President William Ruto today officially assented to the Finance Bill 2025, transforming it into law. The signing ceremony, held at State House, Nairobi, proceeded even as parts of the capital had been brought to a standstill by Gen Z-led commemorative protests—a powerful echo of the public outcry that forced the rejection of the 2024 Finance Bill just last year. This pivotal moment sets the stage for Kenya’s economic direction, introducing a raft of tax amendments and unlocking significant funds for public services.
The newly enacted Finance Act 2025 is designed as a comprehensive fiscal intervention. Its primary objectives are to enhance the ease of doing business, streamline revenue collection, and strengthen the country’s tax regime. The legislation introduces amendments across six crucial tax laws: the Income Tax Act, Value Added Tax Act, Tax Procedures Act, Miscellaneous Fees and Levies Act, Stamp Duty Act, and the Excise Duty Act. These changes are poised to reshape the financial landscape for individuals and businesses alike.
Among the key citizen-centric provisions, the Act brings welcome news regarding retirement benefits. It explicitly repeals sections of the Income Tax Act governing the tax treatment of pensions and retirement benefits under both private schemes and the National Social Security Fund (NSSF), meaning no more tax deductions on gratuity upon retirement. This offers a significant reprieve for retirees, safeguarding their hard-earned benefits.
Furthermore, the Bill promises broader tax relief for homeowners. Kenyans will now automatically qualify for mortgage tax relief, even if they build their homes through a SACCO or a personal loan, eliminating the previous requirement of purchasing a house to access this benefit. In a move lauded by employees, a mandatory amendment to the Income Tax Act now requires all employers to automatically apply all applicable tax reliefs, deductions, and exemptions, streamlining a process that previously burdened individuals with seeking refunds from the Kenya Revenue Authority (KRA). The daily tax-exempt subsistence allowance (per diem) has also seen a substantial increase from KSh 2,000 to KSh 10,000, offering relief for those on official duties.
Crucially, the Act maintains the existing PAYE tax bands, with earlier proposals for new, additional bands having been rejected by Members of Parliament. Lawmakers also successfully restricted the KRA’s ability to access citizens’ data, ensuring robust privacy safeguards. Essential commodities are set to benefit from zero-rated tax reforms, including raw materials and machinery for manufacturing mosquito repellents, and packaging materials for tea and coffee, aiming to boost local agriculture and health initiatives. Corporate tax breaks have also been extended to key sectors, notably the telecommunications industry, with tax exemptions on investment allowances for spectrum licenses and fiber optic cable rights. Companies certified by the Nairobi International Financial Centre (NIFC) will also benefit from a reduced Capital Gains Tax rate (from 15% to 5%) for high-value investments, alongside preferential corporate income tax rates.
However, the Finance Act also expands the tax base in other areas. The Significant Economic Presence Tax (SEPT) is broadened to cover all online services, including digital marketplaces, and the previous KSh 5 million threshold for non-resident entities has been removed. The Digital Assets Tax has been repealed and replaced with a 5% excise duty on transaction fees payable to virtual asset providers, while a new 5% excise duty will now apply to betting, gaming, prize competitions, and lottery tickets at the point of withdrawal. Additionally, the period for carrying forward tax losses for companies has been limited to five years, a significant change from previous indefinite allowances.
Alongside the Finance Bill, President Ruto also signed the Appropriations Bill 2025 into law. This critical legislation provides the legal authority for the government to access and utilize KSh 1.88 trillion from the Consolidated Fund to finance its operations and services for the fiscal year ending June 30, 2026. Ministries, Departments, and Agencies (MDAs) are further empowered to utilize an additional KSh 671.99 billion as Appropriation-in-Aid, representing their internally collected revenues.
These substantial allocations are meticulously planned to support the implementation of key government programs across vital sectors. The Estimates of Revenue and Expenditure for 2025/2026 earmark KSh 1,805.02 billion for recurrent expenditure and KSh 744.52 billion for development. Major beneficiaries include agriculture (KSh 47.6 billion for subsidies and value chain development), health (KSh 133.4 billion for Universal Health Coverage, disease control, and doctor internships), and education (KSh 658.4 billion for teacher recruitment, free basic education, and university scholarships). Infrastructure development, including roads, bridges, and energy projects, is also slated for significant funding (KSh 217.3 billion for roads/bridges, KSh 62.8 billion for energy).
The signing of these two critical bills, particularly the Finance Bill, in the shadow of ongoing public protests, underscores the government's commitment to its fiscal consolidation agenda and the Bottom-Up Economic Transformation Agenda (BETA). While the administration asserts that these measures will bolster economic growth and improve the lives of Kenyans, the continued public demonstrations highlight a deep-seated public demand for greater transparency, inclusivity, and accountability in economic policy-making. The path ahead will be defined by the implementation of these laws and the government's ability to bridge the gap between its economic vision and the aspirations of a protesting populace.
