Introduction

The Finance Act, 2026, received presidential assent on 23^rd June 2026 and was subsequently gazetted into law on 26^th June 2026 . Most of the changes will be effective from 1^st July 2026,in line with the commencement of the Government’s fiscal year, while three changes will be effective from 1^st January 2027 and one from 1^st September 2026.

In our latest newsletter, we provide an overview of the proposed amendments across several tax laws and highlight their potential implications to help you plan ahead and remain compliant.

Highlights of the key proposed changes include:

• Introduction of a tax amnesty for liabilities relating to periods up to 31^st December 2025, with the amnesty expiring on 31^st December 2026
• Introduction of withholding tax on interchange fees, merchant service fees and payment to card companies following the recent ruling by the Supreme Court that such fees are not subject to withholding tax
• VAT - free threshold for accompanied baggage for returning passengers increased from USD 300 to USD 2,000
• Exclusion from VAT exemption on some financial services made over a software or a platform for a fee or commission
• Individuals required to file their returns by the end of the fourth month after the end of the year of income
• For money lending businesses and institutions licensed under the Banking Act, Microfinance Act and Central Bank of Kenya Act, bad debts allowable as a deduction for tax purposes shall include the principal, interest and any other amount relating to the loan
• Companies that had invested at least ten billion shillings before 1^st July 2025 will be allowed to carry forward losses incurred before 1^st July 2025, until such a time when these are extinguished 
• Companies that invest more than ten billion Kenya shillings in petroleum or gas storage facilities qualify to claim one hundred percent of their investment in the first year of use of such facilities
• Commissioner granted power to issue auto populated returns with taxpayers required to confirm or amend the auto populated return within two months of its issuance
• Employee-related costs in labour outsourcing and employee placement services treated as disbursements and exempted from VAT
• Exemption from VAT on repossession of assets used as collaterals 
• Excise Duty refund eligibility for excisable goods supplied to Defence Forces Welfare Services

Caveat

This newsletter has been prepared by RSM (Eastern Africa) Consulting Ltd, and the views are those of the firm, independent of its directors, employees and associates. This newsletter is for general guidance, and does not constitute professional advice. Accordingly, RSM (Eastern Africa) Consulting Ltd, its directors, employees, associates and its agents accept no liability for the consequences of anyone acting, or refraining from acting, in reliance on the information contained herein or for any decision based on it. No part of the newsletter may be reproduced or published without prior written consent. RSM (Eastern Africa) Consulting Ltd is a member firm of RSM, a worldwide network of accounting and consulting firms. RSM does not offer professional services in its own name and each member firm of RSM is a legally separate and independent national firm.