Everything You Need to Know About Kenya Tax Changes in 2025

Published by Ronalds LLP
Date: July 2025

With the recent enactment of the Finance Act 2025 and updates to the Tax Laws Amendment Act 2024, Kenya has made sweeping changes to its tax regime aimed at enhancing compliance, boosting investment, and adapting to a modern, digital economy.

Whether you’re a business owner, investor, or working professional, staying informed about the Kenya Tax Changes 2025 is critical. Here’s a clear and concise breakdown of what has changed and what it means for you.

1. Income Tax Updates

✅ Introduction of Digital Economy Taxation

Non-resident entities earning from the digital marketplace are now subject to a 3% Significant Economic Presence Tax (SEPT). This ensures that digital platforms contribute fairly to Kenya’s revenue base.

✅ Minimum Top-Up Tax for Multinationals

Companies operating in Kenya within global groups must now meet a minimum 15% effective tax rate, aligning with international tax standards.

✅ New Exemptions

Pension withdrawals upon retirement or ill health are now tax-free.
Income from fully grant-funded development projects is exempt from tax.
Gratuity payments are now exempted, alongside enhanced reliefs for mortgage interest, pension contributions, and social health funds.

2. Withholding Tax (WHT) Reforms

Digital content creators now face a 5% WHT (residents) and 20% (non-residents).
Sales to public entities are taxed at 0.5% (residents) and 5% (non-residents).
Scrap sales have been exempted from WHT.
Punters’ withdrawals now attract a reduced WHT of 5%, down from 20%.

3. Value Added Tax (VAT) Changes

🔹 Time of Supply Clarified

Exports will now be recognized at the time a certificate of export is issued by customs — helping streamline documentation and compliance.

🔹 Input VAT Restrictions

Businesses can only claim VAT on fully taxable supplies, with the apportionment rule eliminated.

🔹 Expanded VAT Exemptions

Products such as fertilizers, sanitary pads, diapers, pest control items, and mosquito repellents now enjoy VAT exemptions.

🔹 Refund Timelines Shortened

VAT refund processing timelines have been cut from 24 months to 12 months, and bad debt VAT claims from 3 years to 2 years.

4. Excise Duty Revisions

Non-residents offering digital services in Kenya will now be subject to excise duty.
Excise on betting, gaming, and lotteries has been slashed from 15% to 5%, promoting industry growth.
Local producers of spirits using agricultural products can now qualify for excise exemptions.

5. Tax Procedures and Compliance

Objection and appeal periods now exclude public holidays and weekends.
Reverse invoicing has been introduced for small-scale traders with turnover under KES 5 million.
KRA assessments must now be justified in writing.
Overpaid tax can no longer be offset against future VAT input claims.
Refund timelines extended to 120 days (normal) and 180 days (audited cases).

6. Corporate Incentives and Employment Tax

Per diem allowance increased to KES 10,000 per day.
Startups certified under the Nairobi International Financial Centre (NIFC) enjoy:
- 15% CIT for the first 3 years
- 20% CIT for the next 4 years
Larger certified companies under NIFC get 15% CIT for 10 years, then 20% for the next 10.
Tax exemption on capital gains from securities listed on the stock exchange.

Why It Matters

The Kenya Tax Changes 2025 reflect a bold move toward modernization, fairness, and inclusion of the digital economy in the tax net. At Ronalds LLP, we are committed to helping businesses and individuals navigate these changes and unlock potential opportunities through strategic tax planning and compliance.