The Finance Bill, 2026
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Executive
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New Reporting Rules for Virtual Asset Providers
The bill introduces a requirement for virtual asset service providers to file information returns with the Commissioner under a new section 6C of the Tax Procedures Act (Cap. 469B). Failure to comply or file a nil return when required attracts a penalty of KSh 1 million for each failure.
Non-Resident Rental Income Tax Introduced
A new final tax under section 6B of the Income Tax Act (Cap. 470) is introduced on rental income earned by non-residents from properties in Kenya. Taxpayers must register through a simplified framework and submit returns by the 20th day of the following month.
Excise Duty Levied on Phone Activations
Under the Excise Duty Act (Cap. 472), a 25% excise duty is introduced on cellular phones and other wireless network devices. Crucially, the tax liability arises at the exact time of the phone's activation rather than at importation or manufacturing clearance.
Road Annuity Fund Levy Slashed by Half
The bill amends section 3 of the Road Maintenance Levy Fund Act (Cap. 427) to reduce the levy rate on petroleum entering the Road Annuity Fund from three shillings to one shilling and fifty cents.
Electronic Tax System Non-Compliance Penalties Upgraded
Taxpayers who fail to issue electronic tax invoices, submit electronic returns, or pay electronically without a reasonable excuse face steep penalties under section 86 of Cap. 469B. Non-compliance results in a penalty equal to the higher of double the tax due, KSh 100,000, or KSh 10,000 for individuals.
Bill No.
No. 26 of 2026
Gazette No.
Supplement No. 113 of 2026
Sponsor
Kuria Kimani
Background
The Finance Bill, 2026 is submitted by the Cabinet Secretary for the National Treasury to propose revenue-raising measures, modify existing tax liabilities, and streamline tax collection and compliance procedures in Kenya.
Key Amendments
Income Tax Act (Cap. 470)
- Definitions: Expands the definition of royalties to include proprietary digital platforms and payment networks. Includes card interchange fees under management or professional fees.
- Withholding Taxes: Introduces a 1.5% withholding tax on the sale of scrap metal and 20% on winnings under the Third Schedule.
- Non-Resident Rental Tax: Creates a final tax on rental income accrued by non-residents under section 6B.
- Home Loan Interest: Allows deductions of up to KSh 360,000 for interest on loans advanced by the Central Bank of Kenya to employees for home ownership.
Value Added Tax Act (Cap. 476)
- Exemptions: Exempts solar and lithium-ion batteries, electric bicycles, electric buses, sugarcane transportation, and raw inputs for animal feeds and pharmaceuticals.
- Input Tax: Restricts input tax deductions under section 17A when taxable supplies subsequently become exempt.
Excise Duty Act (Cap. 472)
- Rates: Standardizes excise duty on cellular phones at 25% of excisable value. Adjusts the rate for cigars, cheroots, and cigarillos to KSh 18,000 per kg, and other manufactured tobacco to KSh 12,550 per kg.
- Betting and Gaming: Establishes a 5% excise duty on amounts deposited into customer betting and gaming wallets.
Miscellaneous Fees and Levies Act (Cap. 469C)
- Reduces certain percentage rates from 20% to 10% under section 7.
- Adjusts exemptions from the import declaration fee and railway development levy for specific aircraft parts and telecommunication devices.
Stamp Duty Act (Cap. 480)
- Restricts stamp duty exemptions on transfers relating to real estate investment trusts to instruments executed before 31st December, 2022.
Road Maintenance Levy Fund Act (Cap. 427)
- Reduces the Road Annuity Fund levy on petroleum products from three shillings to one shilling and fifty cents.
New Obligations
- Virtual Asset Service Providers: Under section 6C of the Tax Procedures Act, providers must file annual information returns detailing user accounts and transactions.
- Non-Resident Landlords: Non-resident property owners must register under a simplified registration framework and file monthly rental income tax returns.
- Electronic Compliance: Taxpayers must generate electronic tax invoices and submit all tax returns electronically.
Penalties
- Virtual Asset Reporting Failures: A fine of KSh 100,000 or up to three years' imprisonment for false statements. Failure to file an information return or a nil return attracts a penalty of KSh 1 million.
- Electronic Tax System Non-Compliance: Taxpayers failing to comply with electronic invoicing or payment rules face a penalty of the higher of double the tax due, KSh 100,000, or KSh 10,000 for individuals.
Transitional Provisions
- Sections 19, 20, 25, 35, 36, 37(a)(i), 59(a)(ii), 59(b)(ii), and 32(a)(x) (new paragraph 163) shall come into operation on 1st January, 2027.
- All other provisions of the Bill shall come into operation on 1st July, 2026.
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