The Finance Bill
2026 — What It
Means for You

Withholding Tax

Card Payment Fees Now Taxed (Interchange & Merchant Fees)

The Bill expands the definition of "management or professional fees" to include interchange fees and merchant service fees that arise from card-based payment transactions. Banks and payment processors who earn these fees will now be subject to withholding tax on them — reversing a Supreme Court ruling from 2025.

Capital Gains Tax

Non-Residents Pay CGT on Indirect Share Transfers

If a foreign company sells shares in an overseas company but that foreign company's value is mostly derived from Kenyan assets (land, property, mining rights), Kenya will now charge Capital Gains Tax on that transaction. This closes a loophole previously used to avoid CGT on Kenyan real estate.

Withholding Tax

EAC Dividend Preference Scrapped

Currently, citizens of EAC partner states (Uganda, Tanzania, Rwanda, etc.) enjoy a preferential 5% withholding tax on dividends received from Kenyan companies. The Bill proposes to remove this preference, aligning Kenya with Uganda and Tanzania. This may reduce Kenya's attractiveness to EAC regional investors.

New Tax

Mitumba (Second-Hand Clothing) Importers Taxed

A brand new tax is introduced for importers of worn clothing and second-hand articles. The taxable profit is deemed to be 5% of the customs value of the imported goods, on which income tax will apply. Traders importing mitumba will now face a formal tax obligation at the point of importation.

New Tax

Gambling Winnings Taxed at 20%

The Bill proposes a 20% withholding tax on gambling and betting winnings. This affects anyone who wins from sports betting platforms, casinos, or online gambling sites. The tax would be deducted at source by the betting company before paying out winnings.

Relief

Non-Residents Exempt from PIN for Investment Bank Accounts

Foreign investors opening accounts with Kenyan investment banks will no longer be required to obtain a KRA PIN. This is a positive ease-of-doing-business measure designed to attract foreign capital into Kenya's capital markets.

Resident Landlords

Residential Rental Tax: 7.5% → 10%

• Applies to landlords earning more than KES 288,000 but no more than KES 15 million per year in rental income
• This is a final tax — charged on gross rental income, not profit
• This increase adds financial pressure on middle-income property owners
• May lead landlords to pass costs to tenants via rent increases

Non-Resident Landlords

New Non-Resident Rental Income Tax

• Foreigners earning rent from Kenyan property will face a new separate tax
• Rate to be specified in the Third Schedule of the Income Tax Act
• Non-residents must register via a simplified KRA framework
• Tax due by the 20th of each month following the month rent is received

Crypto Tax

Virtual Assets Formally Recognised & Taxed

For the first time, the Finance Bill formally brings cryptocurrencies, digital tokens, and virtual assets into Kenya's tax framework. Crypto exchanges and trading platforms will be required to register with KRA and report detailed information on users and their transactions annually.

Data Sharing

International Crypto Data Exchange

Kenya will be empowered to enter into international agreements for automatic exchange of data on virtual asset transactions with other countries. This closes the offshore crypto loophole — Kenyans using foreign exchanges won't escape KRA's reach.

VAT

VAT on Digital & Platform-Based Financial Services

Financial services delivered via digital platforms — including mobile-based lending, insurance aggregators, and payment platforms — will now attract VAT. This was previously untaxed for many digital-first financial products.

Withholding Tax

Withholding Tax Expanded to Digital Payments

The scope of withholding tax obligations is being extended to cover payments made through digital channels. Businesses processing large volumes of digital payments will need to account for withholding tax on certain transaction types.

Positive

VAT Exemption for PPP Infrastructure Projects

Goods and services used in the implementation of infrastructure projects under a Public-Private Partnership (PPP) framework will be VAT-exempt. This is designed to reduce the cost of large infrastructure delivery and attract private capital into roads, hospitals, and utilities.

Positive

CGT & Stamp Duty Relief for REIT Transfers

Property transferred into a Real Estate Investment Trust (REIT) will be exempt from both Capital Gains Tax and Stamp Duty. This is meant to encourage the growth of REITs in Kenya and make property investment more accessible to ordinary Kenyans through the stock exchange.

