The Finance Bill, 2025 (the Bill) was tabled before the National Assembly on 30 April 2025 and is expected to undergo the legislative process for the next two months. The Bill sets out a wide range of proposed changes to Kenya’s tax laws, including the Income Tax Act (Chapter 470, Laws of Kenya), the Value Added Tax Act, 2013, the Tax Procedures Act, 2015, the Miscellaneous Fees and Levies Act, 2016 and the Excise Duty Act, 2015.
All provisions in the Bill are set to come into effect on 1 July 2025, except for the new provisions introducing Advance Pricing Agreements into the transfer pricing regime, and the provision granting the Cabinet Secretary for the National Treasury and Planning the authority to waive penalties and interest in certain cases. These two new provisions will take effect on 1 January 2026.
It was expected that going forward, tax changes would be in line with the Government’s Medium Term Revenue Strategy for FY 2024/25 to 2026/27 published by the National Treasury and Economic Planning in September 2023 (the MTRS). Key amongst these proposals were the intended reduction of the corporate tax rate from 30% to 25% and alignment of the non-resident withholding tax rates with the corporate tax rate.
While the Bill reflects some alignment with the Government’s MTRS, including a push for base broadening, rationalisation of exemptions, and greater administrative efficiency. The Bill does not however adopt key headline measures previously signalled under the MTRS such as the proposed reduction in corporate tax rates highlighted above.
Furthermore, while the government has recently indicated that the Finance Bill, 2025 does not introduce any tax measures that would increase the burden on taxpayers, a closer review of the proposed amendments reveals otherwise. The Bill contains several provisions that are likely to have a material financial impact on businesses and individuals.
We have set out below a highlight of the key proposed amendments in the Bill as well as their potential impact on businesses in Kenya.
Click here to download the analysis of proposed tax changes under the Finance Bill, 2025.
Should you have any questions on this legal alert, please do not hesitate to contact Daniel Ngumy, Kenneth Njuguna, James Karanja or Dennis Chiruba.
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