{"id":17510,"date":"2026-06-09T13:27:47","date_gmt":"2026-06-09T13:27:47","guid":{"rendered":"https:\/\/zadeassociates.co.ke\/?p=17510"},"modified":"2026-06-10T12:29:42","modified_gmt":"2026-06-10T12:29:42","slug":"kenyas-finance-bill-2026what-every-organisation-must-know","status":"publish","type":"post","link":"https:\/\/zadeassociates.co.ke\/index.php\/2026\/06\/09\/kenyas-finance-bill-2026what-every-organisation-must-know\/","title":{"rendered":"Kenya’s\u00a0Finance Bill 2026:What Every Organisation Must Know"},"content":{"rendered":"\n
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The Finance Bill 2026 was tabled on 30th April and is expected to become law by 30th June. It proposes sweeping changes to Income Tax, VAT, Excise Duty, and Tax Procedures \u2014 changes that will touch SACCOs, NGOs, trade unions, small traders, and large corporates alike. This brief sets out the most critical proposals in plain language, with a clear verdict on who wins and who loses under each one.<\/p>\n<\/blockquote>\n\n\n\n

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Tax Amnesty \u2014 A Genuine Opportunity<\/strong><\/p>\n<\/blockquote>\n\n\n\n

The Bill waives penalties and interest on tax liabilities for periods up to 3rd December 2025<\/strong>. Taxpayers who have already settled their principal taxes receive automatic relief. Those with outstanding principal must apply to the Commissioner and enter a payment plan, settling by 31st December 2026<\/strong>.<\/p>\n\n\n\n

Who benefits:<\/strong> Anyone carrying historical tax debts who cannot afford the full amount including accumulated penalties. This is a rare chance to clear the slate without punishment.<\/p>\n\n\n\n

Who does NOT benefit:<\/strong> Compliant taxpayers who paid on time \u2014 many argue this provision penalises those who played by the rules.<\/p>\n\n\n\n

VAT on Digital & Mobile Money Payments<\/strong><\/p>\n\n\n\n

Digital payment services \u2014 including M-Pesa transfers, mobile money, payment processing, merchant acquiring, and gateway services \u2014 will now attract 16% VAT<\/strong>. This will affect loan collections, staff disbursements, beneficiary payments, and supplier settlements for any organisation using mobile channels.<\/p>\n\n\n\n

Simple illustration<\/strong>A Ksh 100 M-Pesa transfer fee could become Ksh 116 after VAT. Multiply this across thousands of daily transactions for a mid-sized SACCO and the annual impact is significant.<\/p>\n\n\n\n

The Kenya Private Sector Alliance (KEPSA) has warned this could drive traders back to cash, directly contradicting the government’s stated goal of a cash-lite economy. This is among the most contested proposals in the Bill.<\/p>\n\n\n\n

Input VAT Clawback on Unsold Stock<\/strong><\/p>\n\n\n\n

If a business claims an input VAT refund on goods purchased, but those goods remain unsold when the VAT rate subsequently changes, the KRA Commissioner may demand that refund back.<\/p>\n\n\n\n

How this works in practice<\/strong>A retailer buys 1,000 phones in January 2026, pays Ksh 1.6M in VAT, and claims a refund. In July 2026 the VAT rate on phones drops. The retailer still holds 500 unsold units. KRA demands repayment of input VAT on those 500 phones \u2014 a Ksh 800,000 liability on stock the retailer bought in good faith.<\/p>\n\n\n\n

The measure punishes businesses with slow-moving inventory, discourages bulk purchasing, and creates unpredictable cash flow risks.<\/p>\n\n\n\n

Zero-Rated to Exempt: The Hidden Price Rise<\/strong><\/p>\n\n\n\n

Several goods shift from zero-rated to exempt status. Consumers still pay 0% VAT at point of sale, but prices rise because manufacturers and suppliers can no longer recover VAT on inputs \u2014 that cost gets buried in the selling price. Affected items include:<\/p>\n\n\n\n