President Ruto Signs Finance Bill 2025 Into Law, Launches Ksh 1.88 Trillion Spending Plan
NAIROBI — President William Ruto has signed the Finance Bill 2025 into law, ushering in significant tax reforms and a government spending plan set to take effect from July 1, 2025.
The new law introduces amendments across key tax statutes including the Income Tax Act, the Excise Duty Act, the VAT Act, the Stamp Duty Act, and the Tax Procedures Act. The aim is to enhance tax compliance, broaden the tax base, and sustain revenue collection for the 2025/26 financial year.
The law now requires employers to automatically apply all applicable tax reliefs and exemptions for their employees. This is expected to simplify income tax calculations and ensure workers receive their full entitlements without needing to apply for them manually.
Private employers will also be required to pay a daily tax-exempt subsistence allowance of Ksh 10,000, up from Ksh 2,000 a 400% increase. Additionally, any gratuity and allowances paid under registered pension schemes will now be exempt from income tax.
To expand tax coverage, the law imposes income tax on non-resident digital service providers who earn from Kenyan consumers through online platforms. Previously, such entities were not subject to local taxation unless they had a physical presence.
The law also repeals the Digital Assets Tax. In its place, a 5% excise duty will now apply to transaction fees paid to virtual asset service providers. The shift is aimed at supporting innovation in the digital asset sector while still collecting revenue from the growing industry.
“The lower excise duty will promote innovation and enhance investments in digital assets,” the government stated in the accompanying summary of the legislation.
President Ruto also signed the Appropriations Bill 2025, which authorizes the National Treasury to withdraw Ksh 1.88 trillion from the Consolidated Fund to finance government operations in the next fiscal year. An additional Ksh 671.99 billion will be collected and spent by Ministries, Departments, and Agencies as Appropriations in Aid (AIA).
Under the approved FY2025/26 budget:
- Ksh 1.8 trillion will go to recurrent spending.
- Ksh 744.52 billion is earmarked for development projects.
- Ksh 658.4 billion is allocated to the education sector.
- Ksh 133.4 billion will fund Universal Health Coverage.
- Ksh 217.3 billion is set aside for roads and infrastructure.
Agriculture and food security will receive Ksh 47.6 billion, while Ksh 2.7 billion has been allocated to expand access to affordable credit for Micro, Small, and Medium Enterprises (MSMEs) and households. An additional Ksh 18 billion is intended to strengthen the value chain between agriculture, MSMEs, and manufacturing.
The Finance Bill’s passage follows public protests and widespread debate over some of its provisions. However, the administration maintains that the reforms are critical for meeting development goals and maintaining fiscal stability.
With the law now in effect, the government has less than a week to begin implementing the new tax measures and spending programs.
