid funded projects upon approval by
the Cabinet Secretary responsible for the National Treasury.
58. Direction-finding compasses, instruments and appliances for aircraft.
62. Taxable goods for direct and exclusive use for the construction of
tourism facilities, recreational parks of fifty acres or more, convention
and conference facilities upon recommendation by the Cabinet
Secretary responsible for matters relating to recreational parks.
63. Taxable goods for the direct and exclusive use in the construction and
equipping of specialized hospitals with a minimum bed capacity of
fifty, approved by the Cabinet Secretary upon recommendation by the
Cabinet Secretary responsible for health who may issue guidelines for
determining eligibility for the exemption.
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
vejiicles.
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
"local 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.
444 The Finance Bill, 2025

30. The supply of motorcycles of tariff heading 8711.60.00.

31. The supply of electric bicycles.
32. The supply of solar and lithium ion batteries.
33. The supply of electric buses of tariff heading 87.02.
34. Inputs or raw materials locally purchased or imported for the
manufacture of animal feeds.
35. Bioethanol vapour (BEV) Stoves classified under HS Code 7321.12.00
(cooking appliances and plate warmers for liquid fuel).
Section 2 of Cap 472, it is proposed to amend-
"digital lender" means person holding a valid digital credit providers
licence issued by the Central Bank of Kenya;
Section 5 of Cap.472, it is proposed to amend-
Imposition of excise duty
(1) Subject to this Act, a tax, to be known as excise duty, shall be
charged in accordance with the provisions of this Act on—
(a) excisable goods manufactured in Kenya by a licensed
manufacturer;
(b) excisable services supplied in Kenya by a licensed person;
(c) excisable goods imported into Kenya; or
(d) excisable services offered in Kenya by a non-resident person
through a digital platform.
(2) Excise duty shall be charged at the rate specified in the First
Schedule for the excisable goods or services in force at the time the
liability arises for excise duty as determined under section 6.
(3) The excise duty payable—
(a) under subsection (1)(a), shall be payable by the licensed
manufacturer;
(b) under subsection (1)(b), shall be payable by the licensed person
making the supply:
(c) under subsection (1)(c), shall be payable by the importer of the
excisable goods; or
(d) under subsection (1)(d), shall be payable by the non-resident
person offering the service.
 The Finance Bill, 2025 445

Section 13 of Cap.472, it is proposed to amend-

Place of supply of excisable services
Subject to this section, a supply of excisable services shall be deemed to
be made in Kenya if the services are supplied from a place of business of
the supplier in Kenya.
Section 17 of Cap.472, it is proposed to amend-
Issue of licence
(1) Subject to subsection (2), the Commissioner shall consider an
application under section 16 and may grant or refuse to issue the applicant
with a licence.
(2) The Commissioner may refuse an application under section 16 if
satisfied that—
(a) the applicant has been convicted of an offence under this Act or
the Tax Procedures Act (Cap. 469B);
(b) the applicant has been convicted of an offence involving
dishonesty or fraud under any law;
(c) the applicant—
(i) is or has been declared bankrupt or insolvent; or
(ii) is in the process of liquidation or receivership;
(d) in the case of an application to be a manufacturer of excisable
goods, the factory, plant or equipment, specified in the
application is not adequate to manufacture or secure excisable
goods;
(e) the applicant has not kept proper records as required under any tax
law or has otherwise failed to comply with its obligations under a
tax law; or
(f) paragraphs (a), (b), (c) or (e) apply to a person related to the
applicant and the Commissioner is satisfied that the related
person is reasonably expected to be involved in the conduct of the
activity to which the application relates.
(3) The Commissioner may impose such terms, conditions or
restrictions as the Commissioner considers appropriate in relation to a
licence issued under this section.
(4) The Commissioner shall give an applicant for a licence under
section 16 written notice of the decision on the application and if the
application is refused, the notice shall include reasons for the refusal.
446 The Finance Bill, 2025

(5) A licence shall take effect from the date specified therein by the
Commissioner and shall unless earlier suspended, remain in force until
cancelled under section 21.
First Schedule to Cap.472, it is proposed to amend-
FIRST SCHEDULE [s. 5(2)]
RATES OF EXCISE DUTY
Part I — EXCISABLE GOODS

