Finance Bill 2025: 12 proposals that will redefine tax laws in Kenya
By Francis Muli, May 26, 2025On April 30, 2025, the Finance Bill 2025 was received by the National Assembly, ready for public participation before being discussed by legislators and later passed into law.
The Finance Bill 2025, which received approval from the cabinet, contains revenue-raising measures for the next financial year.
The bill seeks to amend several key pieces of tax legislation, including the Income Tax Act, the Value Added Tax Act, the Excise Duty Act, the Tax Procedures Act, the Miscellaneous Fees and Levies Act, and the Stamp Duty Act.
In a notice published on May 13, 2025, the clerk of the National Assembly urged Kenyans to present written memoranda on the proposed tax and revenue measures outlined in the bill.
“The National Assembly invites you to submit your views on the Finance Bill 2025 (National Assembly Bill No. 19 of 2025),” the invitation notice reads in part.
Here are some proposals in the bill that Kenyans should take note of;
Taxable income
The Finance Bill 2025 proposes significant changes to the Income Tax Act, impacting both personal and corporate income tax.
The bill also proposes that employers be legally required to apply all eligible deductions, reliefs, and exemptions before calculating PAYE, potentially increasing take-home pay.
If the bill sails through, the tax-free daily allowance for per diem benefits will increase from Ksh2,000 to Ksh10,000.
Capping of tax
The Finance Bill proposes a five-year limit for carrying forward tax losses in a bid to promote transparency and encourage tax filing on time, while helping the government to strengthen its revenue base.
To achieve this effectively, the government is open to exploring systems that verify tax loss claims to ensure fairness and ensure revenue is protected for the benefit of all Kenyans
Tax agreements
The bill is also seeking to enhance clarity on what powers the Kenya Revenue Authority (KRA) has when it comes to nullifying tax agreements to avoid abuse.
The aim is to protect public interest by ensuring that big companies do not hide behind unclear rules to avoid paying their fair share of taxes.
The bill proposes that such funds, if paid in advance, can safely be invested in government bonds and MMFs or safely locked in to avoid budget deficits. The principal amount remains untouched, while the interest earned can be used to fund essential services such as health, education, and infrastructure
Currently, KRA has the power to cancel tax agreements at any time.
Corporate Tax
The Finance Bill 2025 is looking to standardise Corporate Tax for all companies.
Previously, the construction industry was being charged less corporate tax to try and spur growth through the affordable housing programme.
“While some construction firms may feel the pinch, in the long run, they will benefit from the increased demand created by the AHP initiative. This balance supports the growth of the industry in the long term,” .
The government continues to lead by example by buying locally assembled vehicles and moving to lease models to save costs. These efforts are all aimed at supporting the country’s economy, protecting jobs and ensuring public money is spent wisely.
Sports sponsorship tax exemption
Under the current laws, sports sponsorships are exempt from taxation. This means companies or individuals who spend money sponsoring sporting activities do not have to pay taxes on those funds.
Finance Bill 2025 proposes that KRA will be reviewing sponsorship claims on a case-by-case basis for the sponsors to ensure only beneficial contributions are considered.
Per diem nontaxable daily limit
The government is proposing an increase in the non-taxable per diem limit from Ksh2,000 to Ksh10,000 per day.
Data management and reporting
The bill introduces updates to data management and tax reporting, which empower KRA to request and access data for tax evaders.
Already, the updates are raising data privacy concerns for businesses, but the government says there has been a lot of tax evasion and tax avoidance by Kenyans.
“This will help KRA net such people. Kenyans think they can be smart and do online transactions without being known. The ability to track transactions especially those that take place online is key to ensuring that tax cheats don’t unfairly benefit some while hardworking Kenyans carry the burden,” the government explains in the bill.
The government says the provision ensures that those who make money in Kenya also give back. According to the National Treasury, the bill also allows the government to strengthen the Office of the Data Commissioner, making sure that the laws and regulations are robust.
Waiver of penalties and interests
By 2024, anyone who didn’t file their returns was required to pay penalties. There is an amnesty going on that ends in June 2025 for tax returns of before 2024. After that, Kenyans are expected to pay any penalties and interest incurred.
The only provision for penalties given is that which occurred due to error, where the systems have related you to rental obligations that are not yours.
Digital marketplace
The bill is also seeking to harmonise the digital marketplace across the VAT Act and the Income Tax Act.
To address concerns around tax burdens, particularly among content creators and small online traders, the government is exploring the waiver or review of the digital content withholding tax as a gesture of goodwill and political balance.
“Expanding the tax base through digital platforms will support critical public services such as healthcare, infrastructure, education, and youth empowerment,” the government adds.
Digital lenders
If the Finance Bill 2025 sails through, any digital lenders extending credit through an electronic platform will be subject to 20 per cent excise duties on the fees charged.
Electronic services
The Finance Bill 2025 proposes a 16 per cent VAT on internet-based radio and TV services, as well as a reduction of the Digital Service Tax from 3 per cent to 1.5 per cent.
Other electronic services subject to 16 per cent VAT include websites, web hosting, remote maintenance, self-learning packages, music, films, and software updates.
Tax refunds
The Kenya Finance Bill 2025 proposes to reduce the timeframe for lodging Value Added Tax (VAT) refund claims from 24 months to 12 months. This change aims to align the refund application guidelines with the Tax Procedures Act (TPA), which also sets a 12-month period for refund applications.