The Finance Bill 2025 has proposed raising the tax-free per diem allowance for employees from Ksh2,000 to Ksh10,000.
This move, proposed in the 2025 Finance Bill, is expected to ease financial pressure on employees who frequently travel for work, providing them with a wider tax-exempt cushion to cater for daily expenses.
Additionally, the Executive is proposing a budget with no new taxes to ease the pressure of the high cost of living and restore public confidence.
Further, the government plans to introduce aggressive spending cuts, instead of raising taxes to manage the budget deficit, which it aims to keep below 4.5% of GDP.
Finance Bill Proposals Targeting Employees
Under the proposed changes, employers will also be required to calculate all tax deductions at the salary payment stage to ensure transparency and accuracy in remittances.
This will automatically apply on all eligible tax reliefs and exemptions when calculating Pay As You Earn (PAYE) taxes for employees.
In the draft bill approved by the Cabinet on April 29, the government further plans to overhaul Kenya’s tax system and focus on economic growth without overburdening taxpayers.
The president has also promised a crackdown on tax cheats by sealing loopholes and tightening audits.
The government plans to fast-tracking legal reforms to ensure efficient dispute resolution within the tax system.
Also Read: Budget Making Process: What You Need to Know Before Finance Bill 2025
Moreover, Ruto plans to scrap off the 1.5% Digital Service Tax (DST) to remove the burden on local digital entrepreneurs and create a more favorable environment for innovation and digital trade.
According to the draft, the goverment seeks to replace the DSI with the introduction of a Significant Economic Presence (SEP) Framework to ensure that large multinational digital platforms pay their fair share of taxes, even without a physical presence in the country.
Other proposals include halving of the Crypto Tax Rate to attract investment in the fast-growing fintech and cryptocurrency sectors. The crypto tax rate will be reduced from 3% to 1.5% if approved by Parliament.
Additionally, the government plans to exempt aircraft spare parts for repair and maintenance from taxation to support the aviation sector.
Also Read: Ruto Cabinet Approves Finance Bill 2025
Cabinet Approves Finance Bill 2025
The Cabinet on Tuesday, April 29 approved the Finance Bill 2025 following a meeting chaired by President William Ruto at State House, Nairobi.
State House Spokesperson Hussein Mohammed noted that the bill focuses on enhancing efficiency, including addressing loopholes related to tax expenditures that have historically been exploited to siphon funds from public coffers, such as through inflated tax refund claims.
Also, the Bill proposes critical changes to support small businesses, allowing them to fully deduct the cost of everyday tools and equipment in the year of purchase, and eliminating unnecessary delays in accessing tax relief.
In addition, retirees will benefit significantly as all gratuity payments, whether in public or private pension schemes, will now be fully tax-exempt, ensuring dignity for Kenya’s senior citizens after retirement.
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