Coal 2.5% of the custom value

Imported Self-adhesive plates, sheets, 25% or sh. 75 per Kilogramme,
film, foil, tape, strip and other flat whichever is higher
shapes,
of plastics, whether or not in rolls of
tariff number 3919.90.90, 3920.10.90,
3920.43.90, 3920.62.90 and 3921.19.90
but excluding those originating from
East
African Community Partner States that
meet the East African Community
Rules
of Origin
Imported Float glass and surface 35% of custom value or KSh. 200
ground or polished glass, in sheets, per kg
whether
or not having an absorbent, reflecting
or non-reflecting layer, but not
otherwise
worked of tariff 7007
Printed paper or paperboard of tariff 25% or KSh. 150 per kilogramme,
heading 4811.41.90 or 4811.49.00 but whichever is higher
excluding those originating from East
African Community Partner States that
meet the East African Community
Rules of Origin
 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;
(1) 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 non-
resident 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.
448 The Finance Bill, 2025

(4) The electronic tax invoice referred to in subsection (3) may

exclude emoluments, imports, investment allowances,, interest, airline
passenger ticketing, payment of withholding tax and similar payments.
(5) The Commissioner may, by notice in the Gazette, exempt a
person from the requirements of this section.
Section 31 of Cap.469B, it is proposed to amend-
Amendment of assessments
(1) Subject to this section, the Commissioner may amend an
assessment (referred to in this section as the "original assessment") by
making alterations or additions, from the available information and to the
best of the Commissioner's judgement, to the original assessment of a
taxpayer for a reporting period to ensure that—
(a) in the case of a deficit carried forward under the Income Tax Act
(Cap. 470), the taxpayer is assessed in respect of the correct
amount of the deficit carried forward for the reporting period;
(b) in the case of an excess amount of input tax under the Value
Added Tax Act (Cap. 476), the taxpayer is assessed in respect of
the correct amount of the excess input tax carried forward for the
reporting period; or
(c) in any other case, the taxpayer is liable for the correct amount of
tax payable in respect of the reporting period to which the
original assessment relates.
(2) A taxpayer who has made a self-assessment may apply to the
Commissioner, within the period specified in subsection (4)(b)(i), to make
an amendment to the taxpayer's self-assessment.
(3) Where an amended self-assessment return has been submitted
under subsection (2), the Commissioner may accept or reject the amended
self-assessment return and where he rejects, he shall furnish the taxpayer
with the reasons for such rejection within thirty days of receiving
theapplication.
(4) The Commissioner may amend an assessment—
(a) in the case of gross or wilful neglect, evasion, or fraud by, or on
behalf of, the taxpayer, at any time; or
(b) in any other case, within five years of—
(i) for a self-assessment, the date that the self-assessment
taxpayer submitted the selfassessment return to which the
self-assessment relates; or
 The Finance Bill, 2025 449

(ii) for any other assessment, the date the Commissioner notified
the taxpayer of the assessment:
Provided that in the case of value added tax, 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.
(5) Despite subsection (4)(b) (i) the Commissioner shall make an
amended assessment on an application of a self-assessment taxpayer under
subsection (2) if the application was submitted within the time specified in
subsection (4)(b)(i).
(6) Where an assessment has been amended, the Commissioner may
further amend the assessment—
(a) five years after—
(i) for a self-assessment, the date the taxpayer submitted the self-
assessment return to which the self-assessment relates; or
(ii) for any other assessment, the date the Commissioner served
notice of the original assessment on the taxpayer; or
(b) one year after the Commissioner served notice of the amended
assessment on the taxpayer, whichever is the later.
(7) In any case to which subsection (6)(b) applies, the Commissioner
shall only amend the alterations or additions made in the amended
assessment to the original assessment.
(8) When the Commissioner has made an amended assessment, he or
she shall notify the taxpayer in writing of the amended assessment and
specify—
(a) the amount assessed as tax or the deficit or excess input tax
carried forward, as the case may be;
(b) any amount assessed as late payment penalty payable in respect
of the tax assessed;
(c) any amount of late payment interest payable in respect of the tax
assessed;
(d) the reporting period to which the assessment relates;
(e) the due date for payment of any tax, penalty or interest being a
date that is not less than thirty days from the date of the taxpayer
received the notice; and
(f) the manner of objecting to the assessment.
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 451

