The Finance Bill 2026 has unveiled a series of tax and policy proposals aimed at helping the government raise KSh3.533 trillion in revenue for the next financial year.
The National Treasury plans to collect KSh2.901 trillion in ordinary revenue and an additional KSh632 billion through appropriations-in-aid as part of efforts to support government spending and economic programmes.
Unlike previous finance bills that introduced direct consumer tax increases, the latest proposals focus on broadening the tax base, tightening compliance timelines, and expanding taxation within the digital economy.
Treasury Cabinet Secretary John Mbadi has defended the proposals, saying the measures are intended to improve efficiency in revenue collection while supporting economic stability.
Digital Payments and Banking Sector in Focus
One of the key proposals in the Bill targets the financial technology and banking sectors.
The government plans to amend the Income Tax Act to include interchange fees and merchant service fees from card payment transactions under taxable management and professional fees.
The proposed changes are expected to increase withholding tax obligations for financial institutions and digital payment platforms.
The Bill also expands the definition of royalties to cover payments linked to digital platforms, payment processing systems, switching systems, and settlement networks.
In addition, digital financial services such as payment gateways and electronic transfers could attract the standard 16 per cent VAT if the proposals are approved.
Changes Affecting Landlords and Property Owners
The real estate sector is also set for major changes under the Finance Bill.
The government has proposed a new Non-Resident Rental Income Tax targeting individuals and companies earning rental income from properties located in Kenya.
Under the proposal, affected landlords would be required to register with KRA and remit taxes through a simplified system.
At the same time, residential rental income tax for local landlords is expected to increase from 7.5 per cent to 10 per cent.
The Bill also introduces new provisions on trusts, trustees, and estate administrators aimed at reducing tax avoidance while streamlining taxation procedures.
Shorter Tax Filing Timelines
The Finance Bill seeks to significantly reduce tax compliance timelines for businesses and individuals.
If approved, annual income tax returns will now be filed within four months after the end of the financial year instead of the current six months.
This would effectively shift the filing deadline from June 30 to April 30.
Taxpayers filing nil returns will also be required to submit them within one month after the end of the income year.
The Bill further proposes that tax objection and appeal periods be calculated using calendar days instead of working days, reducing the time available for taxpayers to respond to disputes.
Green Energy and Mitumba Products Affected
The proposed law also introduces taxes affecting clean energy and second-hand imports.
Electric motorcycles, electric buses, electric bicycles, solar products, and lithium-ion batteries are set to attract a 16 per cent VAT under the new proposals.
The move marks a shift from earlier government incentives aimed at promoting green energy adoption.
Imported second-hand clothes and footwear, commonly known as mitumba, may also face a 5 per cent tax based on customs value.
The gambling industry has similarly been targeted through expanded taxation on winnings and gaming withdrawals.
Relief Measures Included in the Bill
Despite the new taxes, the Bill contains several relief measures aimed at easing pressure on some taxpayers.
The duty-free threshold for accompanied baggage entering Kenya is proposed to increase from USD300 to USD2,000, benefiting travellers and small traders.
The government has also proposed extending the tax amnesty programme on penalties and interest, provided taxpayers clear their principal tax obligations before the deadline.
Employees whose only income comes from salaries are expected to be exempted from instalment tax requirements.
Additional tax deductions have also been proposed for housing-related loans and gratuity contributions under certain employment arrangements.
Debate Expected During Public Participation
The Finance Bill 2026 is expected to attract intense debate during public participation and parliamentary discussions in the coming weeks.
Lawmakers, businesses, and ordinary Kenyans are expected to submit their views before Parliament begins deliberating on the proposals ahead of the 2026/27 budget process.
