The 2025 Finance Bill has included a proposal that will grant the Kenya Revenue Authority (KRA) access to personal data.
As part of the bill tabled before Parliament on Wednesday, the government has proposed the deletion of Section 59A(1B) in the Tax Procedures Act, which prohibits KRA from demanding trade secrets or customer personal data.
If approved, the proposal will grant KRA the power to compel businesses to share transactional information relating to their operations.
Section 59A(1B) protects businesses from being forced to integrate their systems with those of KRA if doing so compromises trade secrets or personal data collected from customers.
If passed, the deletion would pave the way for KRA to demand full integration with business systems, widening its access to private or sensitive information for the sake of tax compliance.
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Treasury CS to Get New Powers
At the same time, the Bill proposes the reintroduction of powers for the Cabinet Secretary of the National Treasury to waive penalties or interest. The provision had been previously removed in the 2023 Finance Act due to fears of abuse and a lack of transparency.
However, under a new clause, the CS may waive penalties or interest where the fault lies with electronic tax systems, like system errors, delays in updating data, duplication due to malfunctions, or incorrect taxpayer registration.
“(5A) The Cabinet Secretary may, on the recommendation of the Commissioner, waive the whole or part of any penalty or interest imposed under this Act where the liability to pay the penalty or interest was due to,
“(a) an error generated by an electronic tax system; (b) a delay in the updating of an electronic tax system; (c) a duplication of a penalty or interest due to a malfunction of an electronic tax system; ог (d) the incorrect registration of the tax obligations of a taxpayer,” the bill reads in part.
Also Read: Ruto Cabinet Approves Finance Bill 2025
Other Highlights and Proposals in the 2025 Finance Bill
The Finance Bill 2025 has scrapped the three-tier implementation schedule in favor of a simplified structure, with most provisions set to take effect on July 1, 2025.
No proposals in the Bill are scheduled for a September 1st commencement. However, two clauses have been deferred to January 1, 2026, while the remaining 57 provisions will take effect on July 1, 2025.
Moreover, the Bill seeks to remove several key products and services from the list of VAT Zero-Rated items and instead classify them as VAT Exempt.
These products include inputs or raw materials supplied to pharmaceutical manufacturers, transportation of sugarcane from farms to mills and locally assembled or manufactured mobile phones.
Also, the supply of electric bicycles, solar and lithium-ion batteries and inputs for manufacturing animal feeds will be classified as VAT Exempt if the bill is enacted.
Under the current VAT Zero-Rated system, suppliers are not taxed at the point of sale and can claim refunds on VAT paid for raw materials.
However, if these items are moved to the VAT Exempt category, suppliers will no longer be able to claim input tax credits, and will consequently increase the cost of production, which may be passed on to consumers.
In a further tightening of VAT compliance, the Bill proposes that anyone who purchases or imports Zero-Rated or Exempt goods and later uses them in a way that contradicts their tax classification will be liable to pay the VAT.
“66A. Where a person imports or purchases goods or services which are exempt or zero-rated and the person subsequently disposes of, or uses, the goods or services supplied in a manner inconsistent with the purpose for which the goods or services were exempted or zero rated,
“The person shall be liable to pay tax on the goods or services at the applicable rate at the time of disposal or inconsistent use,” reads part of the bill.
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