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 have 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
452 The Finance Bill, 2025

(a) the tax is unpaid tax; or

(b) the Commissioner has reasonable grounds to believe that the
taxpayer will not pay the tax by the due date for the payment of
the tax.
(2) The Commissioner may, in respect of the taxpayer and by notice
in writing, require a person (referred to as the "an agent")---
(a) who owes or may subsequently owe money to the taxpayer;
(b) who holds or may subsequently hold money, for or on account of,
the taxpayer;
(c) who holds or may subsequently hold money on account of some
other person for payment to the taxpayer; or
(d) who has authority from some other person to pay money to the
taxpayer, to pay the amount specified in the notice to the
Commissioner, being an amount that shall not exceed the amount
of the unpaid tax or the amount of tax that the Commissioner
believes will not be paid by the taxpayer by the due date.
(3) When a notice served under subsection (2) requires an agent to
deduct a specified amount from a payment of a salary, wages or other
similar remuneration payable at fixed intervals to the taxpayer, the amount
required to be deducted by an agent from each payment shall not exceed
twenty per cent of the amount of each payment of salary, wages, or other
remuneration (after the payment of income tax).
(4) This section shall apply to a joint account when—
(a) all the holders of the joint account have unpaid tax liabilities; or
(b) the taxpayer can withdraw funds from the account (other than a
partnership account) without the signature or authorisation of the
other account holders.
(5) An agent shall pay the amount specified in a notice under
subsection (2) by the date specified in the notice, being a date that that
does not occur before the date that the amount owed by the agent to the
taxpayer becomes due to the taxpayer or held on the taxpayer's behalf
(6) When an agent who has been served with a notice under
subsection (2) fails to comply with the notice by reason of a lack of
monies held by an agent on behalf of, or due by an agent to the taxpayer,
an agent shall notify the Commissioner in writing within fourteen days of
receiving the notice, setting out the reasons for an agent's inability to
comply.
 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
33 (2);
(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
454 The Finance Bill, 2025

(e) the taxpayer has not appealed against an assessment specified in a

decision of the Tribunal or court.
Section 42A of Cap.469B, it is proposed to amend­
Appointment of Value Added Tax withholding agent
(1) The Commissioner may appoint a person to withhold two per cent
of the taxable value on purchasing taxable supplies at the time of paying
for the supplies and remit the same directly to the Commissioner:
Provided that the withholding tax shall not apply to the taxable value
of zero-rated supplies and registered manufacturers whose value of
investment on the 31st December, 2024 is at least two billion shillings.
(2) The Commissioner may, at any time, revoke the appointment of a
tax withholding agent made under subsection (1), if the Commissioner
deems it appropriate to do so.
(3) Subsection (1) shall not apply to taxable supplies for official aid­
funded projects.
(4) For the avoidance of doubt, the withholding of tax under
subsection (I) shall not relieve the supplier of taxable supplies of the
obligation to account for tax in accordance with this Act and the '-"
regulations.
(4B) The tax withheld under this section shall be remitted to the
Commissioner within five working days after the deduction was made. "I
(4C) A person who is required under this section to withhold tax and,
without reasonable cause-
(a) fails to withhold the whole amount of the tax which should have
been withheld; or
(b) fails to remit the amount of the withheld tax to the Commissioner
by the fifth day of the following month, shall be liable to a
penalty of ten per cent of the amount not withheld or remitted.
(4D) A person who commits an offence under subsection (4C) is
liable on conviction to a penalty of ten per cent of the amount involved.
(5) A person who, prior to the commencement of this section, was
appointed to withhold tax under section 25A of the Value Added Tax Act
(Cap. 476) shall, notwithstanding the repeal of that section, be deemed to
be a person appointed under subsection (1), Provided that this provision
shall not be construed to impose any penalty whatsoever on any such
 The Finance Bill, 2025 455

