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The Finance Bill 2026 was published in May 2026 and proposes significant amendments to various tax laws in Kenya, including the Income Tax Act, Value Added Tax Act, Excise Duty Act, and Tax Procedures Act. If passed, most changes are expected to take effect on 1 July 2026, while certain compliance timelines will apply from 1 January 2027.
This article provides a clear, high-level summary of the 10 major tax proposals in the Finance Bill 2026 that are likely to impact businesses, investors, and professionals across multiple sectors in Kenya.
One of the most notable proposals in the Finance Bill 2026 is the expansion of withholding tax rules to cover payments related to card payment networks. This includes interchange fees, merchant service fees, and payments for access to proprietary digital platforms, payment processing systems, switching systems, and settlement systems.
The proposal aims to bring more transactions within the tax net, particularly in the fast-growing fintech and digital payments sector. Both domestic and international card networks could be affected.
The Bill proposes to expand the definition of “royalty” to include payments made for the distribution of software where regular payments are involved. This change seeks to clarify the tax treatment of software licensing and distribution arrangements involving non-residents.
This proposal has appeared in previous Finance Bills but remains a key area of focus for technology companies operating in Kenya.
A new Non-Resident Rental Income Tax (NRRT) is proposed for rental income derived from property situated in Kenya. Non-resident landlords will be required to register and file monthly returns for this tax.
This measure is expected to strengthen tax collection from foreign-owned real estate assets in Kenya, covering both residential and commercial properties.
The Finance Bill 2026 proposes to broaden Kenya’s offshore capital gains tax framework. Gains from the sale of shares in foreign companies could fall within the scope if the shares derive value from Kenya or result in a change of ownership of Kenyan assets or group membership.
This is one of the widest expansions of source-based taxation on offshore transactions proposed in recent years.
The Bill introduces a simplified framework for the taxation of trusts. Key proposals include clearer rules on the taxation of income at the trustee level and distributions to beneficiaries, aiming to reduce ambiguity that has existed in the current regime.
This change will be particularly relevant for family offices, investment holding structures, and estate planning.
Starting January 2027, the deadline for filing income tax returns is proposed to be shortened from six months to four months after the end of the year of income. Nil returns may need to be filed even earlier, within one month.
This forms part of a broader push toward faster compliance and greater use of digital tax administration tools.
The Finance Bill 2026 proposes to reintroduce withholding tax on lottery winnings and significantly expand the definition of taxable “withdrawals” from gambling accounts. The changes align with the new Gambling Control Act.
This will affect operators and participants in the betting, gaming, and lottery sectors.
Several VAT-related proposals are included, such as:
These changes aim to rationalise the VAT base and improve compliance.
A major shift is proposed in the taxation of mobile phones and wireless devices. Excise duty would be charged based on device activation rather than importation. This represents a significant change in the taxing point for the telecommunications sector.
Other important proposals include:
These measures reflect the government’s continued focus on improving tax compliance through technology and data.
The proposals in the Finance Bill 2026 continue the government’s strategy of expanding the tax base while modernising tax administration. Sectors likely to be most affected include:
While the Bill is still going through the legislative process, forward-looking organisations are already:
Staying informed about these developments is essential for effective tax planning and risk management.
Conclusion
The Finance Bill 2026 introduces several important changes to Kenya’s tax landscape. Businesses and investors are encouraged to monitor the progress of the Bill through Parliament and public participation.
For a more in-depth professional analysis of these proposals, you can read and download the full Tax Changes Legal Alert we previously published.