Ruto signs Finance and Appropriations Bills into law

President William Ruto has signed into law the Finance Bill 2025, which contains raft of tax amendments and fiscal reforms designed to streamline revenue collection, ease the cost of doing business, and bolster economic growth across key sectors.

A key highlight in the Bill is a requirement for employers to automatically apply all applicable tax reliefs, deductions and exemptions for their employees.

The Bill, which was passed by MPs on June 18,  provides a tax exemption on investment allowances related to the purchase of spectrum licenses and rights to use fiber optic cables by telecommunication operators, in a move aimed at lowering operating costs and improve service delivery in the sector.

It provides for tax exemptions on gratuity and allowances paid under pension schemes, along with an increase in the daily tax-exempt subsistence allowance from Sh2,000 to Sh10,000.

On capital gains tax adjustments, the new law exempts property transfers within Special Economic Zones and gains on listed securities and reduces the Capital Gains Tax rate from 15 per cent to 5 per cent for high-value investments certified by the Nairobi International Financial Centre Authority.

It also expands the Significant Economic Presence tax to cover all online services, including digital marketplaces, regardless of revenue thresholds, introduces Advance Pricing Agreements for non-resident entities operating in Kenya. Betting transactions will also be taxed at the point of withdrawal.

The Digital Assets Tax has been repealed and replaced with a 5 per cent excise duty on transaction fees payable to virtual asset providers, aimed at promoting innovation and investment.

The Bill also introduces Valued Added Tax (VAT) exemptions on raw materials and machinery used in manufacturing mosquito repellents while tea and coffee packaging materials have been zero-rated to boost the agricultural value chain.

Further, it introduced a 5 per cent excise duty on betting, gaming, prize competitions, and lottery tickets.

Micro-distillers will also be exempted from certain costly automation and metering requirements.

It also exempts Import Declaration Fee and Railway Development Levy for mosquito repellent production inputs.

However, it introduces new levies to boost local steel and ceramic industries.

The new law also extends the period for processing tax offset and refund applications from 90 to 120 days while importers now be required to present a valid certificate of origin to regulate standards.

In passing the Bill, MPs, however, rejected a proposal to raise the lowest tax band to Sh30,000 from Sh24,00 by adjusting rates to 10 pet cent, 15 per cent, 20 per cent, 25 per cent, and 28 per cent, which would have increased personal relief from Sh2,400 to Sh3,000 per month.

Currently, the monthly tax bands set out in the Finance Act 2023 are 10 per cent, 15 per cent, 25 per cent, 30 per cent and 32.5 per cent.

Also rejected was a proposal to repeal Section 59A(1B) of the Tax Procedures Act, which would have give the Kenya Revenue Authority’s access to trade secrets and personal data during digital system integrations.