person who ceased to withhold tax for any period following the repeal of
that section upto the 8th June, 2016.
Section 42B of 469B, it is proposed-
Appointment of digital service tax agent
(1) The Commissioner may appoint an agent for the purpose of
collection and remittance of digital service tax to the Commissioner.
(2) An appointment under subsection (1) may be revoked at any time
by the Commissioner.
Section 47 of Cap. 469B, it is proposed to amend-
Offset or refund of overpaid tax
(1) Where a taxpayer has overpaid a tax under any tax law, the
taxpayer may apply to the Commissioner in the prescribed form—
(a) to offset the overpaid tax against the taxpayer's outstanding tax
debts and future tax liabilities including instalment taxes and
input value added tax; or
(b) for a refund of the overpaid tax--
(i) in the case of income tax, within five years from the date on
which the tax was overpaid; or
(ii) in the case of any other tax, within twelve months from the
date on which the tax was overpaid.
(2) The Commissioner shall ascertain and determine an application
under subsection (1) within ninety days and where the Commissioner
ascertains that there was an overpayment of tax—
(a) in the case of an application under subsection (1)(a), apply the
overpaid tax to such outstanding tax debts or future tax liability;
and
(b) in the case of an application under subsection (1)(b), refund the
overpaid tax within a period of six months from the date of
ascertainment and, if the Commissioner fails to refund, the
overpaid tax shall be applied to offset the taxpayer's outstanding
tax debt or future tax liabilities.
(3) Where the Commissioner fails to ascertain and determine an
application under subsection (1) within ninety days, the same shall be
deemed ascertained and approved.
 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 hundred- and 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.

(91 Notwithstanding any other provision of this section, where a

person overpays 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
(b) any penalties due in respect of the amount due.
(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
 458 The Finance Bill, 2025

information within the specified period, the Commissioner may make an

objection decision within sixty days after the date on which the notice of
objection was lodged.
(5) Where the tax decision to which a notice of objection relates is an
amended assessment, the taxpayer may only object to the alterations and
additions made to the original assessment.
(6) A taxpayer may apply in writing to the Commissioner for an
extension of time to lodge a notice of objection.
(7) The Commissioner shall consider and may allow an application
under subsection (6) if—
(a) the taxpayer was prevented from lodging the notice of objection
within the period specified in subsection (2) because of an
absence from Kenya, sickness or other reasonable cause; and
(b) the taxpayer did not unreasonably delay in lodging the notice of
objection.
(7A) The Commissioner shall notify the taxpayer of the decision
made under subsection (7) within fourteen days after receipt of the
application,
(8) Where a notice of objection has been validly lodged within time,
the Commissioner shall consider the objection and decide either to allow
the objection in whole or in part, or disallow it, and Commissioner's
decision shall be referred to as an "objection decision".
(9) The Commissioner shall notify in writing the taxpayer of the
objection decision and shall take all necessary steps to give effect to the
decision, including, in the case of an objection to an assessment, making
an amended assessment.
(10) An objection decision shall include a statement of findings on
the material facts and the reasons for the decision.
(11) The Commissioner shall make the objection decision within
sixty days from the date of receipt of a valid notice of objection failure to
which the objection shall be deemed to be allowed.
(12) A person who is dissatisfied with the decision of the
Commissioner under subsection (11) may appeal to the Tribunal within
thirty days after being notified of the decision.
Section 59A of Cap.469B, it is proposed to amend-
Data management and reporting system.
(1) The Commissioner may establish a data management and
reporting system for the submission of electronic documents including
detailed transactional data relating to those documents.
 The Finance Bill, 2025 459

