The Kenya Revenue Authority (KRA) has announced new tax rates for the Fringe Benefits Tax, Deemed Interest Rate and Low-Interest Benefit.
The revenue authority in a statement on Friday, January 17, revealed that it had lowered rates on Fringe Benefits Tax, Deemed Interest Rate to 13 per cent from 16 per cent. Similarly, KRA announced that it had lowered the Low-Interest Benefit by two per cent from 16 per cent to 14 per cent.
Fringe Benefit Tax is payable by every employer in respect of a loan provided to an employee, at an interest rate lower than the market rate.
It is provided under section 12B of the Income Tax Act, which became effective on June 12, 1998 and is derived from the difference between the market interest rate and the actual interest paid on the loan.
The tax also applies to non-cash benefits offered to an employee by an employer. The non-cash benefits could include vehicles, cars or other forms of perks that are not part of the employee's gross earnings.
According to the Authority, in a special case where the tenure of the loan extends beyond the date of the termination of employment, the new rates will still be applicable.
KRA revealed that Kenyans will remit the Deemed Interest Rate and Low-Interest Benefit for the next three months from January to March this year while the Low-Interest Benefit shall be remitted for the next six months from January to June.
“For Section 12B of the Income Tax Act, the Market Interest Rate is 13 per cent. This rate shall be applicable for January, February and March 2025,” KRA stated.
“For purposes of section 5(2A) of the Income Tax Act, the prescribed rate of interest is 14 per cent. This rate is applicable for January, February, March, April, May and June 2025,” the Authority added.
KRA's notice comes hardly a month after the government announced new tax reforms under the Tax Laws Amendment Act that was formally implemented on December 27, 2024.
Following the Act's implementation, KRA announced changes in the excise duty charged on imported goods. The affected products included imported pharmaceuticals, nicotine products and plastics.
Of great concern was the hike in the excise duty on imported sugar whose rate was increased from Ksh5 per kilogram to Ksh7.50 per kilogram. However, this excluded sugar imported from East Africa member states.