President William Ruto has officially signed the Finance Bill 2025 into law, marking a crucial moment for Kenya’s economic landscape. The legislation, assented to on June 26, 2025, comes after intense public debate and widespread protests that characterized the previous year’s Finance Bill 2024. This year’s approach emphasizes fiscal reforms and administrative changes rather than introducing new taxes, a deliberate strategy to avoid renewed public unrest.
The Finance Act 2025 introduces several key amendments across various tax laws, including the Income Tax Act, Value Added Tax Act, and Excise Duty Act. A significant highlight is the mandatory requirement for employers to automatically apply all applicable tax reliefs, deductions, and exemptions for employees, aiming to ease the tax burden on salaried workers. This includes an increase in the daily tax-exempt subsistence allowance from KSh 2,000 to KSh 10,000. Furthermore, the bill fully exempts pension and retirement gratuity payments from tax, providing relief for retirees.
In a bid to stimulate investment and economic growth, the Act offers a reduced corporate tax rate of 15% for startups for their first three years, and for large investors injecting over KSh 3 billion into the economy for ten years. It also repeals the Digital Assets Tax, replacing it with a 5% excise duty on transaction fees for virtual asset providers, and slashes Capital Gains Tax from 15% to 5% for high-value investments.
The new law also grants the government legal authority to access KSh 1.88 trillion from the Consolidated Fund for the 2025/2026 financial year, with an additional KSh 671.99 billion from Ministries, Departments, and Agencies’ internally generated revenues.
Notably, controversial clauses, such as unrestricted access for the Kenya Revenue Authority (KRA) to personal data, were rejected by Parliament following public outcry, reflecting a more responsive legislative process this year.
The comprehensive bill aims to streamline revenue collection, improve the business environment, and foster innovation-driven economic growth in Kenya.