(1A) The Commissioner may, by notice in writing, require a person

to integrate the electronic tax system authorised under section 75 to the
system referred to in subsection (1) for the purposes of submission of
electronic documents including detailed transactional data in the
prescribed form.
(1B) The Commissioner shall not require a person to integrate or
share data relating to—
(a) trade secrets; and
(b) private or personal data held on behalf of customers or collected
in the course of business.
(1C) A notice under subsection (1A) shall be for a reasonable period
but not exceeding one year and depending on the nature of the business of
that person.
(1D) The provisions of subsection (1A) shall only apply to a business
whose turnover exceeds five million shillings.
(2) The Commissioner shall notify in writing the persons required to
submit electronic documents through the system established under
subsection (1).
(3) The electronic documents referred to in subsection (2) include
electronic invoice returns —
(a) of payments made by a person in the ordinary course of business
where goods were exchanged for consideration by a person not
employed in the business;
(b) for payments made by a person in the ordinary course of business
where services were rendered, or in anticipation of services to be
rendered, by a person not employed in the business;
(c) for payments for services rendered, or in anticipation of services
to be rendered, in connection with the formation, acquisition,
development, or disposal of a business or a part of it, by persons
not employed in the business;
(d) for periodical or lump sum payments in respect of a royalty; or
(e) for such other commercial or financial transaction as may be
designated by the Commissioner.
(4) For the purposes of this section —
(a) "transactional data" includes —
 460 The Finance Bill, 2025

(i) the names and addresses of each person to whom a payment

was made;
(ii) 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)(iii) 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
(1) The Commissioner may refuse an application for a private ruling
if—
(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 amend-
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.
462 The Finance Bill, 2025

Section 83 of Cap.469B, it is proposed to amend-

Penalties for late submission and failure to submit returns
(1) A person who submits a tax return after the due date shall be
liable to a penalty—
(a) of twenty five percent of the tax due or ten thousand shillings
whichever is higher, if it is in relation to a return required to be
submitted on account of employment income;
(b) one thousand shillings if it is in relation to a return required to be
submitted under Turnover Tax; or
(c) five per cent of the amount of tax payable under the return or ten
thousand shillings, whichever is the higher, if it is in relation to
value added tax or excise duty;
(d) in any other case—
(i) five per cent of the amount of tax payable under the return or
twenty thousand shillings, whichever is the higher, in respect
of a person other than an individual; or
(ii) five per cent of the amount of tax payable under the return or
two thousand shillings, whichever is the higher, for an
individual:
Provided that in the calculation of the late submission penalty for
purposes of this section, the amount of tax payable or due under
the return shall be reduced by the amounts already paid
andwithholding tax credits.
(1A) An export processing zone enterprise that fails to submit a
return as required under paragraph 4 of the Eleventh Schedule to the
Income Tax Act shall be liable to a penalty of twenty thousand shillings
per month for each month or part thereof that the failure continues.
(2) A person who fails to submit a document, other than a tax return,
as required under a tax law by the due date shall be liable to a penalty of
one thousand shillings for each day or part day of default but the total
penalty shall not exceed fifty thousand shillings.
(3) For the purposes of subsection (2), a person ceases to be in default
at the time the document is received by the Commissioner.
Section 89 of Cap.469B, it is proposed to amend-
General provisions relating to penalty
(1) Each penalty shall be calculated separately with respect to each
section in this Division.
 The Finance Bill, 2025 463

(2) If the same act or omission imposes more than one penalty under
a tax law on a taxpayer, the Commissioner shall determine which penalty
applies.
(3) A person shall be liable to a penalty only when the Commissioner
notifies in writing that person of a demand for the penalty setting out the
amount of the penalty payable and the due date for the payment being a
date that is at least 30 days after the date of the notification.
(4) Subsection (3) applies also to a penalty imposed under a tax law
other than this Act.
(5) A penalty payable by a person shall be due and payable on the
date specified in the notification under subsection (3).
(9) This Act shall not preclude the imposition of penalty under any
other tax law and the same act or omission shall not be subject to—
(a) the imposition of a penalty under more than one provision of that
other tax law; or
(b) both the imposition of a penalty and prosecution for an offence
under that other tax law.
Section 9B of Cap. 469C, it is proposed to amend-
Application of Tax Procedures Act (Cap. 469B) to excess tax refunds
The provisions of section 47 of the Tax Procedures Act (Cap. 469B)
shall apply for the purposes of—
(a) an application for refunds, ascertainment and repayment of fees
and levies overpaid or paid in error under this Act; or
(b) the determination by the Commissioner of penalties and interests
on fees and levies that remain unpaid.
Second Schedule of Cap.469C, it is proposed to amend-
SECOND SCHEDULE [s. 7(3)(a)]
GOODS EXEMPT FROM IMPORT DECLARATION
FEE AND RAILWAY DEVELOPMENT LEVY
Part A — GOODS EXEMPT FROM IMPORT DECLARATION FEE
WHEN IMPORTED OR PURCHASED BEFORE CLEARANCE
THROUGH CUSTOMS
(xv) All goods and parts thereof of Chapter 88;
(xva) any other aircraft spare parts including aircraft engines imported by
aircraft operators or persons engaged in the business of aircraft
464 The Finance Bill, 2025

