Tax & Economic Law in Kenya 2025-June

From the Finance Bill to Crypto tax, VAT restructuring, and what’s ahead in 2026

1. Background: From Backlash to Reset (June 2024–June 2025)

The 2024 Finance Act triggered Kenya’s most intense wave of tax-related protests in over a decade, culminating in nationwide demonstrations between July and September 2024. Following the outcry and civic pressure, President William Ruto initiated a public fiscal review, which led to a scaled-down tax policy in 2025 focused more on clean-up than extraction.

The result? The Finance Bill 2025, tabled in Parliament on May 15, 2025, approved by Cabinet on June 6, and signed into law on June 19, 2025, ushered in a leaner, tech-focused framework for revenue and compliance.

2. Finance Bill 2025: Current Provisions (Effective from July 1, 2025)

No New Direct Taxes Introduced

Revenue forecast: KSh 24.1 billion, compared to over KSh 344 billion in new taxes under the 2024 Act
Focus: Administrative tightening, enforcement via eTIMS, and tax base realignment

Pension & Gratuity Reforms (Effective July 1, 2025)

All retirement gratuities now tax-exempt, regardless of employer type
Pension withdrawals from provident schemes no longer taxed after 20 years of membership or in terminal illness cases

Mortgage Relief Expansion

Eligible tax relief extended to loans from SACCOs, microfinance banks, and family-financed construction
Applies retroactively to any mortgage entered into since January 2023

3. Digital Assets, Crypto Tax, and the VASP Bill

Crypto & Digital Asset Tax Cuts (July 2025)

DAT reduced from 3% to 1.5%
Applies to gains from NFTs, cryptocurrency sales, token transfers
Payment system: Self-declaration via iTax, with select VASPs designated to deduct at source

Virtual Asset Service Providers Bill (VASP) 2025 – Awaiting Senate Approval

Passed by the National Assembly on June 25, 2025
Expected to come into force by November 2025
Assigns crypto regulation as follows:
- CMA: Tokens, ICOs
- CBK: Custodial wallets, stablecoins
Establishes capital adequacy, local registration, and AML/CFT audit rules

4. VAT Restructuring: From Exemptions to Enforcement

Highlights Effective August 1, 2025:

Item	VAT Status in 2025
Solar panels, inverters, cables	16% VAT reinstated
Affordable housing materials	VAT exemption repealed
Animal feed inputs	VAT-exempt (not zero-rated)
Tea/coffee packaging materials	VAT-exempt
Education e-books	Remain zero-rated

Refund Mechanism Adjustments

Refund cycle extended from 90 to 120 days
Deadline to file VAT claims reduced to 12 months from date of supply

Upcoming (2026 Preview):

The VAT (Digital Services Enforcement) Regulations, expected in Q1 2026, will bring micro-content creators and AI tool providers under VAT scope

5. eTIMS Expansion & KRA Enforcement (July–December 2025)

Real-Time Tax Monitoring

eTIMS now required for:
- All businesses earning KSh 3M+ annually
- Lawyers, private clinics, landlords (phased between Aug–Oct 2025)
KRA integrating eTIMS with NTSA, HELB, and NHIF databases to catch tax evaders

Advance Pricing Agreements (APA)

Multinational corporations now signing 5-year tax certainty deals
Two signed by end of June; 15 more under review as of August 2025

Upcoming Enforcement Notes:

KRA and CAK set to issue joint framework on eCommerce marketplace taxation by December 2025

6. Forecasts and Legislative Agenda into 2026

Coming in 2026:

Tax Appeals Tribunal Review Bill: Expected to streamline appeals timeline to under 6 months
Wealth Declaration Tax (Under Study): A proposal to tax unexplained net worth is under discussion, led by Treasury and KRA
Digital Twin IDs for Businesses: From January 2026, each VAT-registered business may be issued a digital compliance scorecard publicly ranked on iTax

7. Sector Impact Highlights (July–December 2025)

Sector	2025–2026 Tax Trend
Startups	15% tax relief extended under Nairobi IFC regime
Manufacturing	Lobbying for reintroduction of input VAT offsets (pending Finance 2026)
Tech & AI	Cross-border digital service rules tightening (Sept 2025 onward)
Agri-trade exporters	Favorable packaging VAT regime—but fuel/input costs rising
Informal sector	Pushed into presumptive tax schemes; new digital ID policies in trial

Final Word: 2025 Is the Year of Tax Modernization, Not Expansion

While Kenya has pulled back from shock tax measures, it’s pushing forward full force on digital compliance, data-driven enforcement, and structural clarity. The Finance Bill 2025 is light on new taxes, but heavy on infrastructure, systems, and a long game into 2026 and 2027.

Expect: