The National Treasury has officially unveiled the Finance Bill 2025, which outlines a series of new tax proposals to be applied during the 2025/2026 financial year.
These proposed changes are aimed at reshaping the country’s tax policies and are expected to bring notable impacts across different sectors of the economy.
The bill was shared with the public by the Chairperson of the National Assembly’s Finance Committee, Kimani Kuria, on Wednesday, April 30.
Some sectors, particularly the construction industry, have welcomed the proposals, especially the revision of the Export and Investment Promotion Levy.
One of the major highlights of the Finance Bill 2025 is the proposed reduction in the Export and Investment Promotion Levy.
The bill suggests slashing the levy from the current 17.5 per cent to just 5 per cent for a range of construction-related materials.
The affected items include semi-finished iron products and non-alloy steel goods, such as iron bars and rods made from non-alloy steel. This move is intended to reduce construction costs and promote investment in infrastructure.
The bill also seeks to make several adjustments to the Value Added Tax (VAT) system. A key proposal involves shifting certain goods and services from a Zero-Rated VAT status to a VAT-Exempt status.
This means that while these goods and services won’t attract VAT, producers and sellers won’t be able to claim VAT refunds on input costs, which could increase their production expenses.
Items that could be affected by this VAT change include raw materials supplied to local pharmaceutical manufacturers, as well as the transportation of sugarcane from farms to sugar processing factories.
In a move to support local industries and green technology, the Finance Bill also outlines tax provisions that apply to locally manufactured and assembled products.
These include mobile phones, electric bicycles, solar batteries, lithium-ion batteries, and ingredients used in making animal feed.
However, the bill adds a cautionary clause: if these tax-exempt or zero-rated goods are later used for purposes other than what they were intended for, the user will be required to pay VAT on them.
Another major tax proposal is the introduction of a 25 per cent tax — or Ksh200 per kilogram, whichever is higher — on imported plastic items such as adhesive films, tapes, plates, foils, strips, shoes, and other flat-shaped plastic materials.
It is important to note, however, that this tax will not be charged on products imported from other East African Community (EAC) countries, as long as those goods meet the EAC’s established rules of origin.
The Finance Bill also proposes an extension of the timeline allowed for the Kenya Revenue Authority (KRA) to process VAT refund claims.
Currently, the period is 90 days, but the new proposal seeks to extend this to 120 days, giving the tax authority more time to handle refund requests.
President William Ruto’s Cabinet approved the Finance Bill 2025 during a meeting held on Wednesday, April 30, allowing it to proceed to Parliament for discussion and potential approval.
Speaking during the Labour Day celebrations at Uhuru Gardens in Nairobi on Thursday, May 1, President Ruto emphasized that the new tax proposals are part of a broader plan to stimulate economic development.
He explained that the 2025 Finance Bill was crafted carefully to support economic recovery and to create an environment where businesses and workers can thrive.
According to the president, the bill reflects the government’s commitment to fostering entrepreneurship, productivity, and overall national progress.
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