maintenance upon recommendation by the competent authority

responsible for civil aviation.
Part B — GOODS EXEMPT FROM THE RAILWAY DEVELOPMENT
LEVY WHEN IMPORTED OR PURCHASED BEFORE CLEARANCE
THROUGH CUSTOMS
(xiii) all goods and parts thereof of Chapter 88;
(xvi) any other aircraft spare parts including aircraft engines imported by
aircraft operators or persons engaged in the business of aircraft
maintenance upon recommendation by the competent authority
responsible for civil aviation;
Third Schedule of Cap .469C, it is proposed to amend—
THIRD SCHEDULE [s. 7A(1)]
Export and Investment Promotion Levy

7207.11.00 Semi-finished products 17.5 % of the customs

of iron or non-alloy value
steel containing,
by weight, <0.25% of
carbon; of rectangular
(including
square) cross-section,
the width measuring
less than twice
the thickness
7213.91.10 Bars and rods of iron or 17.5 % of the customs
non-alloy steel, hot- value
rolled, in
irregularly wound coils
of circular cross-section
measuring
less than 14mm in
diameter of cross
section measuring less
than 8 mm
7213.91.90 Bars and rods of iron or 17.5 % of the customs
non-alloy steel, hot-
rolled, in value
 The Finance, Bill, 2025 465

irregularly wound coils

of circular cross-section
measuring
less than 14nun 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;
466 The Finance Bill, 2025

(e) a conveyance or transfer of any stock or marketable security in

any company incorporated in Uganda or Tanzania, if the
conveyance or transfer has been duly stamped in accordance with
the law of the territory in which the company was incorporated;
(1) an instrument for the sale, transfer or other disposition, either
absolutely or by way of mortgage or otherwise, of a ship or of any
part, interest, share or property of or in a ship;
(g) a bond given by a public officer for the due execution of his
duties;
(h) a will, codicil, registered family trust or other testamentary
disposition;
(hh) instruments for the sale or transfer of land for the
construction or expansion of educational institutions:
Provided that stamp duty shall become payable if such land reverts to
any other use;
(i) the instruments generally or specially exempted in the schedule;
(j) the exemption of all instruments with respect to licences of
business activities of an export processing zone enterprise
licenced under the Export Processing Zones Act (Cap. 517);
(k) the sale conveyance, transfer or issue of shares, preferred shares,
stocks, warrants or similar capital market instruments which are
listed and transacted on the Nairobi Stock Exchange or other
securities exchange approved under the Capital Markets
Authority Act (Cap.485A);
(1) an instrument under the Movable Property Security Rights Act
(Cap. 499A);
(la) the purchase of a house by a first time home owner under
affordable housing scheme;
(m) an instrument executed for purposes of collection and recovery of
tax;
(n) an instrument relating to the business activities of special
economic zone enterprises, developers and operators licenced
under the Special Economic Zones Act (Cap. 517A);
(o) the transfer of a house constructed under an affordable housing
scheme from the developer to the National Housing Corporation;
(p) fixed duty of one hundred shillings charged on contracts to be
chargeable as conveyances on sale under section 49; and
 The Finance Bill, 2025

(q) an instrument executed in faVour of a mortgage refinance

company.
(2) The exemption conferred by this section on the Government shall
extend to the Community and to the Corporations within the Community.