New Charge

VAT on Digital Financial Services

Platform-based financial services — such as mobile lending apps, digital insurance products, and payment gateways — will face VAT charges where they were previously untaxed. Consumers may see higher fees on these services.

Administration

Input VAT Recovery on Unsold Stock

When VAT rates change, the KRA Commissioner will gain new powers to recover input VAT that was already claimed on goods that remain unsold at the time of the rate change. Businesses holding inventory must track this carefully.

Relief

Higher VAT-Free Baggage Allowance for Returning Travellers

Returning Kenyan passengers will benefit from a higher duty-free threshold for accompanied baggage. The exact new figure will be set in the VAT schedules, but the intention is to reduce the burden on diaspora Kenyans bringing goods home.

Deadline Change

Income Tax Returns: June 30 → April 30

• Individual return deadline moves from 30 June to 30 April
• Nil returns deadline moves to 31 January
• Treasury says this improves revenue forecasting accuracy
• Critics warn it creates pressure on taxpayers and accountants
• Gives KRA more time to verify and act on returns within same fiscal year

Anti-Avoidance

KRA Gets Broad Anti-Tax Avoidance Powers

• KRA Commissioner can now disregard arrangements that are primarily designed to gain a tax advantage
• KRA can look beyond the legal form of a transaction to its actual intent and effect
• Revised assessments can be issued up to 5 years back
• Targets both formal contracts and informal arrangements used to dodge tax

Appeals

Tax Objection Timelines: Working Days → Calendar Days

The Bill reverses the calculation of deadlines for lodging tax objections and appeals, switching from working days back to calendar days. This effectively shortens the practical window taxpayers have to object to KRA assessments, as weekends and holidays now count.

Mining

Non-Resident Mining Contractors — New Tax Rules

Foreign companies operating as mining contractors in Kenya will face adjusted taxation rules on their income and any profits they repatriate out of Kenya. The changes take effect from 1 January 2027, giving the sector time to adapt.

⚠️ Most Affected

Ordinary Kenyans — Cost of Living

• Mobile phones — 25% excise on activation could raise smartphone prices
• Mitumba — New import tax may reduce supply and raise second-hand clothing prices
• Gambling winnings — 20% withheld before you receive any payout
• Fintech users — VAT on digital financial services may increase borrowing and payment costs
• Renters — Landlords facing higher rental tax may pass costs to tenants

💼 Business Owners

SMEs & Corporates

• New KRA anti-avoidance powers require tighter documentation of all transactions
• Withholding tax now covers card payment processing fees
• Input VAT claims on unsold inventory may be clawed back during rate changes
• Appeals against KRA assessments now on a shorter calendar-day clock
• Digital platforms face new VAT and withholding obligations

🏠 Landlords

Property Owners

• Residential rental tax rising from 7.5% to 10% on gross income
• Non-resident landlords face an entirely new monthly tax obligation
• However: REIT transfers are CGT and Stamp Duty exempt — good for structuring

✅ Some Good News

Positive Proposals

• PPP infrastructure project inputs are VAT-exempt — cheaper big projects
• REIT transfers exempt from CGT and Stamp Duty — promotes property investing
• Non-residents don't need a PIN to open investment bank accounts
• Higher duty-free baggage allowance for returning diaspora
• Fewer outright rate hikes than previous Finance Bills

₿ Crypto Users

Digital Asset & Crypto Traders

• Crypto exchanges must register with KRA and file annual user reports
• Kenya can now share your crypto transaction data with foreign tax authorities
• All virtual asset activity brought formally into the tax net
• Using foreign platforms to hide crypto gains will become increasingly difficult

📋 All Taxpayers

KRA Return Filing

• Income tax return deadline moves from 30 June → 30 April
• Nil return deadline becomes 31 January each year
• You have less time to dispute KRA assessments (calendar days, not working days)
• KRA can now go back 5 years to re-examine arrangements it deems tax-avoidance