The Proposed Finance Bill 2025 Kenya introduces sweeping tax changes designed to transform the nation’s fiscal policy and expand government revenue. On 29 April 2025, the Cabinet Secretary for National Treasury and Economic Planning presented the Bill to the National Assembly following Cabinet approval. The Bill is currently under debate and subject to public participation. Once enacted by 30 June 2025, most measures will take effect from 01 July 2025, with select provisions set for 01 January 2026.
While past Finance Bills introduced major tax burdens for salaried individuals, this Bill focuses on widening the tax base to meet the government’s revenue target of KES 3.385 trillion, including KES 2.84 trillion from ordinary revenues and the rest from appropriations-in-aid.
Broadening the Tax Base: Core Goals of The Proposed Finance Bill 2025 Kenya
To meet its fiscal objectives, the government has proposed substantial changes that affect digital businesses, corporates, and individuals alike.
- The Bill expands Significant Economic Presence (SEP) tax to include businesses operating online or via electronic networks.
- It also introduces Advanced Pricing Agreements (APAs) for non-resident entities doing business with related Kenyan residents and vice versa.
- A critical provision empowers the Commissioner to issue agency notices even while tax disputes are pending in court.
These changes reflect a firm shift towards enhanced enforcement and a more inclusive tax regime under The Proposed Finance Bill 2025 Kenya.
Income Tax Reforms under the Finance Bill 2025
Changes for Salaried Individuals
One notable proposal is the increase in the tax-exempt per diem from KES 2,000 to KES 10,000. This move acknowledges rising work-related travel costs and reduces taxable income for affected employees.
Corporate Tax Adjustments
Companies will now be limited to carrying forward tax losses for only five years, instead of indefinitely. This change encourages businesses to improve profitability and close loss cycles sooner.
In addition, The Proposed Finance Bill 2025 Kenya clarifies the due date for Minimum Top-up Tax, targeting multinational enterprises with low effective tax rates in Kenya.
VAT Proposals: Green and Agricultural Incentives
The Proposed Finance Bill 2025 Kenya also amends the First Schedule of the VAT Act to support sustainability and food production:
- Exemption of VAT on electric bicycles and electric buses under tariff 87.02
- Exemption on locally sourced or imported raw materials for animal feed manufacturing
These incentives aim to lower production costs and promote environmentally friendly transport solutions.
The Bill also tightens rules for foreign digital service providers, requiring them to register for VAT and remit taxes in Kenya even without a physical presence.
Excise Duty and the Digital Economy
In line with global trends, the Bill extends excise duty to digital services, including:
- Streaming platforms
- Online gaming services
- Entertainment and digital content apps
This change ensures digital platforms contribute fairly to national revenue.
Reforms to the Tax Procedures Act
Among the most impactful proposals is the Commissioner’s new authority to issue agency notices even when a tax matter is under judicial consideration. While this may accelerate revenue collection, it also raises concerns about due process.
On the positive side, the Bill provides for waivers on penalties and interest where errors result from failures in electronic tax systems. This encourages compliance and gives relief to taxpayers acting in good faith.
What This Means for You
The Proposed Finance Bill 2025 Kenya touches nearly every corner of the economy. Here is how it could affect you:
- Digital businesses face new SEP taxes and VAT obligations
- Salaried workers benefit from increased tax-exempt travel allowances
- Farmers and manufacturers gain relief through VAT exemptions
- Multinational firms must adjust to stricter loss-carryforward rules and Minimum Top-up Tax obligations
With its broad scope, the Bill reflects the government’s push toward a self-sustaining and digitally responsive economy.
Use Our Tools to Stay Informed
Don’t get caught off guard. Use our calculators to stay ahead of the changes:
- Income Tax Calculator – Estimate your new monthly deductions
- VAT Calculator – Determine changes in product or service pricing
- Excise Calculator – Track cost implications for digital and traditional goods
- Penalty Estimator – Understand potential waivers or enforcement scenarios
Our tools are tailored for a Kenyan audience and incorporate projections based on The Proposed Finance Bill 2025 Kenya.
Be Ready for Changes in Kenya’s Tax Landscape
As public participation continues, now is the time to get involved. Share your feedback, attend forums, or consult a tax expert. The President must assent to the Bill by 30 June 2025 for it to become law.
In conclusion, The Proposed Finance Bill 2025 Kenya signals a shift from taxing a narrow base to engaging a broader section of the economy. Whether you are a business owner, employee, or digital content creator, staying informed and proactive is key.