Kenya Revenue Authority (KRA) has announced new tax rates to be applied on employee and company loans for October, November, and December 2025.
Notably, the rates will be used in computing Fringe Benefit Tax and Deemed Interest Rate in line with the Income Tax Act, Sections 12B and 16(2) (ja).
KRA Fringe Benefit Tax Set at 8 Per cent
According to the notice issued by the Commissioner for Micro and Small Taxpayers on October 21, the 8 per cent rate will serve as the market interest rate for the purpose of calculating Fringe Benefit Tax.
This applies when employers provide loans to employees at interest rates below the market rate.
“For Section 12B of the Income Tax Act, the Market Interest Rate is 8 per cent. This rate shall be applicable for the three months of October, November, and December 2025,” the statement read.
The Fringe Benefit Tax ensures that loans granted to employees by their employers at reduced or zero interest rates are taxed fairly, reflecting the value of the benefit received.
It is paid by the employer and is not a deduction from the employee’s salary.
Deemed Interest Rate Also Fixed at 8 Per cent
As per the notice, the same rate will also apply to Deemed Interest, which is calculated on loans advanced by companies to directors, shareholders, or other related parties where no interest or a lower interest is charged.
“For purposes of Section 16(2) (ja) of the Income Tax Act, the prescribed rate of interest is 8 per cent. This rate is applicable for October, November, and December 2025,” KRA stated.
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The objective of setting the deemed interest rate is to prevent companies from avoiding tax by offering interest-free loans to insiders.
This rate is reviewed quarterly to reflect prevailing market conditions and maintain consistency in taxation practices.
Withholding Tax and Compliance Period
The association further directed that a 15 percent withholding tax on the deemed interest must be deducted and paid to the Commissioner within five working days.
“Withholding tax rate of 15 percent on the deemed interest shall be deducted and paid to the Commissioner within five working days,” the notice added.
Additionally, taxpayers and employers were encouraged to access more details through KRA’s official website www.kra.go.ke or by dialling *222# for free access to KRA services.
How to Check KRA Deductions and Current Tax Rates
Registered taxpayers can check their deductions and filings through the iTax system.
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Steps:
- Go to https://itax.kra.go.ke
- Log in using your KRA PIN and password.
- Under the “Returns” or “Ledger” tab, select “View Taxpayer Account” or “Tax Deduction Cards (P9 Form)” for PAYE records.
The system displays your tax obligations, rates applied, and any payments or deductions recorded.
Alternatively, KRA offers a free mobile service for quick tax information.
Steps:
- Dial *222# on your mobile phone.
- Select “KRA Services” → “Tax Rates”.
- Choose the specific tax type (PAYE, VAT, Excise, or Withholding).
- You’ll receive the current rates and deduction details by SMS.
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