On June 19, 2025, Kenya’s Parliament passed the much-debated Finance Bill 2025, attracting major public interest and intense discussions both inside and outside the House.
While it stirred strong opinions, it’s important to break down what this Bill really means for ordinary Kenyans—the hustler trying to provide for a family, save for the future, or run a small business.
The Finance Bill 2025 affects nearly every aspect of daily life—your income, your spending, your savings, and how the government collects and uses taxes.
Key Tax Exemptions for Retirees
One major change is the government’s decision to amend the First Schedule of the Income Tax Act. This change officially exempts gratuity and other benefits paid under public pension schemes from being taxed.
The Bill also repeals specific parts of Section 8 of the Income Tax Act (subsections 4 to 9A), which had previously dictated how pensions and retirement benefits from private and public schemes (like NSSF) were taxed.
In simple terms, if you’re retiring soon, you will now receive your full gratuity without any tax deductions. This is seen as a win for retirees who can now enjoy their life savings and retirement benefits without losing a portion to the taxman.
Higher Tax-Free Allowance for Per Diems
Another important change is the adjustment in the per diem tax-free ceiling. Previously, only up to Ksh2,000 per day was exempt from tax for those receiving daily allowances while on official duty. Under the new law, this threshold has been raised to Ksh10,000.
So, starting July 1, 2025, employees travelling for work will have more of their daily allowance protected from taxation, meaning more money in their pockets.
Good News for Digital Hustlers: Reduced Tax on Crypto and NFTs
If you are involved in digital business—like trading cryptocurrencies, creating or selling NFTs, or earning income online—the Finance Bill has some welcome news.
The Digital Asset Tax has been reduced from 3% to 1.5%. This tax is charged on the value exchanged or transferred through digital assets.
The Treasury explained that the aim is to support the growth of digital entrepreneurship, especially among youth. By making the tax rate lower, it becomes easier for digital workers and freelancers to comply with the law while still remaining profitable.
Taxing Global Giants: Netflix, Google & Others
The 2025 Finance Bill also shifts focus to foreign digital companies like Netflix, Google, Amazon, and Facebook that earn money from Kenyan users without having a physical presence in the country.
The new law introduces the Significant Economic Presence (SEP) Tax, replacing the earlier Digital Service Tax (DST).
Under SEP, any income made from Kenya through online platforms or digital services—even if the company has no office in Kenya—will now be taxed. This includes income from streaming, online advertising, app marketplaces, and more.
This change helps Kenyan digital businesses compete fairly, and ensures foreign tech giants pay their fair share to the local economy.
Alignment with EAC for Better Trade
The Finance Bill also included a new provision under the Excise Duty Act that brings Kenya in line with the East African Community (EAC) Customs Union Protocol.
This means goods will now be classified under the same system used across EAC countries, helping reduce disputes, improve clarity at the border, and promote easier trade across East Africa.
This harmonization is expected to reduce confusion for importers and exporters and help Kenyan traders operate more smoothly within the region.
Mortgage Tax Relief Now Covers SACCO & Personal Loans
In the past, you only qualified for mortgage tax relief if you were buying a house through a registered mortgage provider. But now, the law has changed. Even if you build your home through a SACCO loan or a personal loan, you’ll still be eligible for tax relief.
This is a big shift and encourages more Kenyans to pursue homeownership through alternative financing options without being locked out of tax benefits.
Certainty for Multinational Corporations: Advance Pricing Agreements
For big companies involved in cross-border trade, the new Bill introduced the Advance Pricing Agreement (APA) framework. This allows companies to strike long-term agreements—up to five years—with the Kenya Revenue Authority (KRA) about how they’ll handle transfer pricing.
These APAs help provide certainty to multinational businesses, attract foreign investment, and create a stable business environment that can protect Kenyan jobs.
Other Notable Highlights
- No new PAYE tax brackets introduced – meaning the current income tax structure for employees remains unchanged.
- Privacy concerns addressed – the law now puts limits on how KRA can access a person’s private data.
- Zero-rated taxes on essentials – some essential goods will now have reduced or zero-rated taxes, easing the cost of living.
- Corporate tax breaks – certain key industries will benefit from reduced corporate taxes to encourage growth and job creation.
A Sensitive Issue for the Public
The Finance Bill has become a highly emotional and political topic for many Kenyans. Following the mass protests sparked by the 2024 Finance Bill, this year’s version faced a lot of scrutiny. While some reforms appear to be pro-people and business-friendly, public trust remains fragile.
Still, the government argues that these new changes are aimed at easing the tax burden, encouraging digital innovation, attracting investment, and making trade easier within East Africa.
Conclusion
While the Finance Bill 2025 comes with its share of controversies, it also introduces several reforms that could positively impact the lives of many Kenyans.
Whether you’re a retiree, a digital hustler, a frequent business traveler, a SACCO member building a home, or a business owner eyeing the EAC market, there are tangible benefits to look forward to.
As always, understanding how these changes affect you is key to making informed financial and business decisions in the months ahead.
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