NAIROBI — President William Ruto has signed the Finance Bill 2025 into law, enacting sweeping tax reforms intended to reduce burdens on salaried workers and increase compliance across sectors. A central provision mandates automatic tax reliefs for employees, removing the need for individual claims.
The law now requires all employers to apply relevant deductions, exemptions, and reliefs directly through payroll. “This provision will ensure that employees receive their full tax benefits without needing to make separate claims, improving compliance and fairness in the tax system,” said Kuria Kimani, who sponsored the bill.
The Finance Act 2025, passed by Parliament on June 19 and published on May 6, amends six existing tax laws. These include the Income Tax Act, the Value Added Tax Act, the Excise Duty Act, the Tax Procedures Act, the Miscellaneous Fees and Levies Act, and the Stamp Duty Act.
Key Provisions and Sectoral Impacts
The law introduces tax exemptions for the telecommunications sector, specifically on investment allowances tied to spectrum licenses and fiber optic cable rights. This move is aimed at reducing operational costs and improving service delivery in the sector.
Gratuity and certain allowances paid under registered pension schemes are now tax-exempt. Additionally, the daily tax-free subsistence allowance has increased from KSh2,000 to KSh10,000.
Capital Gains and Financial Markets
The law exempts gains from property transfers within Special Economic Zones and from listed securities. High-value investments certified by the Nairobi International Financial Centre Authority will benefit from a reduced Capital Gains Tax rate, cut from 15% to 5%.
Taxation in the Digital Space
The new law removes the Digital Assets Tax and replaces it with a 5% excise duty on transaction fees charged by virtual asset providers. All online services, including digital marketplaces, will now fall under the Significant Economic Presence Tax, regardless of their revenue.
Betting proceeds will be taxed at the point of withdrawal, while a 5% excise duty now applies to lottery tickets, prize competitions, and gaming.
Manufacturing and Agriculture Relief
Manufacturers of mosquito repellents received key incentives, including VAT exemptions on raw materials and production inputs. Import Declaration Fees and Railway Development Levies have also been waived for these inputs.
To support agriculture, packaging materials for tea and coffee are now zero-rated under VAT provisions.
Administrative Reforms
The processing period for tax refunds and offsets has been extended from 90 to 120 days. All importers must now present a valid certificate of origin to strengthen regulatory compliance and product standards.
The Finance Bill 2025 reflects a shift in Kenya’s fiscal policy focus balancing revenue growth with taxpayer relief and investment incentives. Ruto’s administration views the law as a strategic step toward sustainable growth and improved public trust in the tax system.
